Thinking outside the Xbox, Microsoft reportedly considers Discord buy

By Robert Scammell

Microsoft is in talks to acquire communities and chat service Discord in a deal which may finish up north of $10bn, according to reports.

The company, whose app is used mostly by gamers to communicate via voice, video and text in “server” chat rooms, is said to be scoping out suitors for a potential acquisition. Last year it announced moves at widening its appeal beyond gaming to serve other types of community.

It has also reportedly approached game maker Epic Games and ecommerce giant Amazon, which owns gamer streaming company Twitch.

According to Games Beat, which first reported the news, Discord has signed an exclusive acquisition discussion with one party.

The $10bn or more price tag limits the list of potential suitors to the larger tech companies. For Microsoft, the Discord takeover could dovetail with its Xbox Game Pass. The software giant has recently been on a gaming push after acquiring ZeniMax Media, the parent company of Bethesda Softworks, for $7.5bn.

However, other reports suggest it is far from being a done deal.

“It’s hard to tell the difference between a serious acquisition attempt and a fishing expedition,” one source told Games Beat. “It can fall apart at any time. The reality is the company is doing really well. I don’t see a reason they would want to sell. They seem to be completely in control of their destiny right now.”

Meanwhile, Bloomberg reports Discord may instead go public. The Microsoft takeover is listed as a rumoured deal on GlobalData’s Intelligence Centre.

Microsoft and Discord did not return a request for comment. Neither has so far commented on the speculation.

San Francisco-based Discord currently says it has 140 million monthly active users. The application is free but it offers a paid subscription at $9.99 per month – the firm’s primary revenue source.

Part of its commercial appeal is its ability to link gamers with gaming companies, but the company has resisted introducing advertising – something that could change under new ownership as it seeks to become profitable.

Discord brought in $130m in revenue in 2020. This marked a 189% year on-year-increase spurred by a gaming boom during the pandemic’s stay at home restrictions. It remains unprofitable.

Instead, the company has relied on venture capital to grow, most recently raising $100m of Series H funding in December 2020 at a $7bn valuation. It has raised a total of $420m to date, according to GlobalData’s Deals database. Investors have included Tencent, Greenoaks, Greylock and Spark Capital among others. In November 2018, Discord acquired e-sports video publisher Blitz Esports for an undisclosed sum.

The messaging company previously scoped out possible suitors in 2018, but ultimately a takeover never materialised.

Discord may have decided to revisit these plans after Roblox’s $42bn public listing earlier this month set the benchmark for privately-owned gaming companies looking to cash in.

For Redmond-headquartered Microsoft the rumoured deal marks another linked acquisition target in the space of half a year.

It had been in talks to buy the US operations of video app TikTok following an order by former President Donald Trump that banned the Chinese company. In recent months Microsoft approached Pinterest about a $51bn takeover of the image-sharing social network.


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