Mojang and Microsoft; A $2.5 Billion Trojan Horse?

For all the talk that Microsoft overpaid for Mojang, I offer my own little angle on the subject.

So yes. Microsoft paid $2.5 Billion for Mojang, to acquire the studio and Minecraft.

There’s been a lot of discussion over the last few days about this deal. Some have argued that it was a tad expensive. Some argued that it would see eventual non-parity with other systems, fearful that they might not get to enjoy their game any more. Some have even suggested it’s evidence that Microsoft is pulling out of hardware and focusing on big-brand software and merchandise. All excellent arguments. There are lots of great discussions and for once, I’m pleasantly surprised that the discussions have been so sprightly, lively and interesting.

My viewpoint? Well, I’ll expand on my Eurogamer post.

After a bit of thought – getting beyond my, “$2.5 billion for an indie studio with one successful game under their belt, without the genius that built that brand up, seems a bit overkill…” – I quickly began to realise that, if I’m right, that that price is more than justified. Not only that, it could be the best – and most brutal – business move we’ve seen in years. It requires consideration beyond the basic voyeur of ‘Will I Still Be Able To Play Minecraft?’ Because that’s the wrong question. But we’ll address that later.

First, we need to get Minecraft out of the way.

Minecraft is superficial to the discussion; there’s obviously no way Microsoft can make that $2.5 billion back by mere sales of the game, or even content packs or additional tools. Depending on which analyst you choose to believe, at current profits, it would take Minecraft between twenty and fifty years before Microsoft even broke even on the deal, let alone made any actual profit. Would a company like Microsoft simply buy an indie studio with one game and none of the actual genius talent that built the brand up for so much money to gain access to that one brand? Possibly, but not for $2.5 billion. It’s a facetious discussion. Minecraft, to my mind, is NOT why Microsoft bought Mojang for so much money.

Why would I be confident stating that? Well, you need to know where Microsoft has been, where it’s going and what Mojang has… beyond Minecraft.

Microsoft hasn’t had a lot of luck of late in the consumer electronics market. The XBox One has been sluggish, now being consistently outsold by the Wii U (you know, that Nintendo console you all thought was dead this time last year? Yeah, that one!). It bought Nokia with the ambition to have a smartphone line – only to find it’s hardware, and Windows-based OS, lagging in the market somewhat behind the likes of Apple and Samsung, as well as the Android platform. The range of Surface tablets have been critically applauded but with accusations of being overpriced or behind the curve, those tablet devices haven’t set the world on fire. So too has Microsoft seen criticism of its “Cloud” – the online infrastructure that was meant to revolutionise how we play games and how they run, it’s been a constant sea of disappointment.

Being a business, Microsoft obviously doesn’t want to lose money – it probably doesn’t like losing, full stop. It would like all of these fragments to be pulling their weight; to compete and be seen competing at a more serious level. Outside the usual Enterprise thing, Microsoft has been losing traction for years, always seemingly one step behind, always close – but never quite there. It’s here the Mojang sale begins to make a lot more sense.

Minecraft is a bit of a phenomenon. It’s available on a variety of devices, and relies on dealing with companies to make sure those games run well, smoothly and are sold at the right price. Mojang is well-placed; it’s had many years now to firmly entrench Minecraft into the market as a solid, immovable object, being available on everything from Apple and Samsung devices to the PlayStation 4 and soon, the PS Vita. All of these companies have likely, at one time or another, confided in Mojang things it needed to know; specifications, marketing strategies, access to devkits and firmware, perhaps even system tools for debugging. Mojang is unlikely to have got rid of this information just because Microsoft is buying them out (even if that’d probably be the morally decent thing to do).

With a new range of mobiles, tablets and updates to come, Microsoft now owns and operates a game which will ensure these companies have to deal with it… and likely hand over details.

Does that sound sneaky? In an age where information is leakier than a colander, where companies fight tooth and nail to compete and be seen competing, defending their patents and trademarks with an almost vicious ferocity, Microsoft has in effect bought the flat next door. And it’s quite likely that it’s going to be one of those very creepy neighbours, always wanting to know what you’re doing. Checking your mail. Offering to ‘clean your windows’. Asking about what you were shouting about last night. That sort of thing. Microsoft has become a presence; an undeniable, unshakable presence… where it really isn’t all that welcome, if truth be told.

In the short term, companies will have to honour deals already made. They will have to provide the basics in order to get the content for the game that was promised. It would be foolish to think Microsoft isn’t very interested in these comings and goings, working out its own next move, and whether it will be competing or not against it. It’s a brutal bit of business – and effective. It puts other companies in a difficult position. Because one of their rivals is now one of their clients; whilst still simultaneously being a rival. It’s an awkward situation.

Now that question from earlier; “Will I Still Be Able To Play Minecraft?”

The real question is – will others WANT Minecraft going forward now? Think about it; in order to keep selling Minecraft, to keep it updated and running at peak efficiency, companies like Samsung, Google, Apple and Sony will likely end up needing to give Microsoft what could be considered… delicate information. Again, this is one of their rivals. Who will need to be informed of any major hardware, firmware or network changes in the meantime. Microsoft could indeed promise “to not use it for ill-will”, but seriously, if you buy my take on it then you’d probably consider that the whole deal was made of ill intent and such promises would be ultimately seen as hollow. In order to ‘win’ this particular battle, the only tactic is to not play it; to withdraw, and to not supply the product on newer hardware going forward. Or if they do, it certainly won’t be there in the opening weeks and months.

But Microsoft knows that would draw ire from millions of players – people who now expect and demand that Minecraft run on their devices. To be seen reneging on this front, to be phasing out support for such a successful game, would be damaging on a PR front, even if it makes sense from a business standpoint. After all, why would you deal with a company who may have the intention of stealing critical information in order to further their own rival products? Consider the risks for Sony – new firmware changes offering a brand new service. And conveniently, turns out Microsoft is making a rival product and has been for a while. How on EARTH did Microsoft get that information?

Customers however simply won’t care about that. They don’t care about corporate secrets, or the importance of developing unique features away from the prying eyes of your rivals. They just want Minecraft, damnit! They don’t care. They really, truly couldn’t care less. Minecraft. Now. Do it. Or we go… well, to a device which WILL run it. And you can bet your ass that will be a Microsoft product…

The question I asked myself was; is this legal?

Well, to a certain extent, yes but also, no. Microsoft has a chequered history on stifling competition; it’s had plenty of fines in a variety of places over the years for its heavy-handed approach to gaining dominance, and here we are with possibly another very good example of it. It will be up to individual companies to sound the warnings, to appeal to competition commissions or high courts. Ultimately, it will be judges and experts who will consider if the deal gives Microsoft an unfair advantage (Well, duh!) in the current climate. But that could take years. And it will be very costly. And there will likely be appeals. By the time any actual verdict is made, most companies and manufacturers will have probably made up their minds whether or not to deal with Microsoft over continued support of Minecraft.

My personal viewpoint is through all of this, Minecraft will end up a Microsoft exclusive, but not because it wants it to be, but because the market has rejected the interference of Microsoft in their business. There will be some major hangovers this week as companies worry about what information Microsoft may have access to now, just from buying Mojang. Many more will need to consider how they conduct their business affairs with someone who is quite likely seeking sensitive information. Others will have to consider the value of selling Minecraft, and the consumer desire for it, against the possibility of handing over specifications to Microsoft in the future. It’s a bleak picture, but it’s one that will need to be carefully considered. And in future, Microsoft may even be forced to give up large parts of its business by governments and courts, for fear of excessive market influence and dominance (after all, it could go both ways – Microsoft may be more easily able to dictate the direction of others!).

The beauty of the deal is that like it or not, they HAVE to deal with Microsoft, one way or another. Ignoring them is no longer an option. Microsoft is there, inside their boundaries. It now owns one of the worlds most popular pieces of software. It now enjoys a very nice cross-section view of the near-future; it sits in a position where further information may end up coming to it, than chasing around. Mojang, therefore, is Microsoft’s ‘Trojan Horse’. It’s there, and it’s inside the confines of enemy territory. What Microsoft, and others, do next will be very important. It will set an agenda. It will dictate how lines are drawn.

Microsoft has made probably the smartest acquisition possible then; it has a product others have been and may want to keep selling. It has access to short-term information, and possibly even mid-term changes on the way. And there will be no escaping the reality that, like it or not, these companies will have to deal – in the short-term at least – with Microsoft, whether they like it or not.

So again, the question – is Mojang’s $2.5 billion value justified? I’d say yes.

For what Microsoft are getting…. you could even call that cheap.

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