According to internal documents from the FTC v. Microsoft hearing, it was revealed that Microsoft considered acquiring both Bungie and Sega. Xbox chief Phil Spencer sent an email to Microsoft CEO Satya Nadella and Microsoft CFO Amy Hood requesting strategy approval to approach Sega Sammy about a potential acquisition of its Sega gaming studios.
In his email, Spencer stated that Microsoft believed Sega had developed a well-balanced portfolio of games with global geographic appeal. He further explained that acquiring Sega would help accelerate Xbox Game Pass, both on and off-console. He believed that Sega’s beloved intellectual property (IP) would expand Xbox Game Pass’s reach to new audiences worldwide, particularly in Asia where localized content is crucial. Additionally, he mentioned that Sega would offer valuable game transactions for future monetization opportunities.
Despite the initial email, it remains unclear what transpired regarding the potential Sega acquisition or whether Nadella approved further discussions. However, in an internal Microsoft merger review document from April 2021, Sega was still listed as a key target. Microsoft had identified PC, mobile, and console as key areas for acquisitions in different markets. Alongside Sega, Bungie, Zynga, and IO Interactive were among the companies Microsoft was seriously considering acquiring.
Bungie, now a Sony-owned studio, was also on Microsoft’s list. The internal document mentioned that acquiring Bungie would include securing the valuable IP of Destiny, along with its community, and integrating Bungie’s development and live operations infrastructure into Xbox Game Studios. Microsoft identified a “high burn-rate” risk for Bungie and noted NetEase’s $100 million minority stake investment in 2018. The document also highlighted Destiny as one of the highest hours-generating titles on console Game Pass.
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Furthermore, the document revealed that Hitman developer IO Interactive was on Microsoft’s “final watchlist” in 2021. Other mobile companies such as Thunderful, Supergiant Games, Niantic, Playrix, and Zynga were also on the watchlist. Microsoft had engaged in talks to acquire Zynga but ultimately shifted its attention to Activision Blizzard for its mobile ambitions. Zynga was eventually acquired by Take-Two. It is unclear if Microsoft had any discussions with the other mobile-focused companies.
These internal documents shed light on Microsoft’s ambitious plans for acquisitions in the gaming industry. The company recognized the value of expanding its IP portfolio, reaching new audiences globally, and capitalizing on the growing popularity of services like Xbox Game Pass. While the specific details of the potential acquisitions and their outcomes remain undisclosed, it exemplifies Microsoft’s willingness to invest in strategic partnerships to strengthen its position in the gaming market.
