Sega: Microsoft wanted to acquire Sega and other game companies, read the email from November 2021 – Times of India
An internal document from FTC v. Microsoft has revealed that the company was planning to boost the game offering in its Xbox Game Pass to take on Sony PlayStation. The key takeaway from the document is that the company was planning to acquire both Bungie and Sega.
The email sent by Xbox chief Phil Spencer to Microsoft CEO Satya Nadella and CFO (seen by The Verge) mentioned a strategy approval for approaching Sega Sammy over acquiring Sega gaming studios.
Microsoft wanted to buy Sega and Bungie
According to the email, Spencer wanted to approach Sega Sammy and he mentioned that he and Bill Gates have reviewed the business case of acquiring Sega and both were positive on this idea. He further added that “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”. The approach was to expand the game portfolio on the subscription model to offer more content for players, especially in Asian regions where players relate more with the localised content.
This means, Microsoft was planning to acquire Sega in order to expand its Xbox Game Pass portfolio and accelerate the subscription across all platforms including Xbox consoles, PC and cloud.
Sega acquisition details are unclear
The main dates back to November 2021 and it has been almost 20 months now. But, no news about the entire acquisition idea has panned out to date. That said, the internal email did mention Sega as the top target for acquisition. Also, it is still not clear whether Microsoft’s current CEO has agreed on the idea of acquiring Sega or not.
Apart from Sega, the list also includes Bungie, Zynga and IO Interactive as the target companies for acquisition.
Read the complete email
“I’m writing to request Strategy Approval to approach Sega Sammy regarding a potential acquisition of their Sega gaming studios. For context, Bill and I have reviewed the business case for acquiring Sega and are both supportive. 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. Please find the attached memo and bullets below for additional detail on our strategy to prioritize our next acquisition target, a brief overview of Sega’s gaming portfolio, and the value drivers for the potential acquisition.
As the Sega gaming studios are owned by Sega Sammy, a publicly-traded Japanese company, we have called out a few deal complexities in the memo. Sega’s gaming has represented roughly half of Sega Sammy’s revenue and operating income, or -$900M of revenue and $60-90M of operating income, in each of Sega Sammy’s last three fiscal years. The team is coordinating closely with CELA on next steps, if we were to receive SA.
Please let us know if you have any questions or concerns, or would like us to schedule time to discuss live.
Thanks,
Phil
Prioritizing Acquisition Targets
To help inform our next strategic acquisition target, we have identified top priority segment and geographic combinations for Xbox, in order:
• PC in North America and Europe
• Mobile in North America and Europe
Console and PC in APAC
Keeping in mind these leading priorities, we evaluated a set of targets, both individually and in combination of our own studios, to determine the best strategic fit. Sega is the most attractive next acquisition target due to its global PC catalog, presence on mobile in Asia, and global brand affinity on console through its classic IP.
The email sent by Xbox chief Phil Spencer to Microsoft CEO Satya Nadella and CFO (seen by The Verge) mentioned a strategy approval for approaching Sega Sammy over acquiring Sega gaming studios.
Microsoft wanted to buy Sega and Bungie
According to the email, Spencer wanted to approach Sega Sammy and he mentioned that he and Bill Gates have reviewed the business case of acquiring Sega and both were positive on this idea. He further added that “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”. The approach was to expand the game portfolio on the subscription model to offer more content for players, especially in Asian regions where players relate more with the localised content.
This means, Microsoft was planning to acquire Sega in order to expand its Xbox Game Pass portfolio and accelerate the subscription across all platforms including Xbox consoles, PC and cloud.
Sega acquisition details are unclear
The main dates back to November 2021 and it has been almost 20 months now. But, no news about the entire acquisition idea has panned out to date. That said, the internal email did mention Sega as the top target for acquisition. Also, it is still not clear whether Microsoft’s current CEO has agreed on the idea of acquiring Sega or not.
Apart from Sega, the list also includes Bungie, Zynga and IO Interactive as the target companies for acquisition.
Read the complete email
“I’m writing to request Strategy Approval to approach Sega Sammy regarding a potential acquisition of their Sega gaming studios. For context, Bill and I have reviewed the business case for acquiring Sega and are both supportive. 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. Please find the attached memo and bullets below for additional detail on our strategy to prioritize our next acquisition target, a brief overview of Sega’s gaming portfolio, and the value drivers for the potential acquisition.
As the Sega gaming studios are owned by Sega Sammy, a publicly-traded Japanese company, we have called out a few deal complexities in the memo. Sega’s gaming has represented roughly half of Sega Sammy’s revenue and operating income, or -$900M of revenue and $60-90M of operating income, in each of Sega Sammy’s last three fiscal years. The team is coordinating closely with CELA on next steps, if we were to receive SA.
Please let us know if you have any questions or concerns, or would like us to schedule time to discuss live.
Thanks,
Phil
Prioritizing Acquisition Targets
To help inform our next strategic acquisition target, we have identified top priority segment and geographic combinations for Xbox, in order:
• PC in North America and Europe
• Mobile in North America and Europe
Console and PC in APAC
Keeping in mind these leading priorities, we evaluated a set of targets, both individually and in combination of our own studios, to determine the best strategic fit. Sega is the most attractive next acquisition target due to its global PC catalog, presence on mobile in Asia, and global brand affinity on console through its classic IP.
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