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Editor’s Note: This story has been updated with a statement from Microsoft.
The Federal Trade Commission (FTC) has expressed its disapproval of Microsoft Corp.'s (NASDAQ:MSFT) decision to raise the prices for Xbox Game Pass and introduce a new "degraded" standard tier.
What Happened: Last week, Microsoft announced a hike in the prices of PC Game Pass and Xbox Game Pass Ultimate and simultaneously launched a new Game Pass Standard tier.
The FTC has labeled this new tier as a "degraded product" because it will not offer day-one access to first-party Xbox games, a feature that is included in the $10.99 Game Pass for Console, as reported by The Verge.
“The FTC's Rule 28(j) letter presents a misleading, extra-record account of the facts and is a continuation of the agency's attempts to reinvent its case on appeal. It is wrong to call this a "degraded" version of the discontinued Game Pass for Console offering. That discontinued product did not offer multiplayer functionality, which had to be purchased separately,” Microsoft said in response to FTC’s filing, as seen by Benzinga.
The Xbox Game Pass Standard, priced at $14.99, will only provide online multiplayer. The FTC, in a submission to the US Court of Appeals for the Ninth Circuit, argued that Microsoft’s price increases, product degradation, and reduced investments in output and product quality are signs of a company exercising market power post-merger with Activision Blizzard.
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This criticism is part of the FTC’s ongoing appeal against a district court’s decision not to prevent Microsoft’s acquisition of Activision Blizzard last year.
The $68.7 billion deal was completed in October, but the Ninth Circuit Court of Appeals is still to decide on the FTC’s appeal.
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Why It Matters: Microsoft’s decision to increase the prices of its Xbox Game Pass was not unexpected. In September, Phil Spencer, the head of Xbox, had already hinted at an "inevitable" price hike for the service, citing inflation and economic factors.
However, the restructuring of the Game Pass tiers and the significant price increases were officially announced earlier this month. The standard Xbox Game Pass tier no longer includes day-one releases, such as Call of Duty: Black Ops 6.
These changes followed the $69 billion acquisition of Activision Blizzard by Microsoft, which was approved by the Competition and Markets Authority (CMA) in Britain in October 2023, after Microsoft agreed to sell Activision's game streaming rights to Ubisoft Entertainment.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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Posted In: MSFT
