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With Minecraft, Microsoft Bets Again on Blockbuster Game Franchises Over Talent

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IMAGE: Tim Cook, Apple Chief Executive Officer »


The conventional wisdom in Silicon Valley is that acquisitions are about gaining great talent. Just last week, Tim Cook told Charlie Rose that one of the main reasons Apple bought Beats was for "incredible talent." The Valley even has its own term for an acquisition based solely on hiring: "acquihire."

But that's not why Microsoft is spending $2.5 billion for Mojang. The purveyor of all things Xbox is buying the Swedish developer for the mega-hit video game Minecraft. That's it. While Mojang says the "vast majority" of employees are expected to stick around until after the deal closes, the three founders are leaving right away. That includes Markus "Notch" Persson, the face of the company.

The headline on Microsoft's press release is telling: "Minecraft to join Microsoft." Not Mojang. Minecraft. That's a pragmatic way to describe the deal: Just about every kid and parent has heard of Minecraft, which has sold more than 54 million copies, comprising virtually all of the small studio's revenue. But Microsoft seems to indicate that this isn't about cultivating an eccentric group of independent-minded game designers; it's about Minecraft.

Microsoft declined to comment on its acquisition strategy, referring us to a generic statement that reads: "Microsoft has acquired Mojang and the iconic Minecraft franchise. We’re honored to partner with them to carry Minecraft forward."

Phil Spencer, the head of Xbox who led the Minecraft deal, seems to place a premium on franchises. He also helped broker Microsoft's purchase of the Gears of War franchise in January from Epic Games, a high-profile developer led by antagonistic creatives. In the announcement, Spencer noted that the shooter series "has a very strong, passionate and valued fan base on Xbox." They've bought 22 million copies of the Gears of War games, grossing more than $1 billion, he added.

The focus on cultivating successful franchises, rather than brilliant but sometimes fickle visionaries, makes a lot of sense, says Billy Pidgeon, an independent consultant to the games industry. Video games are a lot like Hollywood, and a recognizable title goes a long way.

Microsoft's talent plays haven't always produced results. In 2002, the company bought Rare, the British studio behind some of the most beloved Nintendo games including Donkey Kong Country and GoldenEye 007. Rare didn't own most of the franchises it worked on, and it hasn't produced a major hit under Microsoft. Founders Tim and Chris Stamper left Microsoft in 2007.

Bungie Software joined Microsoft in 2000, a year before releasing the first in its blockbuster Halo series. The developer created five Halo games until the relationship became untenable. Microsoft agreed in 2007 to spin off Bungie into an independent company, without Halo. Microsoft established its own development team devoted to Halo, and that group is creating a new version of Halo every year. Each one has been selling well. Meanwhile, Bungie teamed up with Activision to release Destiny on Sept. 9. That's already on track to be a massive franchise, generating $500 million in revenue in its first day available.

In addition to Halo, Microsoft lists a series called Fable among its "global blockbuster franchises." That one came from the 2006 acquisition of Lionhead Studios. The company, also British, was started a decade earlier by Peter Molyneux, who's somewhat legendary in the gaming world for his innovative games, grand visions and over-promising. Molyneux, who has a lot of fans and critics, resigned in 2012.

"The thing with games is it can be more volatile, and you're really dependent on the talent: You lose them, and you're in a bad place," says Pidgeon. "Franchises are always worthwhile. As long as you continue to keep the quality and continue to develop it in line with expectations, it can be really valuable. It's guaranteed to sell. As long as there are millions of people playing it, they'll continue to play it. The games business is very hit-driven."

Article Credit: Bloomberg

Updated 5 Years ago

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Tags:     Tim Cook     Charlie Rose     Xbox     Markus     Minecraft     Microsoft     Phil Spencer     Pidgeon