Microsoft's Minecraft Buy: 6 Interesting Facts - InformationWeek

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9/15/2014
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Microsoft's Minecraft Buy: 6 Interesting Facts

Microsoft acquisition of game developer Mojang is turning heads. Here's some context.

 NYC Vs. Vegas: 10 Fun Interop Differences
NYC Vs. Vegas: 10 Fun Interop Differences
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Following several days of rumors, Microsoft agreed on Monday to buy Mojang, the Swedish developer that created Minecraft, for $2.5 billion. Given Microsoft's past gaming successes, such as Halo, an investment in Minecraft might seem a departure. Whereas Halo features cinematic flair, cutting-edge graphics, and lots of action, Minecraft lets gamers use Lego-like bricks to build digital universes and relies on graphics that might have seemed impressive a decade ago. Why did Microsoft decide to purchase Mojang, and what other details are simmering behind the scenes? Here are six reasons Microsoft's new acquisition is turning heads.

1. This isn't a risky investment for Microsoft. 
Two-and-a-half billion dollars sounds like a like a lot of money, but Minecraft is both profitable and growing. According to The Wall Street Journal, privately held Mojang earned $360 million in revenue last year, up 38% from the previous year. In a video announcing the deal, Xbox head Phil Spencer noted that Minecraft is the best-selling online game ever on the Xbox 360.

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Microsoft said in a statement that it expects the deal to break even during its fiscal 2015. Though reportedly not a motivating factor in the deal, Microsoft will pay for Mojang with funds held overseas. Because these funds would have been subject to taxes if brought back to the US, this move further ensures that the deal will be profitable.

2. People create amazing things with Minecraft.
An open-world game with few rules, Minecraft has attracted a dedicated community of gamers who build incredible things. The Dutch government recreated the entire country using Minecraft, for example, and if you're a Lord of the Rings fan, check out this amazingly detailed rendering of Minas Tirith:

 

Source: Cornabss
Source: Cornabss

3. Minecraft's creator was ready to hand over the reins.
In a blog post, Minecraft creator Markus "Notch" Persson expressed relief following the deal. He said the game's popularity had turned him into a "symbol," but that he just wants to be a "nerdy computer programmer who likes to have opinions on Twitter. It's not about the money. It's about the sanity."  

Mojang spokesman Owen Hill said in a statement that Persson and the company's two other founders plan to depart as part of the deal. Although this change in leadership might be distressing to some Minecraft fans, Hill emphasized Microsoft was among "only a handful of potential buyers with the resources to grow Minecraft on the scale that it deserves."

In a blog post, Xbox head Spencer said Microsoft's investments in cloud infrastructure, Xbox Live, and mobile technology will help the company build richer Minecraft worlds, more powerful developer tools, and more opportunities for users to connect.

4. Microsoft will keep supporting Minecraft on other platforms.
As products such as Office for iPad demonstrate, Microsoft CEO Satya Nadella believes in cross-platform strategies. Minecraft reportedly will follow

Michael Endler joined InformationWeek as an associate editor in 2012. He previously worked in talent representation in the entertainment industry, as a freelance copywriter and photojournalist, and as a teacher. Michael earned a BA in English from Stanford University in 2005 ... View Full Bio

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Michael Endler
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Michael Endler,
User Rank: Author
9/16/2014 | 11:51:57 AM
Re: Not risky?
It's a privately-held company, and the figure refers only to highest disclosed revenue, and that's from 2013 to boot-- so our insight into the company's current financials are limited. But I see your point. Given Microsoft's aggressive break-even estimate, I suspect they're factoring in more than pure Minecraft revenue--i.e. they might also be anticipating certain ecosystem benefits, such as the article's suggestion that they might use Minecraft to drive device sales.
stevew928
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stevew928,
User Rank: Ninja
9/16/2014 | 11:48:11 AM
Not risky?
I guess I'm wondering how they are going to break even in 2015, when their investment is nearly 7x Mojang's highest revenue. I'd guess that a majority of the people on all the current platforms who are interested in Minecraft have already purchased it. I suppose Microsoft could give it more exposure to pick up the stragglers... but 7x?

If they change the pricing model, I think they will face revolt from the community. A Minecraft 2 or annual subscription just isn't going to fly. If Microsoft expects any success, they need to keep things the same, not make drastic changes to Minecraft. It's success is largely in part to it's business model, indi nature, and slow stable growth in features contrasted with low system requirements.

The only place I see for big growth in revenue is in Minecraft servers (ie: Realms). If Microsoft does that really well, there is an opportunity there. But, they are already competing with some stiff competition in that market.

What actually would make most sense is if the purchase isn't intended to break even financially, but were intended to bring goodwill to Microsoft, especially with the younger generation. If they do really well for Minecraft, they might be seen more in those terms than as a hated has-been megacorp. That might be worth $2.5B. Otherwise, I'm just not seeing it unless I assume Microsoft has some failed strategy in mind.
danielcawrey
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danielcawrey,
User Rank: Ninja
9/15/2014 | 8:41:51 PM
Re: Azure for Minecraft services?
I had only heard about Minecraft previously on the peripheral I suppose, so I guess I never realized just how valuable the game might be. 

I am amazed with such graphics this could become so popular, but then again I think an open platform and an open world is something attractive to many. This will probably be a good investment for Microsoft over time. Smart move I suppose. 
Charlie Babcock
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Charlie Babcock,
User Rank: Author
9/15/2014 | 7:28:21 PM
Nadella's broadening move
Azure cloud services and Microsoft's hosted game engine are running on the same Azure infrastructure. This is a Nadella move to broaden Microsoft's appeal and collect a new group of users -- typical of the moves he's trying to make and probably quite good for Microsoft in the long run.
Michael Endler
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Michael Endler,
User Rank: Author
9/15/2014 | 4:29:59 PM
Re: Azure for Minecraft services?
Not sure how involved OneDrive will be, but I expect Azure will be running everything in the background. What that implies, aside from a potentially infinite digital canvas for gamers, I'm not as sure. What do reader think?
Thomas Claburn
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Thomas Claburn,
User Rank: Author
9/15/2014 | 4:27:53 PM
Azure for Minecraft services?
Do you think Microsoft will encourage Azure or SkyDrive usage to store Minecraft assets and power Minecraft in-game capabilities?
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