Discord, a Chat App for Gamers, Said to Have Discussed Deal With Microsoft

SAN FRANCISCO – Discord, a social media company popular with gamers, has entered into contract negotiations with Microsoft on a transaction that could exceed $ 10 billion.

The talks were preliminary and no deal is forthcoming, said one of the people who refused to be identified because the discussions are confidential. The talks came when video games were booming in the pandemic and Microsoft, one of the world’s most valuable tech companies, strengthened its games business with deal making.

Many of Microsoft’s acquisitions in recent years have centered on online communities, such as the purchases from LinkedIn, GitHub, and the game developer who developed Minecraft. Last summer, Microsoft was in talks to buy the TikTok video app as part of a blockbuster acquisition. The discussions later fell apart. In September, Microsoft also bought ZeniMax Media, the parent company of several large game studios, for $ 7.5 billion.

Discord, which has more than 100 million monthly active users, was hugely popular during the pandemic as people used the service to chat with each other while playing. The San Francisco-based company, which has raised nearly $ 600 million in funding since 2014, has had preliminary contract negotiations with various applicants over the years, another person aware of the matter said.

The privately held company, whose investors were valued at $ 7 billion in December, is also a candidate for an IPO. This month Discord hired its first CFO, a sign that it may be preparing for an IPO.

Microsoft and Discord spokesmen declined to comment. VentureBeat previously reported Discord was having deal discussions, and Bloomberg reported on Microsoft’s involvement.

Joost van Dreunen, a professor at New York University who studies video game businesses, said Discord, if dealt, would be “a natural addition” to Microsoft’s Xbox video game business. He said Microsoft “built hardware, bought software, and now put it all together with the connective tissue of a community layer.”

Microsoft has stated that it will make it easier for users to play games at home on their Xbox consoles or on their phones on the go. In the final three months of 2020, the gaming business posted $ 5 billion in revenue for the first time after the release of new Xbox consoles.

Discord was founded in 2015 by Jason Citron and Stan Vishnevskiy, programmers and entrepreneurs, as a platform for video game players to entertain and hang out while gaming. It gained widespread attention as a meeting place for the far-right party that Discord used to organize the white nationalist Charlottesville, Virginia rally in 2017.

Discord has since implemented stricter rules for content moderation and banned alt-right communities. The app that allows users to create private servers – essentially small communities – has audio, text, and video chat options.

Last year Discord announced plans to expand beyond gaming into the daily use of online groups of all kinds. It was used for activities like college classes and organizing events like the protests against the Black Lives Matter.

The company had sales of $ 100 million last year, one respondent said. Discord makes money selling subscriptions to a premium version of the service.

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