Xbox FTC Trial Day 3: What Was in Phil Spencer’s Missing Email?

Today’s FTC v. Microsoft trial was bad radio if you were tuning into the trial for spicy testimony. While we certainly got a few highlights, such as Jim Ryan calling Xbox Game Pass “value destructive” and admitting that Starfield exclusivity was not anti-competitive, much of the third day of testimonies was devoted to lengthy back-and-forths between lawyers and economists over the definitions of relevant markets. Not exactly easy listening.

But there are two pretty significant elements of today’s testimony that you may not read about elsewhere, as they’re not exactly headline fodder, but which may shape the ultimate verdict more than you’d expect.

Jim Ryan, Phil Eisler, and the Redacted Testimony

Much of the ink spilled over today will focus on what was in Sony Interactive Entertainment head Jim Ryan’s video deposition, but what was most interesting to me was what wasn’t there. From the courtroom, watching the video feed of Ryan’s testimony, it was apparent that veritable swaths of deposition were missing.

A time stamp near the start of the video indicated the testimony was begun roughly around 9:00am (time zone unclear) on April 6, 2023. But as the deposition wore on and redaction after redaction was introduced, the clock skipped ahead dramatically and a container of water next to Ryan emptied, refilled, and emptied again. His testimony seemed to wear on all day on the 6th and even into April 7th, concluding roughly around noon on a second day.

Now, it’s good to be generous: Ryan likely took multiple breaks to step out, stretch, freshen up, eat lunch, and so forth. But even most generously, the condensed 70 minutes of testimony seen in court today had to have taken up several more hours, especially given the near entire day Xbox head Phil Spencer spent on the stand last week. And Ryan wasn’t alone in this. Nvidia general manager Phil Eisner similarly had nine minutes of deposition that, per time stamps, seemed to span an entire half-day with multiple missing segments. What, then, is contained in the redacted testimony?

From the courtroom, watching the video feed of Ryan’s testimony, it was apparent that veritable swaths of deposition were missing.

For the most part, we’re unlikely to find out, despite the fact that any number of arguments made during those hidden hours could wind up critical to either Xbox or the FTC’s respective cases. But one major element might peek its head out from behind the curtains in the coming days as evidence pours into the public evidence folder: an email. Ryan was asked repeatedly during his deposition about a specific email he was sent by Phil Spencer in August of 2022 that supposedly changed his mind on Xbox’s acquisition of Activision, taking him from feeling frustrated but resigned, to fully against the transaction and convinced it was anti-competitive. Per Ryan, it “set the alarm bells ringing.”

What was in the email? We never saw it in court. But it was likely entered into evidence. It’s possible it will be fully redacted, and we’ll never know. Or you’ll be inundated with headlines about it tomorrow. But the question of what Phil Spencer could have possibly said to turn an otherwise amicable Jim Ryan against his plans so vehemently is a fascinating mystery at the heart of today’s testimony, and evidence that may prove critical to the verdict.

The Economists

Okay, yes, let’s talk about the economists. Harvard university economist and professor Dr. Robin Lee took to the stand for the FTC today, though it may have been a bit confusing at first as to why Microsoft was questioning him first. Dr. Lee already submitted his testimony in writing, and thus the court proceedings jumped straight to the cross-examination. Which was, well, a bit chaotic.

From the courtroom, the proceedings were a bit difficult to follow, as Microsoft counsel Beth Wilkinson questioned Dr. Lee on various models from his written testimony — how he came to his conclusions, what those conclusions were, where his data had come from, and so forth. Largely, it seemed Wilkinson’s intent was to poke holes in the FTC’s definition of “relevant markets,” which I’ve written about elsewhere. But what many who listened in were discussing was the seemingly unfortunate way Dr. Lee came off in court, with Wilkinson confidently asking questions and Dr. Lee seeming to divert and hedge away from anything resembling a direct answer. At one point, Wilkinson dragged out a giant white board to write down his explanations of his models, in an attempt to hold him to a straight answer. At another point, Judge Jacqueline Scott Corley got involved to force him to give straightforward, yes or no answers to a series of questions about what he thought likely to happen to Call of Duty on different platforms if the deal went through.

What I want to hone in on, though, is that those rooting for Xbox to take over Activision should probably temper their enthusiasm. Confusing as this testimony seemed, by the time the FTC took over questioning again and let Dr. Lee explain himself more comfortably, Judge Corley actively seemed to be learning a lot under his tutledge about how subscription services and cloud libraries work, and asked a number of clearly engaged questions. As confidently as Wilkinson was able to put Dr. Lee on edge, it’s not immediately clear that the confusing back-and-forth between the two didn’t make her look equally as silly.

But here’s where I think Microsoft still has the upper-hand: Dr. Lee submitted written testimony, then immediately jumped into cross-examination in court. But Microsoft’s expert witness, economist Dr. Elizabeth Bailey, was given the opportunity to present her findings to the court in full under Microsoft counsel’s guidance. As a result, her arguments came off immediately more graceful, as she was able to give clear explanations for where she got her data, how she was using it, and why.

Dr. Bailey’s incomplete testimony brought the day to a close, and tomorow we’ll hear even more from her alongside Microsoft CEO Satya Nadella and Activision-Blizzard CEO Bobby Kotick. With Microsoft already giving a fairly strong showing, Wednesday should bring even more opportunities for them to bring their case home. But again, this is not open and shut for a number of reasons. The FTC has only to prove it needs more time to investigate the anticompetitive nature before the real showdown in August, Judge Corley is self-admittedly a novice in games industry knowledge, and then there’s all that redacted testimony that could be full of bombshells on either side.

We’re keeping track of it all in our our daily roundups as the trial reaches its conclusion. And if you want a more in-depth look at the previous trial days, check out our day one and day two analysis pieces.

Rebekah Valentine is a senior reporter for IGN. You can find her on Twitter @duckvalentine.