Xbox hits back at the FTC, saying it's "wrong" to call its revised Xbox Game Pass tiers "degraded"

Update, 20th July, 2024: Xbox has hit back at the FTC, saying it is "wrong" and "misleading" to call its revised Xbox Game Pass tiers "degraded", and stating the Commission "barely mentioned [concerns about] subscription[s] at trial".

"Earlier this month, Microsoft announced changes to its gaming subscription service, Game Pass, to provide consumers valuable options at different price points," Xbox said, in court papers filed yesterday, Friday 19th July.

"Microsoft is offering a new service tier, Game Pass Standard, which offers access to hundreds of back-catalogue games 'and multiplayer functionality for S14.99/month.

"It is wrong to call this a 'degraded' version of the discontinued Game Pass for Console offering. That discontinued product did not offer multiplayer functionality, which had to be purchased separately for an additional $9.99/month (making the total cost $20.98/month).

"While Game Pass Ultimate's price will increase from $16.99 to $19.99/month, the service will offer more value through many new games available 'day-and-date'. Among them is the upcoming release of Call of Duty, which has never before been available on a subscription day-and-date."

"The FTC barely mentioned subscription at trial, instead focusing on the theory that Microsoft would withhold Call of Duty from Sony's console. The district court correctly rejected that theory, which is now further eroded by Microsoft and Sony's ten- year agreement to keep Call of Duty on PlayStation – a contract Sony was 'thrilled' to enter."

Microsoft also stated that the FTC has now retrospectively "shift[ed] focus" to its subscription service.

"Setting aside that it is common for businesses to change service offerings over time, the FTC's case in all of its alleged markets has always been premised on vertical foreclosure, i.e. that Microsoft would withhold Call of Duty from rivals and therefore harm competition," Microsoft continues.

"But even in the alleged subscription market, Call of Duty is not being withheld from anyone who wants it. And there remains no evidence anywhere of harm to competition: Sony's subscription service continues to thrive, even as they put few new games into their subscription day-and-date, unlike Microsoft.

"The transaction thus continues to benefit competition and consumers – exactly what the district court correctly found."

Original story follows.

Original story: The Federal Trade Commission (FTC) has slammed Microsoft's Xbox Game Pass tier changes as a "degraded product", citing that by "removing the most valuable games from Microsoft's new service", Microsoft has delivered "exactly the sort of consumer harm from the merger the FTC has alleged".

Microsoft confirmed sweeping changes - including price increases - to its Xbox Game Pass subscription service earlier this month. The changes come ahead of October's launch of Call of Duty: Black Ops 6, which will include the removal of day one releases for its overhauled basic tier.

The FTC's filing with the US Ninth Circuit Court of Appeals added that Microsoft's announcement shows why it's necessary to "halt mergers to fully evaluate their likely competitive effects", and is "inconsistent" with what Microsoft said when the FTC initially intervened to prevent its acquisition of Activision Blizzard.

"Product degradation – removing the most valuable games from Microsoft's new service – combined with price increases for existing users, is exactly the sort of consumer harm from the merger the FTC has alleged," the filing said.

"Microsoft's price increases and product degradation – combined with Microsoft's reduced investments in output and product quality via employee layoffs – are the hallmarks of a firm exercising market power post-merger.

"Microsoft promised 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)'."

Earlier this year, FTC claimed that its planned layoff of 1900 people across Xbox and Activision Blizzard went against what was said in court last year, in regards to how Activision would remain structurally independent.

"In continuing its opposition to the deal, the FTC ignores the reality that the deal itself has substantially changed," a Microsoft spokesperson said in a statement to Eurogamer at the time.

"Since the FTC lost in court last July, Microsoft was required by the UK competition authority to restructure the acquisition globally and therefore did not acquire the cloud streaming rights to Activision Blizzard games in the United States. Additionally, Sony and Microsoft signed a binding agreement to keep Call of Duty on PlayStation on even better terms than Sony had before."