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Microsoft purchased Swedish company Mojang AB, the developer of Minecraft, for $2.5 billion in 2014. The popular video game which is available on PC, gaming consoles, smartphones, and tablets, allows the user to use Lego-like blocks to create their digital world. It is especially popular among preteens, though popularity doesn’t always equate to large sales.
Though the blocky and low-resolution game has sold 121 million copies and boasts 55 million active monthly users, in a report by Business Insider, the majority of its player base has no spending power. The game is free to play after the user pays for a one-time fee to purchase the game. Gamers can further spend money on in-game items if they desire to.
While the game’s population is still growing, the revenue isn’t. According to SuperData, Minecraft generated about $228 million last year in digital revenue across all three platforms, down 14% compared to the previous year.
To justify the $2.5 billion purchase, the software giant needs to mine more of the game.
Crowd-Sourcing
Similar to Uber and Lyft, Minecraft looks to the community to provide its new services, it gains a portion of its revenues through a specific platform .
The Minecraft Marketplace will start with nine businesses that will sell their content packs inside the game. The content packs range between $1 and $10. Other companies will be able to apply and sell their original content.
Opening up the existing in-game store to third party developers creates a new business model within the game for independent creatives. “The real impetus is to let creators connect to players and help them make a living on top of Minecraft,” said John Thornton, Minecraft executive producer, in an interview with Bloomberg.
As the user purchases feature packs from the marketplace, the videogame maker will receive a portion of the sales. The company would not reveal the exact figure but said the third-party developer will receive “more than half” of the sale, according to a report by Bloomberg.
To make purchases in the marketplace, users will have to buy the video game’s new currency, “Minecraft Coin.” The in-app payment model, adopted by many mobile game apps, offers free downloads of the game but generates a significant amount of revenue through in-app purchases. Pokémon Go made almost $1 billion in revenue in 2016 through in-app payments.
The move into virtual currency can boost Minecraft's short-term performance. While third-party developers may not bring in an immediate financial effect, it may strengthen the brand’s value and increase sales of the games and merchandise in the long run.
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Microsoft (MSFT) Opens New Business Opportunity in Minecraft
On Monday, Microsoft Corporation’s (MSFT - Free Report) Minecraft is set to launch a virtual marketplace within the game using a new digital currency, looking to create a new stream of revenue for its 100 million users.
Microsoft purchased Swedish company Mojang AB, the developer of Minecraft, for $2.5 billion in 2014. The popular video game which is available on PC, gaming consoles, smartphones, and tablets, allows the user to use Lego-like blocks to create their digital world. It is especially popular among preteens, though popularity doesn’t always equate to large sales.
Though the blocky and low-resolution game has sold 121 million copies and boasts 55 million active monthly users, in a report by Business Insider, the majority of its player base has no spending power. The game is free to play after the user pays for a one-time fee to purchase the game. Gamers can further spend money on in-game items if they desire to.
While the game’s population is still growing, the revenue isn’t. According to SuperData, Minecraft generated about $228 million last year in digital revenue across all three platforms, down 14% compared to the previous year.
To justify the $2.5 billion purchase, the software giant needs to mine more of the game.
Crowd-Sourcing
Similar to Uber and Lyft, Minecraft looks to the community to provide its new services, it gains a portion of its revenues through a specific platform .
The Minecraft Marketplace will start with nine businesses that will sell their content packs inside the game. The content packs range between $1 and $10. Other companies will be able to apply and sell their original content.
Opening up the existing in-game store to third party developers creates a new business model within the game for independent creatives. “The real impetus is to let creators connect to players and help them make a living on top of Minecraft,” said John Thornton, Minecraft executive producer, in an interview with Bloomberg.
As the user purchases feature packs from the marketplace, the videogame maker will receive a portion of the sales. The company would not reveal the exact figure but said the third-party developer will receive “more than half” of the sale, according to a report by Bloomberg.
To make purchases in the marketplace, users will have to buy the video game’s new currency, “Minecraft Coin.” The in-app payment model, adopted by many mobile game apps, offers free downloads of the game but generates a significant amount of revenue through in-app purchases. Pokémon Go made almost $1 billion in revenue in 2016 through in-app payments.
The move into virtual currency can boost Minecraft's short-term performance. While third-party developers may not bring in an immediate financial effect, it may strengthen the brand’s value and increase sales of the games and merchandise in the long run.
Looking for Ideas with Even Greater Upside?
Most of Zacks’ investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information>>