Last week, after much speculation, Microsoft confirmed that they closed a deal to acquire Mojang, creators of the infamous game Minecraft for US$2.5 billion.
In Microsoft’s press release about the deal, CEO Satya Nadella said:
“Gaming is a top activity spanning devices, from PCs and consoles to tablets and mobile, with billions of hours spent each year. Minecraft is more than a great game franchise – it is an open world platform, driven by a vibrant community we care deeply about, and rich with new opportunities for that community and for Microsoft.”
A post on the Mojang website by Chief Word Officer, Owen Hill reads:
“There are only a handful of potential buyers with the resources to grow Minecraft on a scale that it deserves. We’ve worked closely with Microsoft since 2012, and have been impressed by their continued dedication to our game and its development. We’re confident that Minecraft will continue to grow in an awesome way.”
Here are just a few of the impressive facts about Minecraft:
Increasing Mergers and Acquisitions Among Game Developers
The Microsoft-Mojang deal is only the most recent in a market that is becoming increasingly merged and acquired.
In fact, many vendors are currently choosing the merger and acquisition (M&A) route to increase their global presence, and expand their product portfolio and customer base. It also helps companies to focus more on product innovation and increase their profit margins by collaborating with each other.
This is a huge reason why the Global Video Game Market is worth over US$66 billion, and is expected to grow at a CAGR of 8.3 percent from 2013-2018.
Numerous global firms such as Activision, Electronic Arts, and Konami are actively adopting the M&A strategy. For instance:
- In 2012, Electronic Arts acquired PopCap Games, which develops casual games for mobile devices, tablets, PCs, and social networking sites.
- In 2013, Nintendo acquired a video software company called Mobiclip, which helps Nintendo in video rendering and playback in some of its handheld games on the GBA and Nintendo DS.
- In September 2013, Nexon entered into a definitive agreement to acquire all outstanding shares of THINGSOFT, an online game development studio based in Seoul, South Korea.
Many of these deals allow the key players in game development to tackle new fronts and improve their existing portfolios using the technologies and skillsets of smaller companies.
Technological Developments and Product Innovation
The Global Video Game Market has witnessed various technological developments and product innovations over time that cater to a wide variety of needs of consumers. In the early days, video games were played on the TV, and the graphics used were of low quality. However, today there is a dramatic change in games software and hardware, which has made them graphically advanced and more realistic in appearance.
Some of the latest products that have good graphics are:
- The Call of Duty series
- The Medal of Honor series
- The Warcraft series
- The Diablo series
- The FIFA series
- The Battlefield series
- The Grand Auto Theft series
- The Metal Gear series,
- The Mafia series
- LA Noire
The latest platform introduced in the market was the Wii U, and this platform has led to the emergence of eighth-generation gaming consoles. In the past few decades, video games have witnessed sweeping advances in technology and product innovation. Moreover, the innovations in audio-visual devices provide consumers with an enriched gaming experience.
Growing Adoption of F2P Model
It’s not just the gameplay that is receiving an overhaul; game developers are also changing the revenue model.
The F2P or “free-to-play” model is a revenue model adopted by the game developers and publishers that allows users to download or play games on their devices for free. This model is increasingly becoming popular because it enables vendors to capture a wide user base and generate revenue through other means such as in-game purchases that involve selling virtual goods and integrating advertisements in the game.
This model is increasingly becoming successful because the premium gamers who make micropayments for accessing premium features perceive higher value and acknowledgement.
In addition, vendors can have free access to the user content, which they generate when the user downloads the free game application on the device. The F2P model also solves the issue of video game piracy and requirement of high-end hardware for playing games.
