Microsoft's Game Pass Shakeup: Regulator Raises Concerns

The Federal Trade Commission (FTC) has taken issue with Microsoft's recent changes to its Xbox Game Pass service, arguing that the company's price increases and product degradation are signs of exercising market power post-merger. The FTC's concerns come as part of an ongoing appeal against the approval of Microsoft's acquisition of Activision Blizzard.

Shaking Up the Game Pass Landscape

Pricing Adjustments and Tiered Offerings

Microsoft has announced plans to increase the prices of both PC Game Pass and Xbox Game Pass Ultimate, while also introducing a new Game Pass Standard tier. This new tier, priced at .99, will not include day one access to first-party Xbox games, a feature that has been a hallmark of the existing Game Pass offerings. The FTC has labeled this new Standard tier as a "degraded product," arguing that it removes the most valuable games from the service.

Merger Implications and Consumer Harm

The FTC's filing contends that Microsoft's pricing changes and product degradation, combined with the company's reduced investments in output and product quality via employee layoffs, are indicative of a firm exercising market power in the aftermath of the Activision Blizzard acquisition. The regulator argues that this type of consumer harm is precisely what the FTC sought to prevent by challenging the merger in the first place.

Ongoing Legal Battle

The FTC's concerns are part of an ongoing appeal against a district court's decision not to block Microsoft's .7 billion acquisition of Activision Blizzard, which was finalized in October 2022. The Ninth Circuit Court of Appeals has yet to rule on the FTC's appeal, leaving the future of the deal and its potential impact on the gaming landscape uncertain.

Balancing Innovation and Competition

The FTC's intervention in the Game Pass changes highlights the delicate balance between fostering innovation and maintaining a competitive market. While Microsoft may argue that its pricing and product adjustments are necessary to sustain and evolve its gaming ecosystem, the regulator's concerns suggest that such moves could come at the expense of consumer choice and value. As the legal battle continues, the industry and consumers alike will be closely watching the outcome and its implications for the future of gaming platforms and services.