Earlier this month, Microsoft updated and outlined changes coming to Xbox Game Pass starting on September 12, 2024. A new Standard tier was announced and prices for each tier has increased. The changes spurred the FTC to issue new filing, claiming that the changes are causing Xbox Game Pass to become a “degraded product.” Now, Microsoft has responded.
“The FTC’s letter presents a misleading, extra-record account of the facts and is a continuation of the agency’s attempts to reinvent its case on appeal,” Microsoft said in its filing to the U.S. Court of Appeals for the Ninth Circuit.
“Earlier this month, Microsoft announced changes to its gaming subscription service, Game Pass, to provide consumers valuable options at different price points. Microsoft is offering a new service tier, Game Pass Standard, which offers access to hundreds of back-catalog games and multiplayer functionality for $14.99/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. ”
Microsoft continued and argued that “the FTC barely mentioned subscription at trial, instead focusing on the theory that Microsoft would withhold Call of Duty from Sony’s console.” Microsoft and Sony agreed to terms to keep Call of Duty on PlayStation for ten years.
“While the FTC has now tried to shift focus to its alleged subscription market, its letter does not map onto its arguments below. Setting aside that it is common for businesses to change service offerings over time, the FTC 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. But even in the alleged subscription market, Call of Duty is not being withheld from anyone who wants it.”
Microsoft believes that there is no evidence anywhere of harm to competition with Sony’s subscription service continuing to thrive, even though they don’t put every new first-party title into their subscription day and date, unlike Microsoft.
“The transaction thus continues to benefit competition and consumers—exactly what the. district court correctly found.”