Analysts from Morgan Stanley are saying that Microsoft could be the “Netflix of gaming.” This comes after a report came out saying Microsoft is in talks to acquire Discord for $10 billion.
“In our view, investors should pay less attention to the top-line contribution (WSJ reports $130M revenues in 2020), and instead focus on the asset’s impressive user base (140M MAUs), as well as the potential for Discord to be the unifying thread across all gaming platforms, whether it’s the Xbox console that has historically been the centerpiece of Microsoft’s gaming franchise, or the PC, for which Microsoft has been pushing cloud gaming through its Game Pass subscriber service,” Keith Weiss and team writes. “Ultimately, as Game Pass grows in importance, Microsoft not only could get an additional higher-margin, recurring revenue stream (therefore minimizing volatility from future console cycles), but also a gaming franchise that is both accessible and extensible.”
Morgan Stanley has written about how Microsoft needs to make sure their gaming sector addresses the “three Cs”: community, cloud, and content. According to Morgan Stanley, acquiring Discord “would mark a meaningful large-scale cloud win” for the company.
The Profit‘s Take:
Nice to see that Morgan Stanley has discovered something very obvious. They are correct that Microsoft could become the Netflix of gaming, but it has nothing to do with Discord. Microsoft could become the Netflix of gaming because of their Xbox Game Pass product. That’s the closest anyone has come to an “all-you-can-eat” gaming subscription.
(All information was provided by Seeking Alpha)