Microsoft went on record to state that "Xbox has lost the console wars" to the point that Sony and Nintendo have everything they need to continue dominating the gaming market for years to come. The defeatist remarks were part of a legal argument presented in a filing ahead of the company's newly started trial with stateside regulators, which has been in the making since the FTC sued to block Microsoft's Activision Blizzard acquisition back in December.
Microsoft's $69 billion buyout offer for Activision Blizzard – which also owns Candy Crush maker King – would be by far the largest acquisition in the gaming industry's history, surpassing Take-Two's 2022 purchase of Zynga by some $57 billion. And while Sony and several regulators repeatedly argued that buying Activision Blizzard would give Xbox too much power, Microsoft has been reiterating that the move would only level the playing field ever since it first proposed the deal in January 2022.
Elaborating on that stance, the company's attorneys are now arguing that Xbox lost the console wars and cannot hope to compete with Sony and Nintendo without an aggressive acquisition strategy. In a partially redacted filing submitted in preparation of Microsoft's FTC trial, the tech giant revealed that Xbox had just 16% of console sales and barely more than a fifth of the global console install base as of 2021. The company has also "consistently" been the least successful console manufacturer in terms of sales for the better part of the last 22 years, the filing reads.
Xbox is even struggling in its home market, with Microsoft's attorneys claiming Sony's US gamer base is currently larger than that of its own. The exact magnitude of the stated difference has been redacted from the newly surfaced court documentation, but its overall point remains clear, as Microsoft continues to insist that deals such as the Activision Blizzard acquisition are the only way for it to compete with its Japanese rivals.
Speaking of which, the filing specifically mentions Sony and Nintendo's ability to leverage exclusive content as one of the ways wherein the Japanese companies can continue dominating the global gaming market indefinitely. Microsoft already expressed a similar sentiment across the Atlantic back in late 2022, when it told UK regulators that PlayStation has better exclusives than Xbox.
Whether this gloomy legal argument will help the conglomerate win its ongoing trial with the FTC remains to be seen, but even if that doesn't come to pass, the agency itself lacks the authority to outright prevent the Activision Blizzard buyout. As things stand right now, the UK's rejection of the proposed acquisition that Microsoft is currently appealing appears to be a more credible threat to the deal.