Why Minecraft could be worth billions

Microsoft is in talks to buy Minecraft maker, Mojang, for more than $2 billion, according to people familiar with the negotiations.
Microsoft is in talks to buy Minecraft maker, Mojang, for more than $2 billion, according to people familiar with the negotiations.

In a world known for fleeting fads, Minecraft may have staying power.

Unlike video games that had spectacular success and then fizzled, to investors' horror, Minecraft is a create-it-yourself platform that can go pretty much anywhere a player's imagination wants to take it.

That gives it endurance and is one reason acquiring its maker could be a good bet for Microsoft, said Michael Pachter, an analyst with Wedbush Securities. Microsoft is in talks to buy Mojang for more than US$2 billion, according to people familiar with the negotiations.

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Minecraft: Blocked only by imagination

Minecraft, five years old, could be popular for another 10, Pachter said.

It's got the allure of building games, like Lego or Electronic Arts' the Sims, and entices players with achievement goals.

It appeals to both girls and boys, and can even help teach kids computer code, said Tracy Fullerton, chairman of interactive games and media at the University of Southern California in Los Angeles.

"In the same way that Lego makes building things easy, this is a thing that makes constructing physical spaces in a virtual, software, coded environment very easy," said Fullerton, who called Minecraft "timeless."

The Mojang purchase would be the biggest deal for Microsoft since Satya Nadella took over as chief executive officer in February. Microsoft is the world's largest software company and maker of the Xbox video-game console.

Constant concern

Mike Hickey, a Benchmark analyst, said he takes a shorter view of Minecraft's longevity than Pachter. "It's a competitive field," Hickey said. "There are always new games that can come into a market and take share."

That's a constant concern for publishers. So is the size and variety of their fleets of games. King Digital Entertainment, which relies on Candy Crush Saga for much of its revenue, slumped 13 per cent after sales shrunk in the first quarter; the stock's fallen 42 per cent since its initial public offering in March. Zynga tumbled after its IPO when FarmVille, its signature title, lost luster.

Created in 2009 by Markus Persson, who used to work for King Digital and co-founded Stockholm-based Mojang, Minecraft has sold more than 54 million copies. Persson could become a billionaire if the Microsoft deal goes through.

"The game can last a very long time until another game comes along to do what Minecraft does - only better," said Philip Tan, director of MIT's Game Lab. "Even then, it's difficult to dethrone a genre king."

Decade-long lifecycle

As long as players keep coming up with new ideas about what to do and build inside Minecraft, and as long as Mojang - or Microsoft - keeps providing tools to make the ideas work, Minecraft could have a decade-long lifecycle or more, Tan said.

Minecraft's sales jumped 38 per cent to $292 million (NZ$357.5 million) in 2013. It was the No. 2 title in July for the Xbox 360 and Sony's PlayStation 3, according to research firm NPD Group. The game is also played on computers and mobile devices.

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"The crazy thing about Minecraft is because it looks like Lego, it doesn't appeal to an adult," Pachter said. "Because it's hard, kids ask their parents to get involved, and because it's good, parents get involved."

Hard-core gamers like it because they can switch modes, choosing to compete with others or jump through obstacles on their own. While Minecraft's not violent, it does present challenges and there are ways to fight off evil, which Pachter said keeps gamers interested and parents comfortable.

'Still fun'

Since it's not in the free-to-play class - like Candy Crush or Glu Mobile's Kim Kardashian-branded offerings - Minecraft doesn't pester people with ads or pitches for purchases of tools or weapons, he said. It sells for about $30.

Minecraft encourages players to employ basic coding techniques to change the game's features. That helps children learn spatial reasoning and grasp the building blocks of software, according to USC's Fullerton.

"This system isn't going to get old because it will continue to accept new people's creativity and allow them to build new things," Fullerton said. "It's like saying, will it get old to have crayons and draw new pictures? It'll never get old. It's still fun."

- Bloomberg

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