Why Does Microsoft Want the Maker of ‘Minecraft’?

In a tech world full of constant acquisitions and partnerships, one unlikely potential purchase is making headlines this week: Microsoft is reportedly considering a purchase of the game studio behind one wildly popular video game, which boasts a staying power that’s notoriously uncommon in the gaming industry.

The Wall Street Journal recently reported that Microsoft is “in serious discussions” to buy Mojang AB, the Swedish gaming company behind the wildly popular Minecraft video game. The deal would reportedly be valued at more than $2 billion. Mojang has sold more than 50 million copies of Minecraft since its initial release in 2009, and last year the company earned more than $100 million from the game and related merchandise. Mojang has struck deals with Scholastic for handbooks, Lego for toys, and Warner Brothers for a film. The game’s popularity rests on players’ ability to build anything and create their own virtual worlds, mining blocks from objects in a pixelated world and building their own structures.

Mojang would represent the first multi-billion dollar acquisition by Microsoft’s Satya Nadella, who became Microsoft’s chief executive in February. As The Wall Street Journal notes, Nadella said in a letter to employees in July that gaming is the “single biggest digital life category, measured in both time and money spent, in a mobile-first world.”

Microsoft’s current business, including its Xbox line of games, Xbox on Windows Phone, and Windows Phone games, represented just 8 percent of the company’s total revenue in the year ended in June. Minecraft could help Microsoft to appeal to a mobile customer it’s largely failed to reach with its Windows Phone devices and apps on iOS and Android — where Minecraft ranks among the top five paid apps.

Minecraft has built a vast base of users who pay a fee to play the game. Unlike many social games like Angry Birds, Farmville, or Candy Crush, which developers let users download for free, hoping that they’ll later spend money on in-app purchases, Minecraft players purchase the game for $26.95 on PC, $5 on Xbox, $6.99 on iOS, or $6.99 on Android.

Also unlike many popular mobile games, Minecraft has endured beyond the yearlong period of popularity that many top games have enjoyed. As The Wall Street Journal reports, the studio model of game development follows the TV, film, and music industries; its goal is to develop and sell a steady stream of predictably popular games. The model has been worked out by companies creating console and PC games, but none of the new mobile-focused game companies, like Zynga, King, and Rovio, have quite perfected it for mobile games.

As The Wall Street Journal notes, Minecraft, unlike Candy Crush or Angry Birds, is less of a distraction and more of a hobby for its droves of fans. Players spend hours building their virtual worlds, and the game is considered a long-term habit for millions of users. The game has been compared to Lego, which Bloomberg reports is the world’s biggest toy company, in that each consist of ever-expanding worlds without set scripts or finite experiences. Gamespot reported in February that Minecraft had passed 100 million registered users, and in June IGN reported that the game had sold more than 54 million copies across all platforms, meaning that there was one copy of Minecraft for every 6 people living the U.S.

Microsoft’s current strategy around gaming is to create platforms where developers can build games instead of focusing on building its own games. So why does it want to change that? It’s because Minecraft is so unlike most other games available — it has staying power and endurance that are all but unheard of in the game industry. Wedbush analyst Michael Pachter told Businessweek that Minecraft, already five years old, could be popular for another ten.

The game has the appeal of building toys and games, like Lego or Electronic Arts’ Sims, appeals to boys and girls, children and serious gamers, and is even used in classrooms. Philip Tan, director of the Massachusetts Institute of Technology’s Game Lab, agrees that Minecraft could last many years more, and it could be a long time before another game comes along that does what Minecraft does, but better — gaining the traction to “dethrone a genre king.” The activity of the Minecraft player community is fueled less by the tools that Mojang — or potentially Microsoft — provides to players, and more by the ideas that players devise themselves.

As there are practically limitless possibilities for what users can do in the game, there are also a number of different ways that Microsoft could expand the game. The company could bundle Minecraft with its own smartphones, add exclusive content for users of its own platforms, or simply add updates and expansions to the game. In taking Minecraft further, Microsoft wouldn’t need to address gaming trends, work to continually improve graphics, or devise new scripts and storylines, because Minecraft doesn’t operate like an ordinary game, and the title could lend itself well to new games and product categories.

As The Verge reports, Microsoft has acquired video game studios in the past with mixed success. Microsoft purchased Bungie, the studio behind the Halo games that became a flagship series for the Xbox, and Lionhead Studios, which has exclusively released Fable games since the acquisition. But Rare, which created successful games for the Nintendo console, has failed to create a hit game with Microsoft. Even something as simple as requiring Minecraft players to have a Microsoft account — which The Verge notes could be a possibility — could help the company get more users into its cross-platform ecosystem, something it has emphasized lately. Another area of huge potential for Minecraft after a potential acquisition by Microsoft is the education market, where Minecraft has already begun to be played by a large number of young users.

That points to the fact that more important than the game itself is the community that has assembled around it. Owning Minecraft would mean owning a young user base that would be a captive audience for Minecraft’s development into the next hit entertainment franchise. The value of the game’s user base is that it is unusually loyal, and that could be the biggest asset that Microsoft is considering as it looks at acquiring Mojang.

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