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Microsoft (MSFT) Opens New Business Opportunity in Minecraft

Joseph Lu

On Monday, Microsoft Corporation’s MSFT 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.  

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