By Shira Ovide
Microsoft Corp. agreed to buy the company behind the hit
videogame "Minecraft" for $2.5 billion but not the game, but the
startup's founders and top executives won't be joining the software
giant.
The deal for Mojang AB will give Microsoft an asset with a loyal
and largely young following. But it is also a surprising
acquisition for Satya Nadella, who took over in February as
Microsoft's chief executive. He has said the company needs to
double down on what the company does best--selling software to
companies.
The acquisition, expected to close late this year, also means a
hefty windfall for Markus Persson, the 35-year-old Swede who
created "Minecraft" and has became a cult hero in the independent
game community in part for his willingness to bash big companies,
including at times Microsoft. Mojang, which has earned more than
$100 million in profit from selling "Minecraft" and related
merchandise, only has about 40 employees, and Mr. Persson and two
other executives are the only shareholders and board members.
In a statement Monday, Mojang said Minecraft had grown from a
simple and small game into a "project of monumental
significance."
The Mojang team will join Microsoft Studios, but the company's
founders--Mr. Persson, Chief Executive Carl Manneh, and Jakob
Porser--are leaving to start new projects.
Recent online postings by Mr. Persson on Twitter and forums like
Reddit suggest that the Stockholm-born programmer has been growing
tired of answering to Minecraft's fans, and that managing the
popular game has been getting increasingly difficult for the small,
40-person game studio.
"It was never [Mr. Persson's] intention for it to get this big,"
Mojang said on Monday, adding that the pressure of owning Minecraft
had become a burden for the founder. "Over the past year, he's made
attempts to work on smaller projects, but the pressure of owning
Minecraft became too much for him to handle."
"Minecraft," introduced in 2009, has sold more than 50 million
copies for PCs, smartphones and videogame consoles like Microsoft's
Xbox. The game has drawn in middle-school children and veteran
videogame fans eager for the chance to build sprawling worlds from
Lego-like digital blocks. The brand also has licensing deals with
Scholastic Corp. for handbooks, Lego A/S for toys and Warner Bros.
for a coming feature film.
The quick rise of "Minecraft" from a cult game to the target of
one of the world's largest corporations shows how new forms of
entertainment, especially on smartphones or other emerging
computing devices, are shaking up the media and technology
industries. Companies that didn't exist a few years ago, including
Mojang, virtual-reality headset maker Oculus Rift and
mobile-messaging service WhatsApp Inc., have been sold for
multibillion-dollar prices in recent months.
Mojang said it has been working closely with Microsoft over the
years and that the company belongs to "only a handful of potential
buyers with the resources to grow Minecraft on a scale that it
deserves."
While Microsoft owns the Xbox console as well as an as operating
systems for phones and mobiles, Mojang said there is no reason for
development, sales and support of Minecraft for competing platforms
will cease.
While Microsoft's Xbox business has been a secondary focus for
Mr. Nadella, he has emphasized how games are among the most popular
activities on computers and smartphones. Microsoft's ownership of
"Minecraft" could give people extra incentive to latch on to its
Xbox videogame consoles, PCs and phones.
Mojang is particularly important for Microsoft's struggling
smartphone business. "Minecraft" is among the most popular mobile
apps, but the company hasn't made a version for Microsoft's Windows
Phone system, which powers fewer than three out of every 100 new
smartphones sold world-wide.
"We don't view this acquisition as a signal of [Microsoft's]
intent to double down on Xbox but consider it an attempt to better
address mobile on a cross-platform basis, given that 40% of
Minecraft's units are on mobile platforms," Nomura analyst Rick
Sherlund said in a research note last week.
Mr. Sherlund also said Microsoft could make unique or exclusive
"Minecraft" content only for the company's properties like Xbox or
Windows Phone.
The "Minecraft" brand's potential value for Microsoft is far
more strategic than financial, where it will scarcely make a dent.
Annual revenue from "Minecraft," which was 2.07 billion Swedish
kroner ($290 million) last year, is less than 1% of Microsoft's
fiscal 2014 sales of $86.8 billion.
But the acquisition isn't much of a financial risk for
Microsoft, whose operations generate enough cash in roughly a month
to pay for the Mojang purchase. Microsoft said it expects the deal
to break even in fiscal year 2015.
There is, however, a risk of alienating investors already
dubious about Microsoft's deal-making strategy.
Many Microsoft stockholders remain annoyed by the company's $9.5
billion acquisition this spring of Nokia Corp.'s phone-and-tablet
business. Mr. Nadella's predecessor, Steve Ballmer, agreed to the
deal, but now it is the new CEO's job to harness Nokia to help
Microsoft play catch-up in smartphones.
Evelyn M. Rusli, Sven Grundberg and Michael Calia contributed to
this article.
Write to Shira Ovide at shira.ovide@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires