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Microsoft said for now, the company is keeping Mojang's Stockholm office, which includes about 40 employees. Above, Mojang workers in 2012. Agence France-Presse/Getty Images
Microsoft Corp. MSFT -0.97% is hoping a cult videogame built around virtual blocks will help fix the company's real-world problems, even if the brains behind the brand aren't sticking around.
The software giant's $2.5-billion deal to buy Mojang AB, maker of the "Minecraft" videogame, gives Microsoft an entertainment property whose devoted fans dress up like game characters, pack YouTube with how-to guides and rush to sign up for "Minecraft"-themed summer camps.
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Microsoft is in talks to acquire Swedish game company, Mojang. If the $2 billion deal for the maker of Minecraft goes through, the mobs, skeletons, zombies — and most importantly — the company's customer base of more than 50 million, would give Microsoft access to a young, hip demographic it has struggled to attract.
Microsoft, which had tried before to buy Mojang, moved quickly to secure a deal as other potential suitors expressed interest, said a person familiar the matter. The two companies signed an exclusivity agreement in July, this person said, when it became clear that Mojang's founders were open to selling.
Microsoft is betting the popularity of "Minecraft," which lets people use Lego-like blocks to create lush digital worlds, can lure more people to the company's struggling Windows smartphone system, and draw into its orbit a younger crop of users and software developers.
"Great content will drive the ability for Microsoft to expand the sales of its platforms, and bring it to new devices," said Kent Wakeford, chief operating officer of Kabam Inc., which makes videogames such as "Kingdoms of Camelot."
The acquisition isn't a big financial bet for a company as flush with cash as Microsoft, but Chief Executive Satya Nadella is taking a risk that "Minecraft" can have staying power and will prove bigger than a single brand.
Introduced in 2009, "Minecraft" has sold more than 50 million copies for PCs, smartphones and videogame consoles like Microsoft's Xbox. Through licensing deals, the game has also inspired top-selling guide books for Scholastic Corp. SCHL -0.90%, toys from Lego A/S and a coming feature film from Warner Bros.
Microsoft officials declined to comment Monday beyond prepared remarks.
But Microsoft will have to fulfill its plans for Mojang without the company's founders, including the game's well-regarded creator, Markus Persson. The 35-year-old Swedish programmer and Mojang's two other founders said they're leaving to work on new projects. A Microsoft spokesman said the company for now is keeping Mojang's Stockholm office, which houses about 40 employees who both companies say are expected to largely stay in place. According to the deal agreement, Microsoft will pay a penalty to Mojang if it moves the office within the next two years, said the person familiar with the matter.
Mr. Persson has said repeatedly he could never hope to replicate the success of "Minecraft," and it became clear over recent months he was frustrated with managing Mojang and keeping up with its demanding fans.
"Thank you for turning 'Minecraft' into what it has become, but there are too many of you, and I can't be responsible for something this big," Mr. Persson wrote on his personal website. He declined interviews on Monday.
Without Mojang's original backers, it could prove difficult for Microsoft to sustain the videogame and nurture its community. Already, some of the game's ardent fans have been complaining the sale to a big corporation will ruin the independence that made "Minecraft" a hit. In a nod to the backlash, the executive in charge of Microsoft's Xbox business said Monday the company will do whatever it takes to sustain the loyalty of "Minecraft" devotees.
"They should know from us that we come at this with a plan, and a real cornerstone of that plan is listening to the feedback from the 'Minecraft' community on what they'd like to see," Microsoft executive Phil Spencer said in an online video released by the company.
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Mr. Spencer said "Minecraft" is one of the most-played online games for the Xbox, the 13-year-old videogame franchise that Mr. Nadella has said isn't core to Microsoft's business but remains a valuable asset. The bigger potential gain from owning "Minecraft" is a chance to bolster Microsoft's smartphone business.
Mr. Nadella, CEO since February, has made mobile a central plank in the company's strategy, but Microsoft has failed to make headway. "Minecraft" is among the most popular mobile apps for iPhone and Android phones, but Mojang has said there wasn't a compelling reason to make a version for Microsoft's Windows Phone system. The software powers fewer than three out of every 100 new smartphones sold. Microsoft didn't discuss its plans for Mojang, but the company could make a "Minecraft" app for Windows PCs or smartphones, with extra features not available on other phones.
"We don't view this acquisition as a signal of [Microsoft's] intent to double down on Xbox but consider it an attempt to better address mobile on a cross-platform basis, Nomura analyst Rick Sherlund said in a research note last week.
One of the big risks for Microsoft is the popularity of "Minecraft" may prove ephemeral. Games such as Rovio Entertainment Ltd.'s "Angry Birds" and Zynga Inc.'s "FarmVille" took off like rockets, but have since lost some of their luster as consumers move on to other diversions. Many "Minecraft" fans say the videogame already has stayed popular longer than the typical flash-in the-pan videogame, and they don't anticipate any slowdown now.
The acquisition isn't much of a financial risk. Microsoft's operations generate enough cash in roughly a month to pay for the Mojang purchase. There is, however, a danger of alienating investors dubious about Microsoft's deal-making strategy. Many stockholders remain annoyed by the company's $9.5 billion acquisition of Nokia Corp.'s mobile-phone business. Mr. Nadella's predecessor, Steve Ballmer, agreed to the deal, but now it is the new CEO's job to harness Nokia to help Microsoft play catch-up in smartphones.
Annual revenue from "Minecraft," which was 2.07 billion Swedish kronor ($290 million) last year, or less than 1% of Microsoft's annual sales. The company said the Mojang sale should close this year.
Already, "Minecraft" has been an unlikely success. Mr. Persson, who programmed his first computer game at the age of eight, released a test version of "Minecraft" in 2009 and has said he was surprised by its success. A year later, he formed Mojang with his friend and former colleague, Jakob Porser. The two men, along with Mojang CEO Carl Manneh, own the company and never brought in other investors or board members. The trio repeatedly turned down acquisition offers. Oil portraits of each Mojang employee hang in the company's Stockholm offices.
Meanwhile, "Minecraft," at $7 to $27 a copy, has generated more than $100 million in annual profit for Mojang despite little marketing. Middle-school children and veteran videogame fans alike team up online for joint "Minecraft" projects. Fans flock to YouTube and videogame site Twitch to trade tips on how to build "Minecraft" palaces or evade the game's villain, the block-headed Creepers. Teachers have harnessed "Minecraft" to teach computer programming in classrooms.
The seeds of the Microsoft acquisition date back to 2011, when Mr. Spencer met Mojang's founders for dinner just before a videogame-industry conference known as E3, he said in the online video. Back then, "Minecraft" was played mostly on personal computers. Microsoft officials worked with Mojang to create a version of "Minecraft" for the Xbox, released two years ago. Last year, about 38% of Mojang's revenue came from sales of the "Minecraft" for computers, while versions for the Xbox and Sony Corp.'s PlayStation videogame system accounted for 30% of sales.
Mr. Persson, who stepped back several years ago from direct work on "Minecraft," relished the game's iconoclastic roots, and was known for feuding publicly with big companies—including at times Microsoft. Mr. Persson said Monday on his blog that he has "no good response" to selling to Microsoft, but that he just wants to go back to being "a nerdy computer programmer who likes to have opinions on Twitter."
"It's not about the money. It's about my sanity," he wrote.
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