Now that the dust has settled on Microsoft's purchase of Minecraft maker Majong, we've taken a long hard look at the deal. Why did Microsoft buy Minecraft? Will Microsoft ruin Minecraft? Those are the questions, here are the answers. (See also: Here's Markus 'Notch' Persson's farewell letter to Minecraft fans.)
Why did Microsoft buy Mojang and Minecraft?
Why does Microsoft buy anything? In the first place it is to make money, so we'll deal with the prosaic stuff first.
Microsoft says the purchase of Mojang will cost $2.5bn. That may be a lot of money to you or I, but Microsoft has around $85bn in cash and short-term investments, so this is not a big investment for the Redmond giant. Moreover, most purchases of this type see a tech giant buying a non-profitable startup in order to aquire expertise and technology. Or like Microsoft buying Nokia a tech giant buying a non-profitable but established company in order to purchase infrastructure and market position. Mojang, with Minecraft in the vanguard, is a profitable business.
So Microsoft will make more in profit than it would in interest within the first few months of the purchase being complete. And because of its robust health Mojang will immediately show up as $2.5bn worth of assets on the Microsoft balance sheet. It's basically a cost-neutral purchase with the potential to make lots of money. Why wouldn't Microsoft buy Mojang?
Of course if Microsoft wanted to it could spend all of its $85bn war chest on profitable businesses from Starbucks to your local sandwich shop. Why Mojang in particular is a much more interesting question.
Consider the challenges facing Microsoft in 2014. It is a very profitable company, but its products are largely unloved. It has a massive userbase, but is principally associated with desktop computing. Meanwhile we are all buying fewer laptops and PCs, and doing more traditional computing tasks on mobile, on tablet, and in the cloud. Microsoft is making money, but it is uncool. And its key products are all in declining markets. Not markets that will ever dwindle to nothing, but growth is hard to see in the longer term. Mojang helps with this.
Microsoft missed the boat on mobile, and has been playing catchup ever since. And although Bill Gates is rightly revered at Microsoft, when he stepped away from the company in 2008 Steve Ballmer inherited the following product line: Windows Vista, IE 6, the original Xbox, Office 2007 and Windows Mobile. They were all turkeys, and Microsoft was a tired company. Ballmer is to be credited with turning the oil tanker, but current CEO Satya Nadella knows that the current lineup of Windows 8, Office 2014 and Windows Phone 8 is all good without inspiring joy or even credibility - particularly in younger users. Mojang helps with this.
The purchase of Nokia gives Microsoft meaningful scale in the mobile market. Windows 10 is designed to pull together everything from mobile to Xbox to desktop Windows, with one interface and apps that work for all. Intel M chips will lead to a series of Windows devices that range from tiny tablet to huge laptop with all shapes and functions inbetween, but to get buy-in from consumers Microsoft needs for younger users to cast aside iPhones and Androids and consider Windows. It also needs for app makers to consider Windows as a good place to make a living. Mojang helps with all of this.
Finally, Microsoft wants to continue to make money from porting its popular software to other popular platforms. It was noticable that Satya Nadella's first major public event was the launch of OFfice for iPad, for instance. And Mojang can help greatly with this.
And it does so, principally, because of Minecraft.
Minecraft is a game. A game beloved of millions of users, many of whom grew up playing Minecraft, and a great number of whom contribute user-generated content to Minecraft. They are mostly younger users, and they love Minecraft. Microsoft is buying that audience, and that kudos. It's also hoping to buy knowledge of what it takes to create products like that.
Critically, Minecraft is almost unique in that it is available on just about every platform you can think of. There are versions of Minecraft for PC and Windows Phone, as well as Mac, iPhone and iPad, Linux, Xbox and PlayStation. I just checked and there is a Minecraft game on the Amazon App store, which means you can play it on BlackBerry and Amazon TV. This makes Minecraft doubly attractive to Microsoft. For one thing it is buying the expertise to port successful products to every kind of device, and insight into how those devices are used.
Perhaps more importantly Microsoft is buying access to users of all of those platforms. And with it the opportunity to market to them other products. The Minecraft gaming community is made of tens of millions of teens and pre-teens, none of whom is likely to have knowingly purchased a Microsoft product. (For more on this see: Mojang Unchained: Why Microsoft wants Minecraft maker.)
And there is more. Minecraft is also available on Raspberry Pi, and indeed a big part of the game as it is played by millions is the creation of new worlds. It's possible that Microsoft sees Minecraft as a recruiting and training ground for the next generation of coders, too. (For more on this see: Buying the next generation of coders: Microsoft's Minecraft gamble and Why Microsoft bought Minecraft: To lure kids to science.)
In short, Mojang and Minecraft is everything Microsoft isn't, and wants to be. Popular, and popular with young people. Dynamic and flexible, and successful across all form factors and devices. And a source of creativity, with a userbase that helps develop the product.
What do you think Microsoft will do with it now? Will Microsoft change any aspects of the game?
In the short term Microsoft will leave well alone. You don't buy something successful to mess with the winning formula. In the longer term it will hope to transfer some of Mojang's success into its more mainstream products, and that will require a learning process. Whether or not it is possible to graft a young and hip company on to a more established Blue Chip is a discussion for another day. And Microsoft will have to work hard to avoid the temptation to interfere with Minecraft. Like a Dad dancing at the disco, no-one wants to see an old stager messing up something cool.
I would expect that we would start to see some synergies in the medium term, however. Microsoft would be foolish to limit Minecraft to Microsoft products, but we might see updates and features being exclusive to Windows, Xbox and Windows Phone, for a while, before being made available elsewhere. And low-end consumer phones and tablets might launch with new Minecraft games and features bundled in. Think about it: what better way for Microsoft to gain smartphone or tablet market share than to release an 'Xphone' or 'Xtab' that contains the latest Minecraft exclusive?
Also Microsoft will want to bring to bear its own expertise at wringing every last Dollar from a product.
How do you think the community of Minecraft are responding to the sale by Microsoft?
That largely depends on the answers to the previous question. Generally speaking I don't see the majority of Minecraft users caring too much, unless Microsoft starts messing things up. There is a deal of fear and concern, obviously. When anything that is good is taken over by an unknown entity there is that. And Microsoft is, after all, known as the large corporate that in essence monetised code - something that was previously free. But if Microsoft does at it has promised, and takes a softly, softly approach, I can't see the majority of Minecraft users caring. If.