Case 3:23-cv-02880-JSC Document 327 Filed 07/19/23 Page 1 of 53
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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`
`FEDERAL TRADE COMMISSION,
`Plaintiff,
`
`v.
`
`MICROSOFT CORPORATION, et al.,
`Defendants.
`
`Case No. 23-cv-02880-JSC
`
`PRELIMINARY INJUNCTION
`OPINION
`FINAL REDACTED VERSION
`
`In December 2022, the FTC initiated an administrative action to block Microsoft’s
`proposed acquisition of Activision—publisher of the first-person shooter video-game franchise
`Call of Duty, among other popular video games. The gist of the FTC’s complaint is Call of Duty
`is so popular, and such an important supply for any video game platform, that the combined firm
`is probably going to foreclose it from its rivals for its own economic benefit to consumers’
`detriment. Discovery in the administrative action has closed, and trial before an FTC judge is
`scheduled to commence on August 2, 2023.
`Four weeks ago, the FTC filed this action to preliminarily enjoin the merger pending
`completion of the FTC administrative action. Because the merger has a July 18 termination date,
`expedited proceedings were commenced. After considering the parties’ voluminous pre-and-post
`hearing writing submissions, and having held a five-day evidentiary hearing, the Court DENIES
`the motion for preliminary injunction. The FTC has not shown it is likely to succeed on its
`assertion the combined firm will probably pull Call of Duty from Sony PlayStation, or that its
`ownership of Activision content will substantially lessen competition in the video game library
`subscription and cloud gaming markets.
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`BACKGROUND
`The video gaming industry represents the fastest growing form of media and entertainment
`with revenues larger than the film, music, and print industries. The industry consists of several
`components. The three billion worldwide gamers. The videogame developers who create the
`games. The videogame publishers who release the games. And the companies that make the
`devices on which gamers play the games. This action involves a merger between Activision—the
`developer of the Call of Duty video game franchise—and Microsoft—a game developer,
`publisher, and the manufacturer of the Xbox game console.
`
`A.
`The Parties
`Microsoft made $198 billion in revenue in 2022. (PX9050-043.1) Gaming is part of
`Microsoft’s More Personal Computing division. (PX9050-014.) Its gaming business includes
`Xbox, Xbox Game Pass (a gaming subscription service), and Xbox Cloud Gaming. (PX9050-
`014.) Microsoft publishes video games through Xbox Game Studios, comprising 23 game
`development studios, including nine studios that were included in Microsoft’s acquisition of
`ZeniMax Media Inc., announced in September 2020 and finalized in March 2021. (Dkt. No. 226-
`2, Lee Decl. at ¶ 14; PX0003 at 086-087 (detailing Microsoft acquisitions of gaming studios);
`PX1527-002.)
`Activision, a publicly traded corporation, earned $7.5 billion in revenue in 2022.
`(PX9388-040 (Activision 10-K 2022).) “Activision develops and publishes video games for
`consoles, PCs and mobile devices. Microsoft often refers to Activision, along with EA [Electronic
`Arts], Take-Two Interactive Software, Inc., and Ubisoft, as one of the ‘Big 4’ independent video
`game publishers.” (Dkt. No. 226-2, Lee Decl. at ¶ 19.) “Activision’s most successful video game
`franchise is Call of Duty, a first-person shooter video game series playable on video game
`consoles and PCs. “Activision also produces other popular video games for consoles, including
`games from the Diablo, Overwatch, Crash Bandicoot, and Tony Hawk franchises, as well as video
`
`
`1 Exhibit citations are to the exhibit number and the page number associated with the exhibit
`number. For hearing testimony, the Court has endeavored to include citations to the associated
`docket number. Other record citations are to material in the Electronic Case File (“ECF”) with
`pinpoint citations to the ECF-generated page numbers at the top of the documents.
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`games for other devices, including games from the Candy Crush (for mobile devices) and
`Warcraft (for PC) franchises.” (Dkt. No. 226-2, Lee Decl. at ¶ 21.)
`
`B.
`The Proposed Merger
`On January 18, 2022, Microsoft announced an agreement to acquire Activision for $68.7
`billion—one of the largest, if not the largest, tech industry mergers. The agreement provides,
`among other things, either party may terminate the merger agreement if the transaction has not
`closed by July 18, 2023. (PX0083-088.) If the agreement is terminated because it has not closed,
`Microsoft may have to pay Activision a $3 billion termination fee. (PX0083-091, Sec. 8(c).)
`Following the merger, “[Activision Blizzard] will continue as the surviving corporation of the
`Merger and a Subsidiary of Parent [Microsoft].” (PX00083-024; see also RX5058 (Hood Decl.) at
`¶ 6 (discussing Microsoft’s plan to maintain Activision as a limited-integration studio).
`
`C.
`The Video Game Industry
`Video gaming generates hundreds of billions of dollars of revenue a year and is projected
`to grow substantially in the future. (Dkt. No. 283, 6/23/23 Tr. (Spencer) at 404:12–16; Dkt. No.
`285, 6/28/23 Tr. (Kotick) at 710:16–17 (“[T]he business has evolved to be what’s today probably
`a $130 billion-a-year industry.”).) Gaming grew to record high levels during the global pandemic,
`with people seeking at-home entertainment options more than ever before. (RX3136; Dkt. No.
`285, 6/28/23 Tr. (Bailey) at 789:16–22.)
`
`1.
`Gaming Platforms
`Video games are available to play across a wide range of platforms, including mobile, PC,
`and console. (Dkt. No. 283, 6/23/23 Tr. (Spencer) at 404:6–405:3 (discussing RX3166-003); see
`also Dkt. No. 284, 6/27/23 Tr. (Bailey) at 661:3–23.) Games can be played on general purpose
`PCs or gaming PCs, but gaming PCs typically have more advanced hardware to allow them to
`play more computationally demanding games. (PX8001 (Ryan Decl.) at ¶ 15.) Conversely,
`games played on mobile have lower graphics and are less sophisticated than games played on
`consoles or gaming PCs. (PX0003-073.) The three primary console makers are Microsoft (Xbox
`Series X|S), Sony (PlayStation 5), and Nintendo (Switch). (PX1777-008; Dkt. No. 226-2, Lee
`Decl. at ¶ 13.)
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`a.
`Console Gaming
`Video game consoles are consumer devices designed for, and whose primary use is, to play
`video games. (PX8001 (Ryan Decl.) at ¶ 10.) Consumers purchase video game consoles based on
`the hardware features of the consoles as well as the availability of game content on the console.
`(PX8001 (Ryan Decl.) at ¶¶ 4, 11; PX7053 (Ryan Dep. Tr. Vol. I) at 21:1-5.) Console
`manufacturers earn revenues from several sources: sales of consoles and accessories like game
`controllers, headsets, supplemental storage, cables, and power supplies (i.e., hardware) and
`revenue shares or royalties from sales of video game titles (i.e., software) and accessories for the
`console. (PX8001 (Ryan Decl.) ¶ 4; PX0003-016.) Console manufacturers can also earn revenue
`from post-sale monetization. For example, console manufacturers may split royalties with
`publishers and developers on the sale of add-on content or in-game purchases. (PX1110-012;
`PX1065-003.)
`Microsoft entered the gaming industry in 2001 with the launch of its first Xbox video game
`console, competing with the established incumbents Sony and Nintendo. (RX5055-100.) With
`every succeeding generation, Sony, Nintendo, and Xbox have remained the three major console
`producers, and have been engaged in what some refer to as the “console wars.” (PX7054 (Ryan
`Dep. Tr. Vol. II) at 25:22–26:8 (reporting since the release of PlayStation 5 and Xbox Series X|S,
`Xbox outsold PlayStation “about three months”); Dkt. No. 283, 6/23/23 Tr. (Spencer) at 294:23-
`295:6; Dkt. No. 285, 6/28/23 Tr. (Nadella) at 850:4 (describing the console market as “us and
`Sony and Nintendo”).)
`Each console generation represents an opportunity to “win” the console generation by
`shifting the distribution of gamers onto their respective consoles. (PX8001 (Ryan Decl.) at ¶ 11.)
`In the United States, Microsoft won Generation 7 with the Xbox 360 pitted against the PlayStation
`3. (Id.) However, Sony won Generation 8 with the PlayStation 4. (Id.) In this current
`generation—the ninth generation—the Xbox Series X and PlayStation 5 both launched with a
`price of $499 in November 2020 in direct competition. (RX5055-076, Ex. 42; PX0003-050; see
`also Dkt. No. 282, 6/22/23 Tr. (Booty) at 57:21-58:2, 58:25-59:4.) Microsoft released the Xbox
`Series S at the same time as the Series X, and at the same price point ($299) as the Nintendo
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`Switch which had been released three years earlier. (PX7059 (Prata Dep.) at 19:24-20:1; PX8002
`(Prata Decl.) at ¶ 2; see Dkt. No. 285, 6/28/23 Tr. (Bailey) at 783:11–19; RX5055-076, Ex. 42;
`PX0003-050.)
`In recent years, Xbox’s console has consistently ranked third (of three) behind PlayStation
`and Nintendo in sales. (Dkt. No. 282, 6/22/23 Tr. (Bond) at 129:3-4; Dkt. No. 283, 6/23/23 Tr.
`(Spencer) at 295:2–6, 9-10; RX5046.) In 2021, Xbox had a
` share of the console market,
`while Nintendo and PlayStation had a
`and
` share, respectively. For console revenues and
`share of consoles currently in use by gamers (“installed base”), Xbox trails with
` while
`, respectively.
`PlayStation and Nintendo have shares of
` and
`While consoles were once the predominant form of home gaming, they now represent a
`smaller share of video game revenue than either mobile or PC. (Dkt. No. 282, 6/22/23 Tr. (Bond)
`at 127:16-128:1; RX3166-003.)
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`b.
`Mobile Gaming
`Most gamers today play on mobile devices, which is also the fastest growing segment as
`the technical capabilities of mobile devices increase. (Dkt. No. 282, 6/22/23 Tr. (Bond) at
`127:24–128:1; Dkt. No. 283, 6/23/23 Tr. (Spencer) at 392:5–6, 392:10–12, 404:11, 404:21-22;
`Dkt. No. 285, 6/28/23 Tr. (Kotick) at 712:1-12, 732:4-20; id. at 712:8-9 (“And so today the bulk
`of games are played on phones . . . .”); Dkt. No. 284, 6/27/23 Tr. (Bailey) at 661:6–23; see also
`RX5058 (Hood Decl.) at ¶ 14 (“$113 billion of the game industry’s total revenues of $210 billion
`came from mobile gaming in 2020”).) Growth in mobile gaming is expected to continue, as
`microprocessors equivalent to those used in past video game consoles are increasingly becoming
`more powerful and incorporated into phones. (See, e.g., Dkt. No. 285, 6/28/23 Tr. (Kotick) at
`720:7-11 (explaining mobile is “the biggest part of the market”).)
`
`c.
`PC Gaming
`After mobile, PC gaming is the next largest source of video game revenue. (Dkt. No. 284,
`6/27/23 Tr. (Bailey) at 661:11-12.) Jim Ryan, Sony Interactive Entertainment’s CEO, referred to
`PC gaming as “a very direct competitor to the PlayStation platform.” (PX7053 (Ryan Dep. Tr.
`Vol. I) at 112:17-22.) In fact, “Sony delays the launch of their games on PC because they’re
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`trying to drive people to buy a PlayStation.” (Dkt. No. 283, 6/23/23 Tr. (Spencer) at 363:20-22;
`see also RX5055 at ¶ 91; Dkt. No. 285, 6/28/23 Tr. (Bailey) at 786:13-787:4.) Games can be
`played on general purpose PCs or gaming PCs, but gaming PCs typically have more advanced
`hardware to allow them to play more computationally demanding games. (PX8001 (Ryan Decl.) at
`¶ 15.)
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`d.
`Cross-Platform Play
`Games can be single-player or multi-player. Single-player games are normally story-
`driven, and other characters in the game are computations in the game rather than real people. In
`multiplayer games, players are matched with other people of similar skill level, and players
`interact in real time. (Dkt. No. 282, 6/22/23 Tr. (Bond) at 134:5-19.) Gamers can now play
`certain multiplayer games across platforms. For example, a gamer on PlayStation can now play
`many games with other gamers playing on another platform, like Nintendo or Xbox or PC. That
`mode of play is referred to as “cross-platform” gaming or “cross-play.” (Dkt. No. 282, 6/22/23 Tr.
`(Bond) at 135:7-17.) In most multiplayer games, a gamer selects multiplayer game mode, the
`game matches the gamer with other gamers, and the gamers are then placed in a lobby and either
`enter the game or are placed in teams. (See Dkt. No. 282, 6/22/23 Tr. (Bond), at 134:5-19; Dkt.
`No. 284, 6/27/23 Tr. (Bailey) at 669:24-670:4, 672:2-7.) Cross-play makes games more valuable
`to consumers because they can play the game with friends and access larger lobbies of players.
`(See, e.g., Dkt. No. 284, 6/27/23 Tr. (Bailey) at 669:22-670:4; Dkt. No. 285, 6/28/23 Tr. (Kotick),
`at 716:5–8; see also id. at 713:23-714:10 (“[T]he big evolution of the industry has been this
`transformation to the social experience.”), 715:18-24.) Many of the most popular multiplayer
`titles (e.g., Fortnite, PUBG, Call of Duty, and Minecraft) allow gamers to cross-play between at
`least PC and console. (See, e.g., Dkt. No. 282, 6/22/23 Tr. (Bond) at 152:18-153:2 (Call of Duty).)
`
`2.
`Gaming Content
`A game publisher brings games to market and sometimes provides funding to the game
`developer to do so. (PX7014 (Booty Investigational Hearing “IH” Tr. at 28:5-15.) A developer
`creates the assets for a game, including writing the code and designing the art. (Dkt. No. 282,
`6/22/23 Tr. (Booty) at 50:14-19; PX7014 (Booty IH Tr.) at 28:5-15.) First-party content is created
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`and developed by a console manufacturer at an in-house studio. (Dkt. No. 282, 6/22/23 Tr.
`(Booty) at 50:25-51:2; Dkt. No. 226-2, Lee Decl. at ¶ 15; PX7014 (Booty IH Tr.) at 58:20–59:9.)
`Microsoft’s first-party content is created at Xbox Game Studios. (PX9050-015; PX0003-016.)
`Some of Microsoft’s first-party franchises include DOOM, Forza, Gears of War, Halo, Minecraft,
`and The Elder Scrolls. (PX9252-001.)
`Third-party content refers to games independently developed and published by a third-
`party publisher. (Dkt. No. 282, 6/22/23 Tr. (Booty) at 51:6-8; Dkt. No. 226-2, Lee Decl. at ¶ 15;
`PX8001 (Ryan Decl.) at ¶ 5; PX0003-016.) Occasionally, console manufacturers will publish
`titles developed by a third-party development studio, known as second-party games. (PX8001
`(Ryan Decl.) at ¶ 5; PX7003 (Bond IH Tr.) at 152:2-10; PX0003-016.) Console manufacturers
`typically negotiate publisher license agreements with game publishers setting the terms for any
`titles the console manufacturer ships from the publisher. (Dkt. No. 283, 6/23/23 Tr. (Spencer) at
`420:11-421:2.) For second- or third- party developers, console manufacturers create development
`kits for those second- or -third- party developers to use to ensure the game will run on the console.
`(Dkt. No. 282, 6/22/23 Tr. (Bond) at 156:7-17.)
`Both consumers and industry participants acknowledge content drives sales. As a 2021
`Microsoft document states: “In the business of gaming, content remains king.” (Dkt. No. 226-2,
`Lee Decl. at ¶ 22 (citing PX1070-003); see also PX1538-005; PX1087-001 (“well said, content is
`king”); PX9102-009 (“The big bets we have made across content, community, and cloud over the
`past few years are paying off … Our differentiated content is driving the service’s growth.”).)
`The gaming industry recognizes four independent publishers, collectively known as the
`“Big 4”: Activision, Entertainment Arts, Take-Two, and Ubisoft. (PX1019 (Microsoft) at 004
`
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`a.
`AAA Content
`“AAA” content is an industry term and can be synonymous with “a tentpole title, a
`marquee title, a big blockbuster title” that has a high development budget and high expectations
`for sales. (Dkt. No. 282, 6/22/23 Tr. (Bond) at 147:20-148:2 (“[AAA] tends to imply a game of a
`certain size and scope, a certain level of investment put into the game”); PX7046 (Leder Dep.) at
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`97:1-11; PX7011 (Spencer IH Tr. Vol. 1) at 36:22-37:3 (“I wouldn’t say there’s an industry
`definition for what AAA actually means. I think the notion of a AAA game is a game with a high
`development budget with presumably a high expectation for -- for sales and kind of splash when it
`launches.”); PX8001 (Ryan Decl.) at ¶ 20 (“AAA games often feature cinematic storytelling,
`immersive environments, and detailed graphics.”).) AAA games are “immersive,” “major
`blockbuster titles” that tend to include “thoughtful, long storyline[s]” with significant “compute
`power” and “graphic fidelity.” (Dkt. 228 (Joint Stip. and [Proposed] Order) at 4.) AAA games are
`particularly important in the gaming industry. (PX8001 (Ryan Decl.) at ¶¶ 18-23; Dkt. No. 282,
`6/22/23 Tr. (Booty) at. 51:20-52:8.) Phil Eisler, Vice President and General Manager of Nvidia
`GeForce NOW, testified “Access to AAA titles, which are the latest, most-popular gaming
`franchises, is critical to the success of any gaming platform.” (PX8000 (Eisler Decl.) at ¶ 30.)
`Eisler explained the challenge: “[t]oday’s AAA video games . . . require tens of millions of
`dollars (in some cases over $100 million) and years to produce.” (Id. at ¶ 31.) Developing games
`has become more expensive in the last five to ten years, with games on average taking longer to
`develop and experiencing delays in development. (Dkt. No. 282, 6/22/23 Tr. (Booty) at 53:10-
`21.) The immense costs to develop quality games has limited the number of publishers with a
`proven track record of making AAA titles.
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` (PX1063-003.) Activision CEO Bobby
`Kotick concluded sustaining AAA games requires broad and deep capabilities, and even then, a
`AAA title is not guaranteed (though Mr. Kotick admits Activision has the capability to release a
`AAA game every single year). (Dkt. No. 285, 6/28/23 Tr. (Kotick) at 43:14-22.)
`
`b.
`Exclusive Content
`Each of the three major console companies is also a vertically integrated first-party game
`developer and publisher. And while each has a collection of platform-exclusive titles, “the
`Nintendo Switch, the PlayStation, they both have significantly higher number of exclusive games
`on their platform than Xbox does.” (Dkt. No. 283, 6/23/23 Tr. (Spencer) at 346:25–347:2; see
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`also id., 6/23/23 Tr. (Spencer) at 440:24-441:4 (exclusives are “an established part of the console
`business, the video game business, and Sony and Nintendo are very strong with their exclusive
`games.”).)
`As a game publisher, Sony’s PlayStation Studios, is responsible for blockbuster hits like
`God of War, The Last of Us, and Spider-Man, the vast majority of which can be played only on
`PlayStation. (See PX7053 (Ryan Dep. Tr. Vol. I) at 20:16–20:23; RX5055 at 015–016.) And as a
`purchaser of third-party games,
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` (PX7054 (Ryan Dep. Tr. Vol. II) at 107:10–18.; Dkt. No. 283,
`6/23/23 Tr. (Spencer) at 357:12–16.)
`Sony views exclusive content as crucial to PlayStation’s continued success and to
`“differentiate [their] platform.” (PX7053 (Ryan Dep. Tr. Vol. I) at 212:19–23; RX0079.) As a
`result, Sony offers far more exclusive first- and third- party titles than Xbox. (PX7053 (Ryan Dep.
`Tr.) at 169:24–170:2; Dkt. No. 283, 6/23/23 Tr. (Spencer) at 362:17–23.) Sony also enjoys “an
`enormous competitive advantage” because it can draw on the intellectual property of “Sony
`Music, Sony TV, and Sony’s film library” for its game development. (Dkt. No. 285, 6/28/23 Tr.
`(Kotick) at 723:13-16.) The number of exclusive games available on PlayStation dwarfs the
`number available on Xbox, with eight exclusive games on PlayStation for every one on Xbox.
`(RX2098-001 (“Overall, for every 1 exclusive Microsoft game, PlayStation has 8 of them.”); see
`Dkt. No. 284, 6/27/23 Tr. (Bailey) at 684:3–25; RX5055 at 018–019, Exs. 11A, 11B; Dkt. No. 285,
`6/28/23 Tr. (Nadella) at 849:1–8 (“The dominant player [i.e., Sony] there has defined market
`competition using exclusives and so that’s the world we live in.”).)
`Sony has often paid third-party studios to “skip” Xbox—either entirely or to delay a title’s
`release on Xbox. (Dkt. No. 283, 6/23/23 Tr. (Spencer) at 313:4–8.) For example, on June 22,
`2023, while this trial was happening, Square Enix released Final Fantasy XVI, the latest release in
`the iconic Final Fantasy franchise, exclusive to PlayStation 5. Previous versions of Final Fantasy
`shipped on Xbox, but the reason Final Fantasy XVI is a PlayStation exclusive is because Sony
`“pa[id] to exclude Xbox.” (Id. at 312:20–313:8, 441:18–443:1.) ZeniMax, too, was paid by Sony
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`not to ship Deathloop or Ghostwire for Xbox, and one of the reasons Microsoft bought ZeniMax
`was concern Sony would also arrange for Starfield to go exclusive and skip Xbox. (Id. at 314:16–
`24.)
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`In addition to exclusivity, Sony also uses its market power to extract other preferential
`treatment from third-party game developers, including earlier release dates, exclusive marketing
`agreements, and exclusive in-game content. (Dkt. No. 282, 6/22/23 Tr. (Bond) at 162:1–4, 186:5–
`8.)
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`Nintendo is also a significant first-party publisher with some of the most popular exclusive
`game franchises in the world, including Mario, Zelda and Pokémon. (RX5055 at 026–032, Exs.
`15–19.)
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`c.
`Activision Content
`Activision generates 80% of its annual revenue—which totaled $8.5 billion in fiscal year
`2022—from three video game franchises. These core video game franchises are Call of Duty,
`which is developed by Activision; World of Warcraft (“WoW”), a PC-only game, which is
`developed by Blizzard; and Candy Crush, a mobile game, which is developed by King. (RX3166
`at 010; RX5058 (Hood Decl.) at ¶15.) Activision’s CEO Bobby Kotick testified Activision’s
`games are “iconic” and “beloved” because of the “duration, the popularity, the joy, and the fun
`people experience” with Activision games. (PX7006 (Kotick IH Tr.) at 74:23-76:4; Dkt. No. 285,
`Tr. (Kotick) at 736:1-9.)
`
`i.
`Call of Duty
`The Call of Duty games are first-person shooter games based on “military conflict through
`history.” (Dkt. No. 285, 6/28/23 Tr. (Kotick) at 712:21-713:9; Dkt. No. 282, 6/22/23 Tr. (Bond) at
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`152:18-23; Dkt. No. 282, 6/22/23 Tr. (Hines) at 112:10-20.) Call of Duty has a massive
`following, with
` monthly active users in 2020, according to an Activision strategy
`document. (PX2094-007.) Since its first release in 2003, Call of Duty has become one of the
`most successful video game franchises in history, earning approximately
` in sales
`revenue annually. (PX9005-004.) Call of Duty has been the best-selling game in the United
`States every single year for the past 13 years and the 2022 release of Call of Duty: Modern
`Warfare was the best-selling Call of Duty title of all time and the highest grossing entertainment
`opening of the year, making $2 billion dollars in the first ten days of its release. (Dkt. No. 285,
`6/28/23 Tr. (Kotick) at 736:19-737:5.)
`Call of Duty games have been continuously available on both PlayStation and Xbox
`consoles since 2003. (Dkt. No. 285, 6/28/23 Tr. (Kotick) at 714:12-715:12, 720:1-6.) Activision
`typically releases a new buy-to-play Call of Duty game every year. (Dkt. No. 285, 6/28/23 Tr.
`(Kotick) at 736:12-18 (Call of Duty released every year); Dkt. No. 282, Tr. (Bond) at 128:23-25
`(games cost $70).) This annual release cycle is unique among AAA games, with the exception of
`sports games, because games of this caliber often require immense time and resources that take
`years in between releases. (PX8001 (Ryan Decl.) at ¶ 25.) Activision uses four separate studios
`and several support studios to complete the development work necessary to launch an annual
`release. (PX8001 (Ryan Decl.) at ¶ 25; PX3378-015 (Ryan Hr’g Testimony) at 52:1-19
`(“[Activision has] been able to organize themselves to release basically new [Call of Duty] games
`every single year. And the games are different, unique games. There’s nothing like it in the
`industry.”).)
`The latest annual Call of Duty titles are playable across platforms via a cross-play feature.
`(Dkt. No. 282, 6/22/23 Tr. (Bond) at 152:18-153:2.) The introduction of cross-play to Call of
`Duty has significantly improved players’ experience; the game’s online multiplayer functionality
`thrives on a large and active player base, and cross-play has increased the number of available
`players. (Dkt. No. 285, 6/28/23 Tr. (Kotick) at 716:5-8 (explaining cross-play “expands the
`market and also makes you -- let’s say you have a group of friends, not everybody’s going to have
`the same device so it gives you the opportunity to be able to play with your friends”).).
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`Activision also develops and publishes free-to-play versions of Call of Duty called Call of
`Duty: Warzone—available on PlayStation, Xbox, and Windows PC—and Call of Duty: Mobile
`(“COD: Mobile”)—available on iOS and Android mobile devices—which it monetizes through
`optional in-game microtransactions. (Dkt. No. 282, 6/22/23 Tr. (Bond) at 153:3-15; see also Dkt.
`No. 285, 6/28/23 Tr. (Kotick) at 720:3-11.) “Half of [the Call of Duty franchise’s] monthly active
`players play on phones.” (Dkt. No. 285, 6/28/23 Tr. (Kotick) at 716:17-21; see also id. at 719:2-6
`(“[T]he bulk of players [in the Call of Duty franchise] are playing on phones.”).) Recently, COD:
`Mobile reached 150 million monthly annual users. (Dkt. No. 286, 6/29/23 Tr. (Stuart) at 1033:3-
`6.) Cross-play also exists in the free-to-play Call of Duty: Warzone. (See Dkt. No. 285, 6/28/23
`Tr. (Kotick) at 719:7-720:2 (noting the free-to-play Warzone is playable on PlayStation, PC, and
`Xbox).) Call of Duty: Warzone will be available on mobile this fall, and like the console and PC
`versions, it will be available as a multiplayer game across mobile devices. (See Dkt. No. 285,
`6/28/23 Tr. (Kotick) at 720:1-10; 721:9-13.)
`Call of Duty is not currently available on the Nintendo Switch. (Dkt. No. 285, 6/28/23 Tr.
`(Kotick) at 768:8-13.) It is also not currently available on any cloud gaming services or
`multigame game subscription libraries upon release. (Dkt. No. 285, 6/28/23, Tr. (Kotick) at
`734:2-5, 731:12-14.)
`
`ii.
`Other Activision Content
`King’s Candy Crush franchise consists of casual, free-to-play puzzle games made for
`mobile devices. (Dkt. No. 285, 6/28/23 Tr. (Kotick) at 725:25-726:6.) Candy Crush generated
`approximately
` in revenue in fiscal year 2022—roughly
` of Activision’s overall
`annual revenue. King primarily monetizes Candy Crush through optional in-game
`microtransactions, and also generates revenue through in-game advertising placements. (Dkt. No.
`285, 6/28/23 Tr. (Kotick) at 726:24-727:4.)
`Blizzard’s popular World of Warcraft franchise principally consists of a massively-
`multiplayer-online fantasy role-playing game, and related expansions and content released over
`the course of the past 20 years. (See Dkt. No. 285, 6/28/23 Tr. (Kotick) at 730:1-18.) Blizzard
`makes World of Warcraft available for PCs on a subscription-based model. (See, e.g., Dkt. No.
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`285, 6/28/23 Tr. (Kotick) at 730:1-7.) The Warcraft franchise also includes the free-to-play
`mobile game, Hearthstone. (RX3166-010.)
`Activision also develops and publishes other games, including Diablo and Overwatch, both
`of which are developed and published by Blizzard. Blizzard’s Diablo franchise and Overwatch 2
`generated approximately
` and
` in revenue in fiscal year 2022,
`respectively. Diablo is a fantasy role-playing franchise available on gaming consoles, PCs, and
`mobile devices. While most Diablo titles are available for sale on a buy-to-play basis, the mobile
`entry in the Diablo franchise, Diablo Immortal, is free to play. Overwatch is a free-to-play,
`multiplayer team-based shooter franchise (which was previously buy-to-play) available on gaming
`consoles and PCs, which Blizzard monetizes through optional in-game microtransactions.
`(RX3166-010.)
`Indeed, the only Activision titles made available on multigame subscription services have
`been back-catalog games offered for a limited period of time, often for promotional purposes,
`rather than new games made available day and date. (Dkt. No. 285, 6/28/23 Tr. (Kotick) at 774:9-
`24; see also Dkt. No. 285, 6/28/23 Tr. (Kotick) at 747:3-10, 750:10-13 (acknowledging occasional
`placement of “a very old catalog title for a short period of time” on subscription services).)
`
`3.
`Access to Gaming Content
`Gamers can access games through a growing variety of payment and distribution models.
`The diversity of payment and distribution models has increased the accessibility of games and
`expanded gamer choice. (Dkt. No. 283, 6/23/23 Tr. (Spencer) at 392:24-393:10.) Most gamers
`obtain entitlements to access and play console games via the “buy-to-play” model of purchasing
`the games in the form of a cartridge, DVD or Blu-Ray disc, or digital download for an upfront
`price (e.g., $70) and adding them to their own libraries. (Dkt. No. 282, 6/22/23 Tr. (Bond) at
`128:23-25, 138:2-20.) Sony and Xbox also offer users the option of accessing games through
`subscriptions. (Dkt. No. 282, 6/22/23 Tr. (Bond) at 146:17-24, 192:25-193:3; Dkt. No. 283,
`6/23/23 Tr. (Spencer) at 421:21-23; PX7053 (Ryan Dep. Tr. Vol. I) at 260:6-21.)
`
`a.
`
`Multi-Game Content Subscription Services
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`With multigame subscription offerings, gamers pay a flat monthly fee to access a library of
`games. In the case of most subscription offerings, subscribers download the games they want to
`play to their devices (just as they would a buy-to-play game), and then play them usin