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September 22, 2017
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Microsoft-Mojang is about the future not the money

by Tim Merel on 09/16/14 06:16:00 am   Expert Blogs   Featured Blogs

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The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

Microsoft’s acquisition of Mojang is about the future, not short term economics.

It’s not about the money

Compared to other game companies with tent-pole game franchises (GungHo, Supercell, King), $2.5B for Mojang more than doubles any valuation benchmark. The deal also beats Digi-Capital’s All Games Index and Mobile Games Index (see www.digi-capital.com/reports) public company multiples.

It’s not about today

Independent of deal economics, short term synergies appear positive but limited in scope.

Bundling Minecraft (whether free or otherwise) with Windows Phone, Xbox, Windows PCs, Surface tablets and cloud services could bring in new users who have neither Minecraft nor Microsoft devices/platforms. However, for the existing Minecraft community on competing smartphones, tablets, consoles and PCs, this might not be a compelling reason to switch.

Minecraft’s steady growth has been built on a traditional paid game business model, but mobile has been driven by free-to-play (>90% of revenues and downloads) with App as a Service emerging (see http://www.digi-capital.com/news/2014/08/the-5-drivers-of-700b-mobile-internet-2/). The business model question could be a tricky one.

Mojang’s founders are not coming with the deal, so keeping the core 40 person team could help with continuity rather than cost savings.

It’s about the future

Satya Nadella said that “Microsoft is the productivity and platform company for the mobile-first and cloud-first world” and that he is thinking about “dual users” who “use technology for … work or school and … in their personal digital life.” He and colleagues also referred to the Minecraft “community” six times in the deal press release. In that context, acquiring the Minecraft community is a bold long term strategic move for Microsoft’s future cloud, mobile, virtual reality and wearables platforms. Its impact will depend on their ability to nurture that community and migrate them to future platforms. Keep users happy and Mojang could be a great deal. Upset them, and the building blocks might fall away.

About Digi-Capital (www.digi-capital.com): Digi-Capital advises mobile internet, games and digital clients in America, China, Japan, South Korea and Europe.


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