Microsoft’s purchase of Minecraft: just what is it getting for its $2.5 billion?


The rumors of the last few days have been proved true, and Microsoft has bought Minecraft for $2.5 billion. The story can be read on any number of sites, including of course, the posting by Phil Spencer, the man in charge of Xbox at Microsoft… but the best place to get the scoop on this is via the website of Mojang, the Swedish company that developed Minecraft. It is one of the most honest, clear, and candid I have read in a long time: pretty much along the lines of, “Yes, we have sold up… Microsoft made us a great offer, and we’re outta here.”

What the three founders of the company have done is known in the trade as “take the money and run”: neither Markus “Notch” Persson, Carl O. Manneh, or H. Jakob Porsér will be staying on at Minecraft after the deal goes through. Persson’s reasons make total sense: he’s a programmer, not a businessman and much less a CEO, and his decision has nothing to do with the money, and more to just wanting to keep control over his life…

So if Microsoft isn’t doing an acqui-hire, and keeping the old team on to run Minecraft for it, then just what is it buying? The first answer that comes to mind is the community: Minecraft not only brings together more than one hundred million registered users, but that Microsoft has seen how loyal those users are: when the came was first offered on the Xbox 360 in 2012, it began making a profit within the first 24 hours, after more than four hundred thousand players broke the platform’s historical sales record.

Minecraft players are not just any bunch of gamesters: we are talking about some very interesting demographics here, mainly young people, but very dedicated, and able to come up with some surprisingly creative ideas. The freedom that the platform offers, whereby it is possible not only to simply pursue points, but to create things, learn new stuff, or look at what others are up to, makes the game a way to learn new skills, from graphic design to managing servers and communities. For Microsoft, the chance of becoming popular among a community of young players could prove highly valuable… if it works.

That said, buying communities comes with the risk that they will feel alienated, sold out. Microsoft’s purchase and the exit of the founders can be interpreted in many ways: that the company doesn’t give a hoot and it’s business as usual; equally it could prompt a mass exodus of users. And that is a sobering thought after you’ve put $2.5 billion on the table. But betting on gaming hits is a risky business: just look at what happened with Zynga, Rovio, King, Dong, or Flappy Bird…

Obviously, Minecraft is much more than a way to pass a few minutes flinging chickens at pigs: this is a platform that requires players to use their imagination, and in so doing has created a huge and loyal community. More than a game, for many users Minecraft is part of their identity. Behind its pixelated 8-bits aesthetics, we find a platform that parents love to push to their kids, that generates a strong community, and helps do develop digital skills, like a digital version of Lego.

Sure, a lot of acquisitions have gone wrong, but some have also gone right, such as Microsoft’s purchase of Bungie in 2000, which the company used to produce the iconic Halo franchise, a killer Xbox app that generated more than one billion in sales.

Some pundits have suggested that Microsoft will use Minecraft to boost its mobile sales, which prompts the question as to why anybody would buy one of Microsoft’s smartphones, which currently have less than a 2.5 percent market share, just so they can play Minecraft on it. The argument, with all due respect, does not look solid. Microsoft smartphones are the epitome of “not cool” no matter how you look at them, and having Minecraft available on them is not going to improve that.

Does the purchase of Mojang mean that Microsoft’s new CEO, Satya Nadella, is in tune with what’s going on out there in the world of technology? Some analysts say that the Minecraft community of gamers is a no-brainer, that it is too big to fail. Others have pointed out that Microsoft has a poor track record in making the most out of its acquisitions. There are other possibilities: Minecraft might be passed on to Azure, or it might be used to strengthen Xbox’s platform, either by increasing its contribution to the company or as a spinoff somewhere down the line, something the company has denied.

In the final analysis, the acquisition offers Microsoft the possibility of using profits generated outside the United States that it cannot repatriate: money isn’t free, but if you can create value from a “frozen” resource out there in the cold and far away Sweden, so much the better.

Whatever the outcome, this is a fascinating deal, and one worth keeping an eye on.


(En español, aquí)

One clap, two clap, three clap, forty?

By clapping more or less, you can signal to us which stories really stand out.