Microsoft has claimed Sony pays for “blocking rights” to stop developers from adding their content to Xbox Game Pass. The explosive claims are part of documents (Word doc) filed with Brazil’s national competition regulator and part of a review of Microsoft’s acquisition of Activision Blizzard.
“Microsoft’s ability to continue expanding Game Pass has been hampered by Sony’s desire to inhibit such growth,” claims Microsoft in an August 9th filing to the Administrative Council for Economic Defense (CADE), as translated from Portuguese. “Sony pays for ‘blocking rights’ to prevent developers from adding content to Game Pass and other competing subscription services.”
Does this mean Sony is evil and Microsoft is casually out here revealing some dastardly business practices? The reality is likely a little more complicated on both sides. Sony could simply be paying for exclusive rights for its own streaming services, or it may have clauses in some publishing contracts that prevent some games it publishes from being published on rival subscription services.
It’s not clear exactly what Microsoft is referring to here, but contracts for publishing games can be complex, particularly when rights for streaming and subscription services are involved. Documents filed in the Epic Games v. Apple trial last year revealed Microsoft had been considering lowering the revenue split for PC games “in exchange for the grant of streaming rights to Microsoft.”
If Microsoft had proceeded with its plans, that could have led to the company securing exclusive streaming rights on some games, preventing them from being available on rival streaming services. It all depends on how publishing contracts are written, and both Microsoft and Sony regularly secure game exclusives that involve timed releases, console exclusivity, and lots of marketing dollars.
Microsoft is attempting to convince Brazil’s CADE regulator that it should waive through the company’s proposed acquisition of Activision Blizzard for $68.7 billion. While the Federal Trade Commission (FTC) is analyzing documents from Microsoft on its acquisition in the US, that correspondence is private. That’s not the case in Brazil, where its competition regulator offers up public documents that provide unique insight into the business competition between Microsoft and Sony.
Documents from Brazil’s CADE have been analyzed by Xbox and PlayStation fans over the past week, with posters on ResetEra highlighting the juicy parts. The regulator has been asking Sony and other Microsoft rivals about the Activision Blizzard acquisition. Sony previously responded to Brazil’s regulator claiming that it would be difficult for other developers to create a franchise that rivals Activision’s Call of Duty and that it stands out “as a gaming category on its own.”
Naturally, Microsoft disagrees, and Ubisoft, Riot Games, Bandai Namco, and Google have all highlighted competition to Call of Duty in the form of Apex Legends, Battlefield, PUBG, and more.
Microsoft also claims that adding Activision Blizzard content to Xbox Game Pass will actually increase competition somehow. “The inclusion of Activision Blizzard content in Game Pass does not impair the ability of other players to compete in the digital game distribution market,” claims Microsoft in one document, where the company also argues it increases the competition thanks to “high-quality content at lower immediate costs.”
Sony hasn’t responded to this particular point yet, but at $9.99 per month for Xbox Game Pass, it’s easy to imagine consumers picking that option to play titles like Call of Duty instead of paying $60 or more to purchase and own the game.
Microsoft also argues that not distributing games like Call of Duty at rival console stores “would simply not be profitable” for the company. Microsoft has previously made it clear it will keep Call of Duty on PlayStation. Microsoft says a strategy of not distributing Activision Blizzard games on rival consoles would only be profitable if the games could attract a high number of players over to the Xbox ecosystem, resulting in revenue to compensate for losses from not selling these titles on rival consoles.
Whether Microsoft’s claims about “blocking rights” are accurate, it wouldn’t be the first time Sony has used financial incentives to block game developers. Sony held back PS4 cross-platform play for years and implemented a crossplay revenue share for publishers that wanted to enable crossplay in their games.
Sony’s cross-platform revenue share forced publishers to pay Sony a royalty whenever PlayStation players contributed more than a certain percentage to the bottom line of a cross-platform game to “offset the reduction in revenue” from Sony enabling crossplay. Epic Games CEO Tim Sweeney testified last year that Sony was the only platform holder that required this compensation for crossplay.
We’ve reached out to Sony to comment on Microsoft’s claims and to Microsoft to clarify what Sony allegedly blocks. We haven’t heard back from either company yet, and we don’t expect either will comment on these explosive details. But we’ll be watching the documents from Brazil’s CADE carefully in the coming days to see if or how Sony responds to Microsoft’s claims.