Second, Prof. Lee points to his share model. He says this model results in an 8.6% share shift; therefore, the more conservative 5.5% share shift output from his Vertical Foreclosure model is reasonable. But the share model output is also flawed. As a preliminary matter, it is based on Gen 8 console data from only the United States, rather than global Gen 9 data. But putting that aside, as Dr. Carlton observed, Prof. Lee's share model "ignores the presence of non-exclusive games in influencing console choice" even though Prof. Lee acknowledges non-exclusive games do influence console choice. Prof. Lee's reply report's attempt to fix this error fails because he again accords no value to non-exclusive games in consumer choice. Further, Dr. Carlton also contends Prof. Lee's share model assumes every lost PlayStation 4 results in an additional Xbox sale, even though consumers may choose a different device to play Call of Duty (PC, mobile, cloud) or to not play Call of Duty on any device at all. When Dr. Carlton corrects for this error, Prof. Lee's share model is between 1% and 54% of what Prof. Lee predicts and thus does not support his critical 20% conversion rate.
And what does Prof. Lee say about Dr. Carlton's criticism? Nothing in his direct testimony.) At the evidentiary hearing on re-direct? Nothing. And when the FTC cross-examined Dr. Carlton on his written direct testimony? Again, nothing. The FTC chose not to challenge, or even address, Dr. Carlton's identification of material flaws in Prof. Lee's share model. The criticism thus stands unscathed—and persuasive. So, the share model does not justify Prof. Lee's reliance on the strategy memo snippet reporting console shares move 1% to 3% globally with exclusive AAA content.
