Why Microsoft Spent $US2.5 Billion On The Makers Of Minecraft

Why Microsoft Spent $US2.5 Billion On The Makers Of Minecraft

When we first heard rumblings that Microsoft was looking to buy Minecraft studio Mojang for a swimming pool full of hundred-dollar-bills, the amount of cash sounded absurd to just about everyone.

$2.5 billion! Not only is that an astronomical number, the type you'd expect to come signed on a giant novelty check, it seems like way too much for a one-hit developer like Mojang. For the past week, tons of people have been scratching their heads. Why would Microsoft spend $US2.5 billion on a game that has already sold over 50 million copies? Everyone already owns it. Those sales have already happened. What's the point?

Even crazier, as Mojang noted in their blog post about the deal this morning, founders Markus "Notch" Persson, Carl Manneh, and Jakob Porsér are all leaving. With all that money, Microsoft isn't even snagging the man who dreamed up Minecraft in the first place, which makes it clear that this is a gamble for the property, not the talent behind it.

In a few years, we could look back at this deal as yet another massive Microsoft flub, to be remembered alongside Xbox DRM and mandatory Kinect. (This one might be harder to reverse.) But there are a few logical reasons for this acquisition. In many ways, it makes sense. Let's break it down.

Minecraft is still Minecraft

Call of Duty and Grand Theft Auto might be big games, but Minecraft is a global phenomenon. Minecraft is one of the most spectated games on the planet, a widespread tool for education, and now possibly Microsoft's most popular and beloved application since Word. Ask any kid what his or her favourite video game is, and the answer's probably going to be Minecraft. Ask for their favourite YouTuber, and the answer's probably going to be "someone who plays Minecraft." It's impossible to overstate the global impact of this game.

And yes, those 50-million sales have already come and gone, but Minecraft remains on top of the iOS charts every single week, and Microsoft can now make money not just off Minecraft's sales but through merchandise, licensing, and other forms of media. (Maybe a Minecraft movie?) We'll likely see expansion packs, sequels, and even more Minecraft skins that players gobble up every month. Maybe Microsoft will start an official marketplace for buying and selling Minecraft maps. Maybe they will release Minecraft 2 sooner than anyone could've possibly expected.

To put it simply: Microsoft just bought digital LEGO. Anything The LEGO Group has done, Microsoft can now do too.

In their press release about the sale, Microsoft said they expect to break even on this acquisition by the end of this fiscal year. That's June 2015. In other words, they expect to make back $US2.5 billion, and they expect it to happen soon. Based on Minecraft's global impact, that's not out of the question.

Pieces Of The Pay-To-Win Pie

For a long time, some Minecraft players have been making significant amounts of money by running servers that charge people for items and other features. The player-vs.-player server KoonKraft, for example, sells in-game weapons for up to $US475. Another large Minecraft network, Hypixel, charges up to $US150 for VIP passes that give players access to their extra features.

Earlier this year, a small controversy erupted in the Minecraft community when Mojang representatives spoke up about how players technically aren't allowed to charge for gameplay features, even on heavily-modded servers. The controversy fizzled, however, when Mojang showed no signs that they would actually enforce the rule and go after those big servers.

You'd better believe that's going to change.

With Microsoft in charge, it's hard to picture Minecraft remaining the wild west it is today. To speculate a little bit… I imagine that any server that charges money -- whether it's for cool items, aesthetic upgrades, or even just basic access -- will inevitably have to pay a healthy chunk to the giant corporation that now runs things. So-called "pay-to-win" servers could become pay-Microsoft-to-win. It seems likely that Microsoft will either take control of these servers entirely, replace them, or charge very hefty fees for the privilege of running them.

If Microsoft does stick their hands in the Minecraft server pie, it's hard to predict how regular fans will be affected. On one hand, Microsoft's intervention could stop some of the shadier servers from inflating their own economies and manipulating players into spending hundreds of dollars just to get ahead of one another. On the other hand, Microsoft could wind up facilitating and encouraging even more of these pay-to-win servers in a gamer-unfriendly way.

In fairness, Microsoft has done a pretty good job with Minecraft on Xbox 360 so far, having worked with the studio 4J on what might be the definitive version of the game. There's a ton of skin DLC, yes, but so far Microsoft has yet to nickel-and-dime Minecraft players in the way some other publishers might have, which helps alleviate some concerns.

All Hail Microsoft's Ecosystem

You probably don't own a Windows Phone. Most people don't. As Reuters reported on Friday, the Windows Phone only has something like 2.5% of the global smartphone market. Microsoft wants that to change. Putting Minecraft on their phones is a solid first step.

And what about other hardware? Though Mojang has promised that sales and development for Minecraft on other platforms (iOS, Android, PlayStation, Mac) will continue, there's an interesting little nugget in their blog post on the issue (emphasis mine):

There's no reason for the development, sales, and support of the PC/Mac, Xbox 360, Xbox One, PS3, PS4, Vita, iOS, and Android versions of Minecraft to stop. Of course, Microsoft can't make decisions for other companies or predict the choices that they might make in the future.

Huh. So, hypothetically, if Microsoft decided to charge Sony inordinate amounts of money in exchange for regular updates of Minecraft on PlayStation systems, what would happen if Sony turned them down? What if Sony decides that it's just not worth it to keep Minecraft on their systems when they now have to send giant checks to their biggest competitor?

And what about the future? Will we really see possible Minecraft expansions or sequels on PlayStation platforms? Will Microsoft really not use Minecraft as a weapon in their battle to keep the Xbox One competitive with the PlayStation 4? How much longer is Microsoft going to help support their biggest competitor?

What if Microsoft starts offering discounts or other benefits to players who buy the game on Xbox or Windows platforms? We all know Microsoft loves buying exclusives -- well now they have got one of the biggest exclusives on the planet. It seems out of the question for Microsoft to keep any future editions of Minecraft off iOS and Android, where the game has sold tens of millions of copies, but PlayStation might be a different story.

With this deal, Microsoft has all the leverage when it comes to all things Minecraft. The price tag was hefty, but for them, the results could be well worth it.


Comments

    Those guys are living the dream of every games programmer. They struck it rich. Good luck to them....

    ... And frankly, I'm a bit jealous. They never need to work a day in their life again if they don't want to.

      With the amount they already made off Minecraft, they ALREADY didn't need to work another day in their life again if they didn't want to. This sale now means that their DESCENDANTS won't have to work a day in their lives, even unto the seventh generation.

        He hardly worked anyway!
        The few and far between updates from 'beta' show that :P

        Last edited 16/09/14 1:30 pm

    Either Mojang was way overvalued or Oculus was literally sold at Rock bottom value.

      Mojang actually have a popular beloved product in the hands of consumers whereas Oculus still has a lot of Pie in the Sky ideas and some dev kits.

      Comparing the two purchases is chalk & cheese in my eyes man.

      You buy Minecraft and you're not just getting the game. You're getting the Minecraft brand as a whole: Clothing, books, licensed toys, collectables (like the lego kits or statues), royalty cheques from other platforms and god knows what else is being sold with the official MC brand on it.

      With the Rift, Facebook was buying into new, unproven technology. Yes the Rift is an amazing piece of kit, but no one knows if the wider public is going to flock to and embrace it when the retail models finally come out (although one could argue that with Facebook's marketing arm behind it, there's little chance it'll flop).

      A little of Column A and a little of Column B.

      But I can tell you that as soon as OVR solve the "screen door effect", the Rift will rock the gaming world!

    It's one way to get a consoles IP on an opponents console.

    microsoft forces mojang to take away free mod support – mods will be available via DLC. <- my prediction

      Microsoft don't do that with their PC games, why would they start with Minecraft? They don't want to alienate the fanbase. If you mean official mods, then yeah, they'll probably be DLCs, but they won't stop people from modding the game, that's what keeps a game's longevity going

        While I agree with you regarding the mods, They don't want to alienate the fanbase. *cough* Rareware *cough*

        This, if anything all those updates we have been getting for free the last years, will now (the future ones) will be DLC

      I have a theory - the PC mod scene will continue unabated - but the best ones will be co-opted by Microsoft and sold as Xbone exclusive DLC!

    I see the Xbox version becoming the main version now, with updates hitting there first, then PC then the other consoles at some point down to road.

    There will also be possible exclusive to Xbox features as well.

    I guess it might help sell windows phones...

    I see a potential where Microsoft enforces no pay to win servers, possibly a Minecraft demo bundled in new windows OS, but call me idealistic, with what they just bought they don't have to lift a finger in order to make money off the Minecraft IP. Easy money regardless and well done mojang. You just hit the retirement square in the game of life.

    It's a big risk, no doubts about that. It relies on people continuing playing Minecraft for a few years to come, but what if something new comes along for everyone to sink their time into? Minecraft's success was a fluke and there's no guarantee that any future Mojang game will be anywhere near as successful. But as has been said, the potential to quickly make the money back is definitely there.

    In the back of my mind though I can't help but think about Zynga or one of those flash in the pan developers that got snapped up on the wave of one-off success. Granted, Minecraft is a lot bigger and more 'stable' than Facebook games though

    I'll sit back and watch this with interest. I've tried to get into Minecraft but I just can't so I'm not fussed either way, but it'll be good to see if this turns into something like Portal when Valve hired the Narbacular Drop guys

    I wonder how they're going to try to weasel their way out of the "Alpha players don't ever have to pay for updates on PC" agreement. Probably with "It's not an update, it's DLC!"

    Last edited 16/09/14 10:10 am

      "Its not an update, its minecraft 2 which has paid dlc and no server side mods. Or at least no third party server side mods. Or maybe only Microsoft servers"
      Either way I'm sure all platforms apart from xbox1, win8 and windows phone will get much later updates, possibly lacking features. They may even restrict minecraft 2 from all other platforms.

    I'm certainly no expert on the matter, but I would think the quickest/easiest way to make back that much moolah in the next year - from millions of customers who already paid for the game - would be microtransactions.

    I wonder... Microsoft working on VR.... and applied to Minecraft.... wow.

    Although I can't fault Notch or Mojang one bit for their decision to sell, it's difficult to feel as though they sold gamers down the river.
    I hope they were thoughtful enough to set some provisos in place for the future management and development of the game for the benefit of their former committed fans.
    Also wonder if Valve was approached at all. That at least is a company that doesn't instill so much trepidation and uncertainty.

    I just hope this doesn't mess with the game especially the PSN versions. Reaction pending.

    I'm surprised it's only Microsoft... I mean, what happened to the other companies? Nintendo? Sony? Apple? Valve? Were they asleep?

    Even though I don't personally play it, I think this is great for Minecraft. Notch did an incredible job developing Minecraft but Microsoft have the ability to take the game further then he ever could. For one Microsoft they have way more money, resources and experienced personnel at their disposal. I'm excited to see what Notch come us with next though given that he can do anything he wants to.

    They'll just do what they did to RARE and Lionhead. R.I.P Mojang :(

    Couldn't Sony just update the PS4 to play JAVA natively? Hence making the full version of Minecraft available to PS4 users?

    What is hard to understand for us, enfranchised gamers from the 90's is how popular Minecraft is with kids and preteens. In words of Tycho from Penny Arcade, what Microsoft actuaally bought for 2.5 billion was a whole generation, and as such, it a rather a steal.

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