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May 4, 2021updated 05 May 2021 1:55pm

It’s not you: Discord shuts down Microsoft talks and inks deal with Sony

By Eric Johansson

Chat platform Discord has cosied up to Sony in a new deal after acquisition talks with Microsoft ground to a halt last month. The rapid switch from one console giant to another highlights just how competitive the gaming space has become.

There are few details about what exactly the new partnership will mean moving forward. President and CEO of Sony Interactive Entertainment Jim Ryan said in a statement that “the goal is to bring the Discord and PlayStation experiences closer together on console and mobile starting early next year” and that the San Mateo, California company has made a minority investment in Discord’s recent Series H round. Discord is used mostly by gamers to communicate by voice and chat, often in communities called “servers”.

How much Sony has put into the $100m round is unclear. The round was originally announced in December 2020. Index Ventures, Institutional Venture Partners, Spark Capital, Tencent, Benchmark Capital and other investors also participated.

Details of potential Sony/Discord integration are unknown, but the implication is that Xbox players may be losing out on some services in the future, potentially leaving Microsoft suffering from FOMO after its talks to acquire Discord didn’t go anywhere.

Verdict first reported on Redmond’s plans to buy Discord in March, in a deal that market experts said could value the chat and communities platform north of $10bn. The takeover would’ve dovetailed with Redmond’s Xbox Game Pass and marked a second massive videogame-related deal for MS after the software giant officially acquired ZeniMax Media, the parent company of Bethesda Softworks, for $7.5bn earlier this year.

However, in late April it was reported by the Wall Street Journal that talks had broken down. No reasons for the collapse of negotiations were given at the time. Xbox users can still use Discord, but it’s anyone’s guess what will happen in the future.

Discord isn’t alone in this market. Live-streaming and chat portal Twitch is the clearest rival, but GlobalData’s Thematic Research Intelligence Centre lists several Discord competitors such as German TeamSpeak and American Paltalk.

The esports market has surged since 2020 as more people turned to gaming to escape from lockdown monotony. The communications segment of the market boomed as a result with viewership on Twitch growing by more than 70% to 4.9 billion hours, with average viewers rising to 2.3 million, in the second quarter of 2020.

Verdict deals analysis methodology

This analysis considers only announced and completed deals from the GlobalData financial deals database and excludes all terminated and rumoured deals. Country and industry are defined according to the headquarters and dominant industry of the target firm. The term ‘acquisition’ refers to both completed deals and those in the bidding stage.

GlobalData tracks real-time data concerning all merger and acquisition, private equity/venture capital and asset transaction activity around the world from thousands of company websites and other reliable sources.

More in-depth reports and analysis on all reported deals are available for subscribers to GlobalData’s deals database.