Microsoft Explored Acquiring Bungie and Sega to Bolster Xbox Game Pass, Internal Emails Reveal

Internal documents from the recent FTC v. Microsoft hearing have revealed the gaming acquisition targets considered by the tech giant. The documents indicate that Microsoft was exploring the possibility of acquiring both Bungie and Sega to strengthen its Xbox Game Pass service. In a confidential email obtained by The Verge, Xbox chief Phil Spencer reached out to Microsoft CEO Satya Nadella and Microsoft CFO Amy Hood, seeking approval to approach Sega Sammy for a potential acquisition of its Sega gaming studios.

According to Spencer’s email from November 2020, Microsoft believed that Sega had successfully developed a diverse portfolio of games with global appeal across different segments. Acquiring Sega was seen as a strategic move to accelerate the growth of Xbox Game Pass on various platforms, including PC, console, and cloud. Spencer emphasized the importance of Sega’s beloved intellectual properties (IPs) in expanding the reach of Xbox Game Pass to new audiences worldwide, particularly in Asia, where localized content is crucial for success. Furthermore, Microsoft saw potential in leveraging Sega’s IPs for future monetization opportunities through in-game transactions.

While the outcome of the Sega acquisition remains unclear, an internal Microsoft document from April 2021 still listed Sega as a key target. The document highlighted Microsoft’s focus on acquiring companies in the PC, mobile, and console markets across different regions. Alongside Sega, Bungie, Zynga, and IO Interactive were among the companies Microsoft seriously considered acquiring.

Bungie, a studio currently owned by Sony, was specifically mentioned in the document. Microsoft’s internal assessment indicated that acquiring Bungie would involve securing valuable IP, namely the popular game franchise Destiny and its dedicated community. Additionally, the document mentioned integrating Bungie’s development and live operations infrastructure into Xbox Game Studios. Microsoft acknowledged the risk associated with Bungie’s high burn rate, which was compounded by NetEase’s $100 million minority stake investment in 2018. However, the document also recognized the significant success of Destiny as one of the top-performing titles on console Game Pass in terms of hours played.

Another notable entry on Microsoft’s “final watchlist” in 2021 was IO Interactive, the developer behind the Hitman series. The document also mentioned several mobile-focused companies, including Thunderful, Supergiant Games, Niantic, Playrix, and Zynga. Microsoft had engaged in discussions to acquire Zynga before eventually shifting its attention to Activision Blizzard for its mobile ambitions (ultimately, Zynga was acquired by Take-Two). It remains uncertain whether Microsoft pursued talks with the other mobile-focused companies mentioned in the document.

These internal documents offer a glimpse into Microsoft’s strategy and ambitions to strengthen its gaming ecosystem through acquisitions. While the outcomes of the potential Bungie and Sega deals remain unknown, the documents reflect Microsoft’s dedication to expanding the reach and content offerings of Xbox Game Pass across multiple platforms and regions. As the gaming industry continues to evolve, Microsoft’s pursuit of strategic acquisitions underscores its commitment to securing valuable IPs and enhancing its position in the highly competitive gaming market.
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Contributed by Ha My based on The Verge’s source