An XBox 360 Minecraft game is seen at a GameStop store on Septemeber 15, 2014 in Miami, Florida. Microsoft today announced it will acquire video game maker Mojang and its popular Minecraft game for $2.5 billion.Joe Raedle/Getty Images
For the last half-decade, the size of a user base has been perhaps the defining metric by which the technology industry measures the success of its startups. In many respects, it's a deeply questionable metric, one that has led to billion-dollar valuations for companies that boast huge – but still unprofitable – user uptake.
But in paying $2.5-billion (U.S.) to acquire the company behind one of the world's most popular video games, Microsoft Corp. is betting on a far more reliable indicator of success – a user base that's not only massive, but deeply engaged.
The software giant announced this week that it will buy Stockholm-based game-maker Mojang AB. The company is best-known for owning the rights to Minecraft, one of the most popular video games of all time. According to Microsoft, Minecraft has been downloaded more than 100 million times on PCs, and is the most popular online game on the Xbox console.
But perhaps most importantly, Minecraft has one of the most loyal and engaged audiences in the world of gaming. Some 90 per cent of the game's PC customers have logged in to the game within the last 12 months, according to Microsoft.
"Some things that are special to us about Minecraft is the broad set of gamers that play this game," said Phil Spencer, the head of Xbox at Microsoft, in a video he posted on the day of the announcement. "You have young and old, male and female. There's truly very few things in the market – whether games, movies, TV – like it with the amount of just excitement, engagement from the community."
Nominally, Minecraft is an exploration, adventure and combat game. It is designed with a retro, 8-bit aesthetic – the game world is composed of cubes arranged in a grid-like fashion that harks back to earlier days of video gaming. But the game's true appeal lies in what it allows a player to do – essentially, pretty much anything.
Minecraft's vast arsenal of in-game tools – including countless building materials, textures and landscapes, provides players with the digital equivalent of a vast Lego set. With these tools, players have created countless new levels, modifications and even entire worlds. Some users have built detailed virtual replicas of their own homes, while others have collaborated in large numbers to create entire cities. Some users have even used the game's tools to create logic gates, the building blocks of real-world computers – essentially building rudimentary but functional computers from scratch within Minecraft. Beyond their novelty value, such creations are usually very complex, requiring weeks or months of work.
Collectively, the various user-created additions to the original game are referred to as mods. Many video games have vibrant mod communities, but few rival in size or dedication that of Minecraft. That's in part because the game itself is designed to encourage creativity by allowing users to do almost anything they want within the game's open world. But Minecraft's creators have also largely encouraged third-party modifications.
It is that relationship, cultivated slowly and painstakingly since Minecraft first appeared five years ago, that now represents the most lucrative aspect of the game for Microsoft.
"It's a large audience, to be sure, and a global one," said James McQuivey, principal analyst at the research firm Forrester. "It's also a profitable one. But most importantly for Microsoft, it's a very engaged audience."
Mr. McQuivey notes, for example, that Microsoft will be able to partner with various brands to create in-game content that – because of the inherently creative nature of Minecraft – feels far more organic than a traditional ad. Instead of simply showing users a banner ad, a company may choose to build brand-specific tools, landscapes or entire levels for the game.
But the $2.5-billion purchase is not without risks for Microsoft. Since the deal was announced on Monday, many current players have taken to the game's myriad online fan forums to express worries that Microsoft will soon begin clamping down on how users are able to modify the game (for its part, Microsoft has shown no inclination so far to do so).
Microsoft also risks alienating users by either saturating the game with new revenue-generating models, or under-investing in the game's future development. To make matters worse, as part of the purchase agreement, Minecraft's three original creators are leaving Mojang.
But in an era where many tech giants have written billion-dollar cheques for companies whose user base balks at paying even a nominal amount for the service, Microsoft at least has in Minecraft a user base that's not only ready to pay for the game, but to help build it.
"The thing about the Minecraft audience is that they're creating their own game, essentially," said Mr. McQuivey.
"There's lots of value in using Minecraft as a school to study the future of interactive entertainment."