Video gaming is much more interactive than it used to be. When we say that, we’re not just referring to the fact that you can now play games in real-time against thousands of other players instead of however many you can fit around your console in your house. We also mean that video game streaming has become a lucrative career choice for a lot of people. Streamers can command audiences of thousands of people at any one time, and they interact with their audiences using chat services like Discord.
Discord can be used for any purpose, but it was specifically built for gamers. It initially struggled for traction when it was launched in 2015, but it’s since come on in leaps and bounds and is now the default choice when it comes to gaming chat. It was helped on its way by a sudden explosion in popularity among social media “influencers” in 2017, which led to tens of millions of new Discord downloads. Now it would be unthinkable for any professional gamer to operate without a Discord chat – and that makes the company very attractive to companies involved in the video gaming industry. Now, one of those companies has acted on that interest.
According to reports that have appeared in various places online within the past few days, Discord is preparing itself for a ten billion dollar bid from Microsoft, which wants to buy the company lock, stock, and barrel. Some sources say that Phil Spencer, who is the head of Microsoft’s Xbox gaming company, is already in advanced talks with Discord representatives about the potential of such a deal. It’s unlikely that either of the parties would deliberately release details to the press while talks are still at an early stage, so we should take these reports with a pinch of salt, but it could even be the case that Discord has signed an exclusive agreement with Microsoft that precludes the company from talking to other buyers. As Sony, Amazon, and Epic Games were all also thought to be interested, that would be a prudent move on Microsoft’s part if it’s true.
The ten billion dollar valuation of Discord could be considered surprising when you consider the fact that the company is yet to post a profit. The growth potential, though, is obvious. Discord brought in $130m in revenue from its 140 million monthly users last year and subsequently raised a further $100 from a funding round in December 2020. That gave the company an official value of seven billion dollars. If Microsoft really is bidding three billion dollars more than that, it’s a sign of how keen the Silicon Valley company is to get the deal done quickly.
Whether it’s possible to do the deal quickly is another matter. Although most sources agree that Discord and Microsoft are currently speaking to each other, opinions about the likely outcome of those talks vary. Even if it’s true that Discord has signed an exclusivity agreement with Microsoft, they wouldn’t be compelled to go ahead with a sale from that point. It might be that they don’t sell to Microsoft or to anybody else. Bloomberg’s analysts think it’s more likely that Discord’s senior executives will take the company public rather than sell out to any buyer no matter how big the buyer or how high the bid might be.
One question you might be asking yourself – and a perfectly valid one at that – is what Microsoft would do with Discord. The answer to that might be tied up with the company’s recent decision to rebrand its long-standing Xbox Live subscription service as the Xbox Network. Microsoft has big plans for its subscription service, and those plans might extend much further than simply allowing players to play video games by streaming them from external hardware. They could be attempting to create a new platform for video gamers to stream to their followers with the intention of luring them away from Twitch, YouTube, and Facebook. It would be a bold move considering how entrenched those platforms are, but if Microsoft has the consoles, the games, and the chat service, it would have a big advantage.
This is yet another example of the gaming industry moving away from hardware and toward software. Consoles might one day be a thing of the past, as might hard-copy games. The online slots style of delivering content, where games are stored on the internet and then streamed to the user’s device, is gaining rapid traction in the market. Casino pages like the Rose Slots IE website have become enormously successful during the past decade – so much so that online slots are now far more popular than their “real world” casino equivalents. They belong to an industry that’s worth more than fifty billion dollars per year. Microsoft, along with most other gaming companies, is fully aware that however popular online slots might be, video games are still far more popular. If the online slots industry can make fifty billion dollars, the broader video gaming industry might be able to make five hundred billion using the same methodology.
If Microsoft is successful in its pursuit of Discord, it might mean big changes for the platform’s many users. At the moment, Discord is free to use. It makes its money by selling “Nitro” subscriptions that offer additional perks, including better resolution when streaming, unlimited upload limits, and trivialities like “sticker packs” for followers. Microsoft would be unlikely to want to tinker too much with what makes the platform so successful, but if we’re right about the company wanting to integrate Discord with its new Xbox Network, then large-scale changes are inevitable. That might be off-putting for at least some of Discord’s tens of millions of users.
On the other hand, we might be wasting our time considering the question. As we alluded to earlier, Discord isn’t under any obligation to accept any bid. They’ll hear Microsoft out because it would be bad manners and bad business sense not to, but if they believe they can make more money by going it alone, they’re likely to do so. Microsoft could always come back with a higher bid, but Discord is free to do as it chooses. This is a developing story that clearly has some distance left to run, so we may revisit it in the future if there’s more to report.