Microsoft's Xbox Game Pass Faces Scrutiny: FTC Slams Changes as "Degraded Product"

The Federal Trade Commission (FTC) has taken a strong stance against Microsoft's recent changes to its Xbox Game Pass subscription service, labeling the alterations as a "degraded product" that could lead to "consumer harm" from the proposed Activision Blizzard acquisition. The FTC's filing with the US Ninth Circuit Court of Appeals highlights the agency's concerns about Microsoft's decision to remove the most valuable games from the service and increase prices for existing users.

Safeguarding Consumers: FTC's Fight Against Anticompetitive Practices

Removal of Day One Releases: A Blow to Subscriber Value

Microsoft's announcement of sweeping changes to its Xbox Game Pass service, including price increases, has raised eyebrows within the gaming community. The most significant change is the removal of day one releases for the service's overhauled basic tier, which is set to coincide with the launch of Call of Duty: Black Ops 6. This move has been perceived by the FTC as a "degradation of the product" and a clear indication of the potential consumer harm that could arise from the proposed Activision Blizzard acquisition.

FTC's Intervention: Preventing Anticompetitive Mergers

The FTC's filing with the US Ninth Circuit Court of Appeals emphasizes the agency's stance that the changes to Xbox Game Pass are "exactly the sort of consumer harm from the merger the FTC has alleged." The FTC argues that the removal of the most valuable games from the service, combined with price increases for existing users, is a clear sign of a firm exercising market power post-merger.

Broken Promises: Microsoft's Contradictory Statements

The FTC's filing also highlights the apparent contradiction between Microsoft's current actions and the promises made during the initial stages of the Activision Blizzard acquisition. The agency points out that Microsoft had previously stated that the acquisition would "benefit consumers by making [Call of Duty] available on Microsoft's Game Pass on the day it is released on console (with no price increase for the service based on the acquisition)." However, the recent changes to Xbox Game Pass directly contradict these assurances.

Layoffs and Product Quality: Concerns About Market Power

The FTC's filing also raises concerns about Microsoft's recent layoffs across Xbox and Activision Blizzard, which the agency claims are "inconsistent" with the company's previous statements regarding the structural independence of Activision Blizzard. The FTC argues that these layoffs, combined with the changes to Xbox Game Pass, are "the hallmarks of a firm exercising market power post-merger."

Microsoft's Response: Adapting to Changing Circumstances

In response to the FTC's filing, a Microsoft spokesperson stated that the company's actions are a reflection of the changing nature of the deal. The spokesperson noted that since the FTC's initial intervention, Microsoft has been required by the UK competition authority to restructure the acquisition globally, which has resulted in the company not acquiring the cloud streaming rights to Activision Blizzard games in the United States. Additionally, Microsoft and Sony have signed a binding agreement to keep Call of Duty on PlayStation on even better terms than before.

The Ongoing Battle: FTC's Commitment to Protecting Consumers

The FTC's continued opposition to the Microsoft-Activision Blizzard merger highlights the agency's commitment to safeguarding consumer interests and preventing anticompetitive practices in the gaming industry. As the legal battle continues, the outcome of this high-stakes acquisition will have far-reaching implications for the future of the gaming landscape and the power dynamics within the industry.