The Wall Street Journal reported that software developer Microsoft Corporation (MSFT) is set to buy Swedish company Mojang AB, developer of the popular game Minecraft for $2 billion. Per reports, Microsoft is in advanced talks and the deal could be finalized by the end of this week. However, both parties avoided making any comments.
Minecraft, first released for personal computers in 2009, is a popular video game particularly amongst youngsters. It allows players to build things using virtual blocks, dodging spiders and other dangers. Since its launch, more than 50 million copies of the game have been sold and it is among the top five most-downloaded paid apps on both Apple (AAPL) and Google (GOOGL) app stores.
The game has proved extremely profitable for Stockholm-based Mojang. The company raked in around $100 million in profits in the last year itself. The game is already available on Xbox, Sony Corp.'s (SNE) PlayStation, PCs, home consoles and smartphones.
Within a short span of time, Minecraft has been successful in building a huge user base for itself comprising not only children but other enthusiastic gamers as well. The users are so passionate about the game that they are ready to pay to download the game, unlike other new games which are initially offered for free and users are expected to purchase in-game add-ons later.
Minecraft’s Xbox version, PC version and mobile version cost $20, $27 and $7 respectively. In addition, the game is available as a game play video on YouTube and Twitch and has been able to attract more than a billion views.
Minecraft is not yet available on the Windows Phone or for purchase at Microsoft’s online app storel. Microsoft‘s operating system has been struggling to grow market share but remains well behind Apple’s iOS and Google’s Android mobile platforms.
Games are one of the most important revenue generating applications on mobile devices and computers. If the speculations turn out to be true, the deal could prove to be beneficial for Microsoft. With the addition of a top title to its gaming portfolio, Microsoft will be able to rejuvenate its Xbox business and will be able to add attractive content on some of its important platforms. Microsoft’s Xbox one, its latest console, has not done as well as Sony’s PS4, which is the latest console from Sony. So the move this could provide some leverage to compete against Sony.
It could also help the company to expand its foothold in PCs and mobile phones by attracting new generation customers. Mojang also have two more games, Scrolls and Cobalt, two new games in development which could also generate additional revenue for Microsoft.
Moreover, it would be the first multi-billion dollar acquisition since Satya Nadella took over as the CEO of the company in February, succeeding Steve Ballmer. Microsoft is however likely to leave the game open to competing platforms because Satya Nadella is not looking to create a closed ecosystem but seeking to generate dollars from a cross platform experience.
He has been focused on repositioning Microsoft in a cloud-first mobile-first world where Microsoft’s services and technology will reach a larger number of devices across the existing PC and mobile platforms, as well as emerging platforms like wearables and the Internet of Things (IoT).
Microsoft carries a Zacks Rank #3 (Hold).
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