Minecraft Deal Shows Desire for Intellectual Property Is No Game


NEW YORK (TheStreet) -- Microsoft (MSFT) just sank $2.5 billion into the Swedish company Mojang to get its hands on the video game Minecraft, its servers and the merchandising that goes along with it, but it's not just playing games.

When the deal was announced on Monday, the acquisition was viewed as the latest move in Microsoft's console battle against Sony's (SNE) PlayStation 4. While that's partially true, even the console battle has grown to entail a lot more than video games -- even ones as sprawling an social as Minecraft.

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It's about shoring up a company's ecosystem of devices, finding intellectual property to draw people to all of those devices and reeling in those customers. Michael Pachter, an analyst with Wedbush Securities, says this is less about Microsoft taking on Sony and Nintendo (NTDOY) as it is about countering Apple (AAPL) , Amazon (AMZN) , Google (GOOG) (GOOGL) and other more connected rivals.

“The 'big' guys are in an acquisition mode. Microsoft is a software company heading to enterprise solutions in the cloud, and has a device strategy to help it implement its vision,” Pachter says. “Xbox is one of those devices, Surface and Windows phone are the others, and Mojang fits all three.”

Video games, original streaming video content, streaming music, video conferencing (like Skype, which Microsoft paid $8.5 billion to buy in 2011) and even an online marketplace are all just pieces of a greater plan. Amazon knows this, and just spent $970 million to buy video game streaming service Twitch in August.

“This is similar to Amazon’s acquisition of Twitch, which doesn’t sell any more consumer products for them but fits into their device strategy (Kindle, Fire TV and Fire phone),” Pachter says. “Amazon and Microsoft are each looking for a more integrated offering to support their core businesses.”

In Microsoft’s case, Pachter says that means supporting the company's position as the premier enterprise software provider by strengthening its hold on the consumer and expanding Windows to deliver telecommunications, games and business solutions. That differs slightly from Amazon's goal to sell more Prime memberships by getting consumers hooked on its media content (books, Prime Instant Video, Prime Music, some form of game initiative, and Twitch) via the Kindle, Kindle Fire and Fire TV devices, but not by much.

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In the end, it's about keeping customers in-house. There's a reason Google Wallet is countered with Apple Pay. There's a reason Apple scoops up Beats Music for more than $3 billion to counter Pandora (P) , Spotify and (potentially) Bose. Intellectual property matters, and any IP that can keep customers away from a competitor is worth the investment -- whether it's developed or acquired.

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