Last week saw Microsoft confirm the heavy speculation that it is to acquire Minecraft studio Mojang for $2.5 billion.
However, the news has been coupled with the revelation that Notch is to leave the firm following the acquisition and, perhaps more interestingly, Microsoft is to continue Minecraft support for iOS, Android and PlayStation, amongst other platforms.
So what has Microsoft acquired here? Is this an IP that will deliver growing revenues for Microsoft in the years to come – the kind of software success the firm has been calling out for – or a studio that's lost its maverick creative and will boost rival platforms more than its own?
Let's put this all in perspective: Star Wars sold for roughly four billion dollars, the Marvel entertainment properties sold for roughly four billion dollars, and Minecraft is selling for two-and-a-half billion dollars; and Minecraft is worth every penny of that - perhaps even more.
Minecraft is the LEGO of the future, the entertainment property that has the capacity to touch the life of every child growing up in the first-world, forging endearing and enduring memories that will last entire lifetimes.
The current state of Minecraft's user experience is not great, to be frank. Anybody who has ever had to setup a Minecraft server, or even a Minecraft client, can attest. Microsoft's first Minecraft mission should be to remove all friction to getting players up and running with Minecraft.
If design is law, user experience is the supreme court. On second thought, maybe it would have been better if Apple had bought Minecraft.
There may be, and I am hoping it is the case, a larger play here.
When I look at children playing Minecraft, I see more than a great building game.William D. Volk
Education (at least in the USA) has had a string of reform attempts over the last few decades that share the common characteristic of being complete failures.
Some personal background: In 1994 I left the position of VP of Technology at Activision (my children remind me of this often) to help launch an education startup (Lightspan) which focused on using video games (PlayStation) with "Educational Adventures" to improve the results in reading, writing and arithmetic - 100 or so CD's worth for the original PlayStation. Too early for sure.
When I look at Minecraft and, more importantly, children playing Minecraft, I see more than a great building game.
I see a possible direction for education in general. Children are motivated to play this and perhaps Microsoft sees this as an opportunity in the educational space. I know Gates personally cares about it (Microsoft invested in Lightspan). So maybe this is more than just a good game property. Maybe this is the beginning of a new business for Microsoft.
I don't think this acquisition makes a lot of sense for Microsoft. Sure Minecraft is huge, sure it's changed the way a lot of people think about games - I just don't see a lot of long term value.
Minecraft is definitely an evergreen product but in this day and age, nothing lasts forever. I'm sure back in the days of Zynga and FarmvVlle, no one thought that the ride would ever come to an end but it did. The success Angry Birds generated came to an end eventually. I'm sure that will be the case for Candy Crush, Clash of Clans and Minecraft as well.
Not sure if anyone noticed how things have changed with successful franchises. Sequels rule the console era, GTA (1, 2, 3, 4, 5), Madden 88-15, etc. Games that have a limited shelf life and are steady improved every year or so. The rule of thumb is that as long as you don't screw up, the franchise just keeps getting bigger and bigger with each new release.
The mobile industry doesn't really have this. It seems like a successful game experiences a peak in its success that is followed by a slow and steady decline. Most mobile franchise sequels don't achieve anywhere near the same level of success as the original. Just look at Angry Birds - the original still sells much better than any of the other 10+ apps in the franchise. Don't get me wrong, Angry Birds still does well and has a long evergreen tail, but it will probably never surpass its original success.
I would put Minecraft in this category of game. People will always look to the original game, a sequel can't really offer much in the case of Minecraft other than easier server setup like Scott said.
This is a very expensive acquisition. $2.5 billion! It's a single game. It doesn't have a subscription model. It's not sequel friendly.Dave Castlenuovo
Minecraft will still be incredibly successful for a while but it has a tail, it will be in a state of steady decline over time and especially in someone else's hands, I would bet they will accelerate the decline by not really understanding the appeal and making improvements that no one wants. How long before they try to up the graphical fidelity? How long before they try to add freemium mechanics?
This is a very expensive acquisition. $2.5 billion! It's a single game. It doesn't have a subscription model. It's not sequel-friendly. It has awesome merchandising but you would have to be high if you think there is ever going to be a successful movie in this universe. It will always have a place in people's hearts but it will eventually be replaced by something else.
You can't put this in the same league as Marvel which is a unending source of new properties each with their own movies, games, tv shows, and merchandising potential.
In 2013 Minecraft made $129 million in profit. In order to make back it's $2.5 billion, they need to repeat that for 20 years in a row. I just don't see that happening. Maybe see some growth over the next two-five years but I really don't think this era can support a 20 year franchise anymore.
I agree with Scott more on this. Minecraft is the LEGO of the future and its scope to get bigger and better is enormous.
I think it's a great asset for any company and Microsoft, with a pretty strong foot in the gaming camp, is as good a fit as anyone. Based on the standalone figures, it may be hard to make a direct return on this as Dave as highlighted before me but, in terms of what it can do for Xbox One and Windows Phone, I think it could be a bargain.
Microsoft are running 2nd in console and 3rd in mobile. It is also playing a reasonably long patient game. Using this acquisition to acquire the young demographic of players who play Minecraft so fervently could be pretty smart in the medium term. It's an asset with plenty of life yet, giving Microsoft the opportunity to use it to drive young players to Windows devices.
By the way, I agree less with Scott about Apple being a better fit based on user experience because I think Apple are a real hit or miss when it comes to software.
A 20-year veteran of video games and online space, Harry is European CEO of Marvelous AQL, a Japanese developer and publisher of social, mobile and console games, known for console games like No More Heroes and Harvest Moon, but now highly successful in the free-to-play mobile and web space in Japan and Asia.
A games programmer before joining Sony’s early PlayStation team in 1994, he then founded developer Pure Entertainment, which IPO’d and launched a free-to-play online gaming service way back in 1999.
He was also a director of pioneering motion gaming startup In2Games, which was sold to a US group in 2008.
Along the way, he’s been a corporate VP, troubleshooter, and non-exec to a variety of companies and investors in and around the games sector.
Minecraft is astonishing in the way that it has captivated a generation. My daughter still plays it every day, and I love that she does, as it merges creativity and entertainment in a way I haven't seen before.
Microsoft is buying a brand and a short-term revenue stream.Harry Holmwood
But... $2.5 billion? For a game people have already bought? Which mainly hits a young demographic, which, as we know, tends to grow up and a new 'next big thing' comes in?
Mojang isn't a 'hit factory' - Microsoft is buying a brand and a short-term revenue stream here. It's not even a character - maybe a certain look and feel, and a great game experience. Is that a long term thing?
I've been 50/50 on this for the last few days... but I've come round to the idea that, though it may be looked at for a while as a great deal, we'll look back in 10 years at this as a huge, huge mistake, especially if, in the short term, Microsoft doesn't leverage the brand to give some kind of boost via exclusivity on its own platforms.
That must be the goal eventually, but can it happen quickly enough?
We're falling into the trap of thinking games sell phones again – they don't. Hate to break it to you all again but, they don't. Really, they don't.
Microsoft could make some kind of Minecraft follow up entirely exclusive to Windows platforms and it wouldn't sell a single additional unit. Yes, Microsoft would be stupid not to somehow bolster the Windows versions – that's common sense – but that's really not the play here. No one, not even Microsoft, spends $2.5 billion on securing an exclusive for a platform. It's nuts.
(And that's excluding the fact that it has already said it will continue on Android, iOS and PlayStation.)
There's a bigger hand at play here and I think Scott is probably closest to the truth.
I'd say that if, in 10 years' time, Minecraft has indeed become the “LEGO of the future”, this deal will look reasonably priced. If Mojang is the “Zynga of the future” then this deal will look like a huge waste of money (and will also have been a wasted opportunity on the part of Microsoft).
Scott's perspective of looking at Marvel or Star Wars franchises is an interesting one, and I was doing the same thing earlier.
In order to achieve the value Microsoft has put on it, Minecraft has to go beyond being a single IP.David MacQueen
The games industry is a hit-driven business, like most media industries. Disney paid a lot for Marvel and Star Wars because in order to ensure future success, it has to have a large stable of IP so that it has enough successful rolls of the dice to offset the inevitable failures that will also come along.
You can look at Minecraft in that light and it's a terrible deal, because it's one single success and it cost $2.5 billion. How many successful characters does Marvel have? Dozens, and they have persisted through generations. How many successful Star Wars movies were there? Six (although personally I think three of those are terrible and actually I enjoyed Caravan of Courage when I was a nipper, but regardless there were six box office successes), never mind all the games, toys, books, TV shows...
In order to achieve the value Microsoft has put on it, Minecraft has to go beyond being a single IP, much like LEGO has managed. I think it has the potential but it's not a certainty.
Just my 2 cents, or 0.000000000008 percent of the value of Mojang.
I think either Microsoft has paid far too much for a studio that has yet to demonstrate it can be a ‘hit factory' or it has seen an opportunity to exploit the brand in novel ways beyond simply releasing new iterations of the same game and beyond merch.
Would the same game but with v2.0 graphics and UI achieve the same sales figures again if packaged as a sequel? I am sceptical.
Personally I am with William Volk here, in that I would dearly love to see Microsoft build upon the momentum that Minecraft already has in bridging entertainment and education in both formal education (schools) and in the home.
Consider how Minecraft fosters enormous creativity, complex logical problem-solving and communication then see how bright teachers have successfully sought to utilise this positivity in the classroom despite it being somewhat inaccessible and with no support.
The ‘serious games' sector has been trying for 20 years to engineer this and not come anywhere close. I know, I tried! There is plenty of untapped opportunity to go after there.