When a company has nearly 90 billion dollars in the bank it is very tempting to go on a shopping spree. We have seen this over and over and sadly quite often the companies they buy don’t make sense and don’t every return the investment the way it was expected. Now that Microsoft has bought Minecraft for a mind shaking price of $2,500,000,000.00, let’s take a look at why this really does make sense for them. I am confident that this purchase will pay big dividends for Microsoft, and they still have a ton of money in the bank … but we will come back to that later.
1. Minecraft is a tremendously popular game. During the first quarter of this year it was announced that Minecraft had over 100 million registered users. It is calculated that Minecrafter has now sold in excess of 54 million copies between PC based, phone based and xbox – and it is still selling about 8,500 games every single day.
2. Microsoft needs to start developing a youthful client base. Now that they own the game, Microsoft can add it to the list of available games for Microsoft phone and thus get those kids to shift to them.
3. As opposed to a lot of other games that are trendy and burst out big and then fade, Minecraft is an opened ended game that just goes on and on. Games like Angry birds and Candy crush leap up but then quickly show they have no staying power. This game was released in 2009 and 5 years later those early gamesters are still playing. Kids start playing and will still be playing as adults… there are even special Minecraft servers that cater especially to adults.
4. Parents don’t object to Minecraft. This game is about building and creating as opposed to the exclusively action packed exploding games that destroy and have way too much violence. It isn’t often that a kids game is so readily endorsed by those over protective parents.
5. The game develops and fosters a sense of commitment from its players. It can take months and months to have the beginnings of an impressive city and landscape. After having invested so much time and effort into the creation of your own “space”, it is unlikely that players just throw it aside.
6. While Microsoft often makes investments that on their own don’t turn a profit (100 million xbox sales and no recorded profit) the same is not expected from this purchase. Microsoft fully expects this purchase to be cash flow positive within the next twelve months. Between direct game sales, bolstering Microsoft phone sale and creating platform and phone loyalty their calculations seem to be on target.
If it turns out that Microsoft does indeed make this purchase cash flow positive then that 85 billion in the bank will start growing at an even faster pace. 85 billion dollars, that is an impressive amount of cash, for sure. What could you do with that kind of cash? To give you perspective of what this could buy, take a look at the short list below.
You could own over 3 million of these….
or how about 135,000 of these….
or if you get hungry you can have 17,000,000,000 of these…..
or 165,000,000 of these ….
or how about 4,600 of these ….
or how about almost 10,000 of these ….
Or, if you are more into investment, you could purchase the National Football League, Major League Baseball and the National Basketball Association!
Ah, if only we had $85,000,000,000.00. Oh well, I guess it is time to get back to work now.