SAN FRANCISCO — Discord, a social media company popular with
gamers, has held deal talks with Microsoft for a transaction that could top $10
billion, according to people briefed on the situation.
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The talks were preliminary and no deal is imminent, said one of
the people, who declined to be identified because the discussions are
confidential. The talks have taken place as video gaming has boomed in the
pandemic and as Microsoft, one of the world’s most valuable tech companies, has
bolstered its gaming business with deal making.
Many of Microsoft’s acquisitions in recent years have focused on
online communities, such as its purchases of LinkedIn, GitHub, and the gaming
developer that created Minecraft. Last summer, Microsoft was in talks to buy
the video app TikTok in what would have been a blockbuster acquisition; the
discussions later fell apart. In September, Microsoft also bought ZeniMax
Media, the parent company of several large gaming studios, for $7.5 billion.
Discord, which counts more than 100 million monthly active
users, has been highly popular in the pandemic, as people have used the service
to chat with one another while playing games. The San Francisco-based company,
which has raised nearly $600 million in funding since 2014, has had preliminary
deal talks with various suitors over the years, said another person with
knowledge of the matter.
The privately held company, which investors valued at $7 billion
in December, is also a candidate to go public. This month, Discord hired its
first chief financial officer, a sign that it may be preparing for an initial
public offering.
Spokespeople for Microsoft and Discord declined to comment.
VentureBeat previously reported that Discord was holding deal discussions, and
Bloomberg reported Microsoft’s involvement.
Joost van Dreunen, a New York University professor who studies
the business of video games, said that if a deal were to happen, Discord “would
be a natural fit” with Microsoft’s Xbox video gaming business. He said
Microsoft has been “building hardware, buying software, and is now stitching it
all together with the connective tissue of a community layer.”
Microsoft has said it wants to make it easier for people to play
games at home on its Xbox consoles, or on-the-go on their phones. In the last
three months of 2020, its gaming business generated $5 billion in revenue for
the first time, following 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 chat and hang out while gaming. It gained mainstream attention as a
gathering ground for the far right, who used Discord to organize the white
nationalist Charlottesville, Virginia, rally in 2017.
Discord has since implemented stricter content moderation rules
and banned alt-right communities. The app, which allows people to create
private servers — in essence, small communities — features audio, text and
video chat options.
Last year, Discord announced plans to expand beyond gaming into
everyday usage among online groups of all kinds. It has been used for
activities like college classes and organizing events like the Black Lives
Matter protests.
The company crossed $100 million in revenue last year, one of
the people said. Discord makes money by selling subscriptions to a premium
version of the service.