Tears of the Kingdom
This post was updated with new information at 1:15 p.m. after publication at 9 a.m.
New, accidentally released documents in the FTC v. Microsoft case reveal that Microsoft was pursuing an acquisition that would have been even more ambitious than the company’s current $69 billion purchase of Activision Blizzard, expressing a desire to buy Nintendo.
The FTC quickly denied it had a hand in the sprawling document leak that occurred Tuesday morning, and Microsoft has since confirmed that it accidentally uploaded the documents itself, which have now been taken down from the court’s side. But the information has already made its way into the wild.
In an internal email, Xbox’s Phil Spencer wrote to Microsoft’s chief marketing officer, Takeshi Numoto, in the summer of 2020 about the possibility of Microsoft buying Nintendo. He cautioned that Nintendo had enough cash that it didn’t need to make a deal like this, but continued stock purchases may push it toward such a big deal. But Spencer didn’t want to do it the hard way:
“Without that catalyst, I don’t see an angle to a near term mutually agreeable merger of Nintendo and MS and I don’t think a hostile action would be a good move, so we are playing the long game.”
Spencer also said in the email that the Microsoft board was “fully supportive” of an attempt to purchase either Nintendo or Valve, the PC publisher and owner of Steam. Likewise with Warner Bros. Interactive and Zenimax, the latter of which Microsoft did purchase that same year. Spencer also says that Microsoft is playing the “long game” with Nintendo, indicating that such a purchase may remain a current goal, despite this email being from 2020:
“At some point, getting Nintendo would be a career moment, and I honestly believe a good move for both companies,” said Spencer. “It’s just taking a long time for Nintendo to see that their future exists off their own hardware.”
Yes, it may indeed take a long time for Nintendo to see their future exists off their own hardware, given that the Nintendo Switch has sold 129.5 million units and is the third best-selling console in history. Xbox One estimates topped out around 58 million. Current Series X/S estimates are closer to 20 million (Microsoft does not release these numbers itself).
This may remind you of an old story. Twenty years ago, Steve Balmer had Microsoft employees go meet to Nintendo representatives to see if they might want to be acquired. “They just laughed their asses off. Like, imagine an hour of somebody just laughing at you. That was kind of how that meeting went,” said Kevin Bachus, former director of third-party relations.
Again, the pitch back then was along the lines of Nintendo first party games coming to more powerful Microsoft hardware. But they didn’t bite back then. And there’s probably nothing to indicate they would bite now.
Mario Kart 8
The reveal of these documents probably does not help Microsoft’s case that it is not trying to buy up huge chunks of the industry indefinitely, which raises antitrust concerns. Microsoft just offered a big 10-year Call of Duty deal to Nintendo, for instance, but this is saying it would prefer to just… buy all of Nintendo using its endless war chest of cash that a rival like Sony doesn’t have (waiting for the “what if we buy Sony?” email to drop). If this Activision Blizzard deal is $69 billion, actually, a potential Nintendo acquisition would “only” be around $50 billion, its current estimated market cap in USD. But that would seem like a much more dramatic purchase, given both Nintendo’s storied history and the fact that it currently has more hardware sales than Sony and Microsoft combined. Microsoft grabbing 60-70% of that entire space would seem like the exact thing antitrust laws are designed for.
As for Valve? There’s less detail on that, but it would be far cheaper a purchase, possibly only around $7-10 billion, according to estimates. And it’s unclear if it would be more open to the idea than Nintendo. Though perhaps you could not be less open than Nintendo.
I am very curious how and if Microsoft and Nintendo respond to this one, as that’s a large admission and significant leak.
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