(Bloomberg) – Microsoft Corp. and Discord Inc. have a big influence on video game fans. As they are now negotiating a possible $ 10 billion acquisition, a deal would unite two companies in search of audiences far beyond players.
Jason Citron and Stan Vishnevskiy, programmers and entrepreneurs, founded Discord, based in San Francisco in 2015, as a platform for people to chat while playing video games. The free service offers voice, video and text, as well as user-friendly features, including the ability for users to convey the name of the game they are playing.
The app became popular a few years ago, emerging alongside multiplayer hits like Epic Games Inc.’s Fortnite. It also has a more sinister side to its history, having been used as a meeting place for white nationalists to organize the deadly rally in Charlottesville, Virginia, in 2017.
Since then, the company has been striving to clean up its website and make it more inclusive. Last year was a “crucial” year for Discord, said new chief financial officer, Tomasz Marcinkowski, in a blog post earlier this month. During the pandemic, with people trapped at home playing more video games than ever and also looking for ways to socialize safely, Discord became a hub for communities interested in the Black Lives Matter movement, help with homework, book clubs and much more, presenting itself as a “place to talk”.
Discord’s service has long attracted all kinds of famous players and social media influencers. There was that time, three years ago, when Fortnite’s greatest player, Ninja, helped instruct hip-hop legend Drake to open his Discord account. More recently, there was WallStreetBets. The coalition of investors notorious for increasing GameStop’s shares in its position on Reddit also had a server on Discord and was banned earlier this year for not doing enough to contain the hate speech.
The site now claims more than 140 million monthly users and generated $ 100 million in revenue last year. Discord doubled its valuation last December to $ 7 billion, according to The Wall Street Journal. He raised a total of about $ 480 million, according to Crunchbase, from investors, including Greenoaks Capital.
Read more: Game services like Twitch and Discord are growing now
At Discord, anyone can create their own community, or server, which can range in size from less than ten people to hundreds of thousands. The average user can belong to a private Discord server that he only uses to hang out with his friends and other public servants dedicated to discussing his favorite movie or sports team.
For Microsoft, these diverse communities can be Discord’s biggest selling point. The software giant, which last year sought to buy the social media app TikTok and held talks to acquire Pinterest Inc., is buying assets that would provide access to thriving user communities, according to people familiar with the company’s thinking. The Xbox console maker snapped up several video game companies recently, including publisher ZeniMax Media Inc. last fall for $ 7.5 billion. Microsoft may try to integrate Discord with Xbox Game Pass, its subscription service similar to Netflix for video games.
One of the secrets of Discord’s popularity is the lack of ads. Instead of filling channels with intrusive ads, like other social media services like Twitter Inc., Discord makes money from a subscription service called Nitro. For $ 10 a month, members can personalize tags next to their usernames, upload larger files and stream in superior video quality.
Discord has also become a useful way for video game companies to promote products directly and create communities. The company will check servers based on popular video games, giving them a seal of authenticity. Some game developers participate in their Discord channels, allowing fans to interact directly with the people behind their favorite titles.
The official Discord community for the hit game Between Us, for example, has more than 413,000 users. Among us, community director Victoria Tran described it as “very chaotic, but very fun”. She said that people use the server not only to chat about the game and find people to play with, but to have broader conversations about their lives and interests.
The server “is a fun way to connect directly with our players, even if it is not necessarily related to the game itself,” said Tran. She added that video game servers can also be a place for players to report bugs and offer suggestions directly to game makers. “Communities of contention are just a great way to get feedback that you wouldn’t otherwise get,” she said.
Discord can also be useful for smaller games that may not have the reach of Between Us, but still want to provide a place for fans to chat, game developers say.
“We really just wanted to build a low-key community that was pleasant to live with,” said Megan Fox, founder of the independent game development studio Glass Bottom Games. His first game, Skatebird, is about birds on skateboards. It has a Discord community of around 900 users who, according to Fox, use the server mainly to talk about “birds or skateboarding”. She said the studio also has a channel aimed exclusively at users to “share their attempt at a kickflip”. Many Discord servers rely on humor and internal jokes, which is part of the appeal.
The news of a possible deal inspired mixed reactions in the gaming community. “If Discord is going to sell, Microsoft can really be one of the safest places to go without going through major changes,” said Rod Breslau, a sports and games consultant who works with companies like Sony Music Entertainment. Microsoft has taken a direct approach with recent acquisitions, such as LinkedIn and GitHub, he said.
But not all players were enthusiastic about the prospect. Twitter was full of people begging Discord not to sell. Some Discord channels were also filled with negative reactions to the idea of further consolidation in the video game industry.
“Players, especially, suffer from a variety of previous Microsoft complaints,” said Breslau, “and who really wants to see one of the big corporate rulers continue to swallow parts of the industry?”
It may not come to that. Discord is more likely to go public than to be sold, said a person familiar with the discussions.
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