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Microsoft deal to purchase "Minecraft" raises questions

Parents in Maryland may be familiar with the multi-platform video game 'Minecraft," which has been a big hit with children worldwide. The game has sold in excess of 54 million units since its introduction, and it generated profits of $129 million for its Swedish developers in 2013. Microsoft CEO Satya Nadella is on record as saying that video games are not a part of the tech giant's core business model, but that did not stop the company from making the developer of 'Minecraft" the target of a $2.5 billion business acquisition.

The move has raised eyebrows among experts in both the financial and video game sectors. It would take Microsoft decades to its their investment if profit levels remain consistent, but that is far from a safe bet in the video game market. New trends are developing constantly, and even the most popular titles often have a short shelf life.

While Microsoft may hope to increase profits by cashing in on merchandising and licensing agreements, many feel that the deal is more about promoting awareness than improving the bottom line. The Xbox brand has given Microsoft a powerful presence in the video game market, but many of their most popular titles appeal to an adult audience. The "Minecraft" deal is seen as a way of connecting with younger gamers and carving out a slice of the market currently dominated by Nintendo.

Mergers and acquisitions may lead to unprecedented success or catastrophic failure, and they should only be entered into after careful consideration. Entrepreneurs are often have an optimistic nature, and this can sometimes lead to the benefits of a deal obscuring its potential pitfalls. An attorney with experience in this area may be able to offer a more even-headed analysis.

Source: Forbes, "Microsoft Makes $2.5 Billion Gamble On Indie Hit 'Minecraft'", Erik Kain, September 15, 2014

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