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Fantastic article from Stratechery explaining a bit the historical context of videogame consoles competition, plus a specific analysis of the latest FTC/MS drama.

The company that truly took the opposite approach to Nintendo was Sony; after being spurned by Nintendo in humiliating fashion — Sony announced the Play Station CD-ROM add-on at CES in 1991, only for Nintendo to abandon the project the next day — the electronics giant set out to create their own console which would focus on 3D-graphics and package games on CD-ROMs instead of cartridges. The problem was that Sony wasn’t a game developer, so it started out completely dependent on 3rd-party developers.


One of the first ways that Sony addressed this was by building an early partnership with Namco, Sega’s biggest rival in terms of arcade games. Coin-operated arcade games were still a major market in the 1990s, with more revenue than the home market for the first half of the decade. Arcade games had superior graphics and control systems, and were where new games launched first; the eventual console port was always an imitation of the original. The problem, however, is that it was becoming increasingly expensive to build new arcade hardware, so Sony proposed a partnership: Namco could use modified PlayStation hardware as the basis of its System 11 arcade hardware, which would make it easy to port its games to PlayStation. Namco, which also rebuilt its more powerful Ridge Racer arcade game for the PlayStation, took Sony’s offer: Ridge Racer launched with the Playstation, and Tekken was a massive hit given its near perfect fidelity to the arcade version.

It was the Sony-Namco partnership, though, that was a harbinger of the future: it behooved console makers to have similar hardware and software stacks to their competitors, so that developers would target them; developers, meanwhile, were devoting an increasing share of their budget to developing assets, particularly when the PS3/Xbox 360 generation targeted high definition, which increased their motivation to be on multiple platforms to better leverage their investments. It was Sony that missed this shift: the PS3 had a complicated Cell processor that was hard to develop for, and a high price thanks to its inclusion of a Blu-Ray player; the Xbox 360 had launched earlier with a simpler architecture, and most developers built for the Xbox first and Playstation 3 second (even if they launched at the same time).

Given this, it’s positively bizarre that the FTC also claims that Microsoft lied to the E.U. with regards to its promises surrounding the ZeniMax acquisition: the company was very clear that existing cross-platform games would stay cross-platform, and made no promises about future IP. Indeed, the FTC’s claims were so off-base that the European Commission felt the need to clarify that Microsoft didn’t mislead the E.U.

Microsoft didn’t make any “commitments” to EU regulators not to release Xbox-exclusive content following its takeover of ZeniMax Media, the European Commission has said. US enforcers yesterday suggested that the US tech giant had misled the regulator in 2021 and cited that as a reason to challenge its proposed acquisition of Activision Blizzard. “The commission cleared the Microsoft/ZeniMax transaction unconditionally as it concluded that the transaction would not raise competition concerns,” the EU watchdog said in an emailed statement.
The absence of competition concerns “did not rely on any statements made by Microsoft about the future distribution strategy concerning ZeniMax’s games,” said the commission, which itself has opened an in-depth probe into the Activision Blizzard deal and appears keen to clarify what happened in the previous acquisition. The EU agency found that even if Microsoft were to restrict access to ZeniMax titles, it wouldn’t have a significant impact on competition because rivals wouldn’t be denied access to an “essential input,” and other consoles would still have a “large array” of attractive content.

Link: https://stratechery.com/2022/consoles-and-competition/