Internal documents reveal that Microsoft considered acquiring Sega and Bungie

In recent years, Microsoft has acquired a plethora of game developers, including Bethesda and the ongoing acquisition of Activision Blizzard, with a dual strategy of fortifying its own game development prowess to better counteract Sony, while simultaneously broadening its PC/Xbox Game Pass subscription service, thereby amplifying its influence in the cloud gaming market.

The Federal Trade Commission (FTC) of the United States previously resolved to formally file a lawsuit against Microsoft in an attempt to impede its acquisition of Activision Blizzard. According to The Verge, internal Microsoft emails presented at recent hearings suggest that the company once contemplated the acquisition of game developers such as Sega, Bungie, Zynga, and IO Interactive.

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

Phil Spencer, head of Xbox operations, had penned a letter to Microsoft CEO Satya Nadella and CFO Amy Hood, seeking approval to engage with Sega’s parent company, Sega Sammy Holdings, to explore potential acquisition. In his email, Spencer stated, “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.”

In Spencer’s view, Sega’s widely appreciated IPs hold significant appeal across the globe, capable of broadening Xbox Game Pass’s audience, particularly within the Asian region where localized content is crucial to success. It remains uncertain whether Satya Nadella ultimately sanctioned the negotiations, nor is it clear what transpired during the discussions around Microsoft’s acquisition of Sega. However, at least as of April 2021, based on internal review documents, Sega was still listed as a key target.

Additionally, Microsoft had set its sights on Bungie, although it was acquired by Sony last year. Internal documents revealed that Microsoft believed “acquiring Bungie would ensure valuable IP, the Destiny franchise (and its community), and its development and operational infrastructure are integrated into Xbox Game Studios.” Before setting its focus on Activision Blizzard, Microsoft had engaged in acquisition talks with Zynga, although it eventually shifted its attention, leading to Zynga’s eventual acquisition by Take-Two.