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Microsoft considered acquiring Bungie and Sega to bolster Xbox Game Pass, internal emails show

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Microsoft was looking at acquiring both Bungie and Sega, according to internal documents from the FTC v. Microsoft hearing. In an email seen by The Verge, Xbox chief Phil Spencer wrote to both Microsoft CEO Satya Nadella and Microsoft CFO Amy Hood, requesting a strategy approval to approach Sega Sammy over a potential acquisition of its Sega gaming studios.

“We believe that Sega has built a well-balanced portfolio of games across segments with global geographic appeal, and will help us accelerate Xbox Game Pass both on and off-console,” said Spencer in the November 2020 email.

Phil Spencer’s email to Microsoft CEO Satya Nadella and CFO Amy Hood.
Image: Microsoft

Microsoft believed a Sega acquisition would drive Xbox Game Pass subscriptions across PC, console, and cloud. “The global appeal of Sega’s beloved IP will help expand Xbox Game Pass’s reach to new audiences around the world, most notably in Asia, where localized content is critical to success,” said Spencer in his pitch to Nadella and Hood at the time. Sega would also offer game transactions value for monetization opportunities in the future.

It’s not clear what happened with the Sega acquisition and whether Nadella ultimately approved talks. But in a Microsoft internal April 2021 merger review document, Sega was still listed as a key target. Microsoft had identified key areas for acquisitions in PC, mobile, and console across different markets, and Sega, Bungie, Zynga, and IO Interactive were part of a number of companies Microsoft was seriously looking at acquiring.

Microsoft had a lists of key companies to acquire.
Image: Microsoft

Bungie, a now Sony-owned studio, was on the list, with Microsoft’s internal document stating that the “acquisition of Bungie will include securing valuable IP, Destiny (and its community) and integration of its dev & live ops infrastructure into Xbox Game Studios.” Microsoft had identified a “high burn-rate” risk for Bungie, alongside NetEase’s $100 million minority stake investment in 2018. It also noted that Destiny was one of the “highest hours generating titles on console Game Pass.”

Hitman developer IO Interactive was also on the “final watchlist” in 2021, alongside mobile companies like Thunderful, Supergiant Games, Niantic, Playrix, and Zynga. Microsoft was in talks to acquire Zynga before it ultimately turned its attention toward Activision Blizzard for its mobile ambitions (Zynga was eventually acquired by Take-Two). It’s not clear if Microsoft held any talks with the other mobile-focused companies.

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