Microsoft: Long-Term Profits From China's $24.4 Billion Games Industry

Motek Moyen profile picture
Motek Moyen


  • Microsoft has partnered up with NetEase to gain a foothold in China’s growing games industry.
  • NetEase gets a 5-year exclusive deal to sell Minecraft in China.
  • China’s video games industry is estimated to be worth $24.4 billion this year, making it the biggest market for game publishers.
  • Microsoft currently sells only 10,000 copies of Minecraft every day.

China is emerging as the biggest market for video games. It is, therefore, great news to investors of Microsoft (NASDAQ:MSFT) that its subsidiary Mojang has stuck a deal with NetEase (NTES). Mojang granted a 5-year exclusive license to NetEase to distribute the mobile and PC versions of its cult hit game, Minecraft.

Mojang will create a China-specific version of Minecraft for NetEase. Microsoft paid $2.5 billion to acquire Mojang in 2014. Bringing the addictive gameplay of Minecraft to China can notably increase this game's contribution to Microsoft's coffers.

It is estimated that Microsoft is selling 10,000 copies of Minecraft every day. Mojang sells one PC version license of Minecraft for $26.95. The Xbox and PlayStation versions sell for $17 to $19.99.

(Source: Mojang)

If we take a median price of $21 and multiply it by 10k, we can guesstimate that Minecraft's monthly sales (from PC/Consoles) is only $6.3 million. As per SensorTower's April 2016 estimates, the $6.99 Minecraft Pocket Edition iOS/Android versions posted net global sales of $4 million (30% cut of Apple (AAPL) and Alphabet (GOOG) (GOOGL) were already deducted).

The freemium Minecraft: Story Mode mobile game also had net sales of $1.4 million last April. All in all, Minecraft's monthly contribution to Microsoft is $11.7 million or $140.8 million/year. Staying out of China's growing gaming industry means it would take many years before Microsoft could recover its $2.5 billion investment in Mojang.

The Multi-Billion Dollar Opportunity In Monetizing Chinese Gamers

Having such a massive population of citizens is no doubt helping China become a very important market for video games. As per Newzoo's most recent report, China will overthrow the U.S. this year to become the biggest market for video games. Please study the chart below. For this year, China's games market will be worth $24.4 billion, topping the $23.5 billion of the U.S. games industry.

This article was written by

Motek Moyen profile picture
Motek Moyen is a financial analyst, technician, and Adobe multimedia content creator. He studied Mathematics, Commercial Advertising, and Computer Science in the 1990s. He does not trade stocks.

Disclosure: I am/we are long MSFT, INTC, GOOG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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