Microsoft has been busily consuming a number of key players across the games industry in recent years, and a leaked internal email shows it was planning two other major acquisitions that never materialized. In its bid to fuel Xbox Game Pass, potential acquisitions of Bungie and Sega were on the table, as revealed by internal documents from the FTC v. Microsoft hearing.
An image of an email to Microsoft CEO Satya Nadella and Microsoft CFO Amy Hood by Phil Spencer shows the head of Xbox seeking approval to explore the possibility of acquiring Sega’s gaming studios. Spencer cites Sega’s well-rounded portfolio of games with broad global appeal, expressing his belief that such an acquisition would significantly accelerate the growth of Xbox Game Pass.
Fuel For Xbox Game Pass
Spencer clearly saw the acquisition of Sega as a means to enhance Xbox Game Pass subscriptions across PC, console, and cloud gaming. The streaming service is in constant need of new games to provide value to its subscribers, which explains Microsoft’s appetite for game studios in recent times.
As related to Sega in particular, Spencer emphasized the potential for expanding Game Pass’s reach in Asia, where localized content plays a vital role in achieving success. Sega’s beloved intellectual property was regarded as globally appealing and held promising opportunities for future monetization through in-game transactions.
The outcome of the Sega acquisition plans, including whether Nadella approved further discussions, remains uncertain. However, an internal Microsoft merger review document from April 2021 still identified Sega as a key target. The document underscored Microsoft’s strategic focus on acquiring companies in the PC, mobile, and console markets across different regions.
Interestingly, there were several other companies on Microsoft’s list of potential acquisitions. Alongside Sega, Bungie, Zynga, and IO Interactive are mentioned, as seen in the image below.
Bungie, now under Sony’s ownership, featured on Microsoft’s acquisition list. The internal document highlighted the value of securing Bungie’s intellectual property, particularly Destiny and its dedicated community. Integration of Bungie’s development and live operations infrastructure into Xbox Game Studios was also deemed advantageous. Microsoft acknowledged the potential risks associated with Bungie’s high burn rate and recognized Destiny as one of the top titles driving substantial hours of gameplay on console Game Pass.
In 2021, IO Interactive, the developer behind the Hitman series, made it to the “final watchlist” alongside mobile-focused companies such as Thunderful, Supergiant Games, Niantic, Playrix, and Zynga. While Microsoft engaged in talks to acquire Zynga, the company ultimately shifted its focus to Activision Blizzard for its mobile ambitions. The extent of Microsoft’s discussions with other mobile-focused companies remains unclear.
In other recent Microsoft news, its flagship studio Bethesda Softworks is readying to launch Starfield. Fans of The Elder Scrolls, though, should prepare for a long wait.