Microsoft's Game Plan Unveiled: A Sneak Peek into Gaming's Future

Politics, News Sept. 20, 2023, 6:09 a.m.

Leaked 2022 documents reveal Microsofts gaming strategy, emphasizing advertising and mobile growth, a new Xbox console for 2028, and the pivotal role of the pending Activision Blizzard acquisition.

Microsoft's Gaming Growth Strategy Unveiled: Insights from Leaked 2022 Documents

In a surprising turn of events, internal documents inadvertently published on a court website have shed light on Microsoft's strategic vision for the gaming industry in the coming years. These documents, sourced from a Microsoft presentation in May 2022, offer intriguing glimpses into the company's anticipated revenue sources, the pending Activision Blizzard acquisition, and the evolution of its gaming hardware lineup.

Legal Battles and Unintentional Disclosure

This revelation comes as part of Microsoft's ongoing legal dispute with the Federal Trade Commission (FTC) regarding its proposed acquisition of Activision Blizzard. Earlier documents from this case have revealed Microsoft's ambitious goal of achieving $500 billion in total revenue by the 2030 fiscal year, as well as its meticulous analysis of corporate clients' utilization of rival products.

Judicial Favor and Redactions

Back in July, a significant victory for Microsoft and Activision was handed down by Judge Jacqueline Scott Corley of the U.S. District Court for the Northern District of California. Since then, the involved parties have been seeking and receiving court approval to redact sensitive information before making documents publicly accessible.

A recent court order, dated September 14, disclosed that Microsoft had shared a link to documents, including the May 2022 presentation. After these documents were uploaded to the court's website, parties involved alerted the court to the presence of nonpublic information, prompting Corley to promptly remove them from public view.

Insights into Microsoft's Gaming Future

The leaked presentation offers a tantalizing glimpse into Microsoft's plans for the gaming sector, including the launch of a new Xbox console slated for 2028. This console will follow the Xbox Series X and Series S, released in 2020, marking a significant milestone in the company's gaming hardware lineage.

Another noteworthy detail in the documents outlines the features of updated versions of the Series X and Series S consoles, along with an improved controller, all scheduled for a 2024 release.

The Role of Advertising and Mobile

While the presentation surprisingly makes no direct mention of the $68.7 billion Activision acquisition announced several months earlier, it is evident that Activision plays a pivotal role in achieving the ambitious revenue targets outlined in the documents.

The documents project a substantial surge in gaming revenue, with a doubling from $18 billion in the 2022 fiscal year to an impressive $36 billion by the 2030 fiscal year. For context, actual gaming revenue for fiscal 2022 was reported at $16.23 billion in the company's annual report.

Microsoft's CEO of gaming, Phil Spencer, expressed regret that such confidential plans had come to light through this legal process, emphasizing the unintended nature of their public disclosure.

Expanding Horizons with Activision

The completion of the Activision acquisition promises to expand Microsoft's transaction sales across consoles and PCs, potentially attracting more subscribers to its Game Pass library. These growth avenues are integral components of Microsoft's fiscal 2030 revenue forecast.

However, the most significant growth is anticipated in two relatively nascent sectors: advertising and mobile transactions. Although Microsoft collaborates with Yahoo to sell display ads for Xbox consoles, these ads are not yet ubiquitous.

One pivotal aspect is Activision Blizzard's acquisition of King Digital Entertainment in 2016, renowned for the Candy Crush franchise of mobile games. This acquisition allowed Activision Blizzard to tap into revenue streams from in-app purchases and advertising, with the King subsidiary contributing approximately $2.79 billion in revenue in 2022, reflecting an 8% increase.

A Shift towards Mobile-Centric Strategy

Internal emails from 2020 reveal that Microsoft perceives Activision as a "mobile-first publisher." This perspective aligns with the presentation's projections, indicating that Microsoft anticipates its advertising revenue to skyrocket to $1.4 billion in fiscal 2030 from a modest $100 million in fiscal 2022. Additionally, the company envisions revenue from mobile transactions reaching an impressive $2.6 billion, up from zero in fiscal 2022. Collectively, these two categories are expected to constitute $4 billion or 11% of total gaming revenue.

Closing the Activision Deal

Microsoft's focus now shifts towards finalizing the Activision transaction by October 18th. The United Kingdom's Competition and Markets Authority is concurrently assessing a new proposal involving the divestment of cloud streaming rights to Activision games to Ubisoft.

In summary, these leaked documents have inadvertently unveiled Microsoft's multifaceted gaming growth strategy, highlighting the significance of the pending Activision Blizzard acquisition, as well as the company's aspirations in advertising and mobile gaming.