How Does Minecraft Make Money? Business Model of Minecraft


How Does Minecraft Make Money

Minecraft is a popular sandbox video game that allows players the creativity to build whatever they want within the game and create their own gaming experiences.

Minecraft primarily makes money through video game sales. The company also makes money through the sale of in-game currency, subscriptions, Minecraft Marketplace creator fees, and the sale of Minecraft merchandise.

First released in beta in 2011 by the developer Mojang Studios, the game was created by designers Markus ‘Notch’ Persson and Jens Bergensten with the help of artists Markus Toivonen, Jasper Boerstra, and Kristoffer Zetterstrand. Persson originally started developing the game part-time on his own in 2009 before quitting his day job in 2010 to devote more time to game development and officially launching a studio that same year.

As a 3D sandbox survival video game, Minecraft is unique in that they have play modes where there are no goals to accomplish in the game, and players have significant freedom in choosing how to play the game.

Minecraft sold over a million copies in the first month it was released in 2011.[1] Since then, it has become the best-selling video game of all time, with over 238 million copies sold and 140 million monthly active users.[2]

In 2014, Mojang Studios and Minecraft were purchased by Microsoft for $2.5 billion.[3] Microsoft is a public company that trades on the NASDAQ stock exchange.

What is Minecraft & How Does It Work?

Minecraft is a sandbox video game where players can do what they want and get creative building their Minecraft world. It features an open world where players can dig, mine, build, craft, and enchant the things they encounter.

One unique aspect to Minecraft is that it allows players significant control over their games. Players can even code and ‘mod’ directly into the game to alter the gaming world and give themselves more capabilities.

To get started with Minecraft, players have to purchase the game via their gaming platform. Minecraft is available on PC, mobile, and a number of popular gaming consoles, including Xbox, PlayStation, and Nintendo. Players can choose between single player and multi-player modes, where other player can join them.

A world is then generated for the player, or the player can choose to return to a world they have previously generated. Minecraft’s style is distinctive. It is a blocky, procedurally generated 3D world where the terrain is infinite. Players can explore the world in order to discover and extract materials, create tools, and build things.

There are a number of different game modes that allow for different kinds of play. These include:

  • Survival: Players have to gather materials to build things, maintain their health, gain experience, and fight off mobs.
  • Creative: Players have access to all blocks and items, are unable to die, and can even fly. The goal in this mode is to focus on creating and designing unique worlds.
  • Adventure: Players have to interact with things like buttons, levers, and mobs to follow the storyline and complete an adventure plot set out for them.
  • Spectator: Players are invisible and cannot interact with blocks, entities, or inventory. This mode is mostly used to look at others’ worlds.
  • Hardcore: Similar to survival, hardcore is more difficult. In this mode, the difficulty level cannot be changed, and players cannot come back to life after they die. Once a character dies in hardcore mode, the map they created is deleted.

In survival mode, once the game starts, players have to figure out how to survive by doing things like collecting resources and tools such as wood or a pickaxe. They then need to focus on crafting things like tables or planks with logs, building a home, creating a bed, and crafting a sword to defend themselves. Minecraft also suggests placing torches around your home to keep away hostile mobs, cooking food, and more.

Players encounter non-playable characters in the world who can provide additional lessons, and instructions. The game world has distinct day and night periods with many dangers coming out in many game modes at night, including mobs.

The average Minecraft player is 24 years old and is more likely to be male. However, the game is extremely popular with children starting as young as age six. Indeed, a 2018 study found that 53% of children aged six to eight played Minecraft, and 68% of kids aged nine to 12 played.[4]

Players enjoy the game because it allows them to be creative in building their own worlds. Similarly to the popularity of Legos, Minecraft allows players to create their own worlds. The ability to play with friends remotely has also contributed to the game’s success.

Minecraft also has a marketplace where you can purchase add-ons to make your gameplay easier or more fun. These include things like items, resources, texture packs, player skins to customize your character, and entire pre-created worlds. The Marketplace sells both things that are created by Minecraft and items added to it by people within the player community.

Minecraft has a community of fans called modders that create items for sale. This is encouraged by Microsoft and results in a large amount of customizable content that users love. Modders make money and contribute to Minecraft’s revenue, with Microsoft claiming to have earned $350 million from modders.[5] Modders earn 50% of the revenue from the mods they sell.

While some things are free in the Marketplace, many have to be purchased with Minecoins. These are the in-game currency in Minecraft. To use Minecoins to purchase things in Minecraft, you first have to purchase them from Microsoft, through another gaming platform, or via a gift card.

Minecraft has released a number of different editions, including Minecraft: Pocket Edition for mobile, Minecraft: Education Edition, and Minecraft China. Minecraft China is free and has been downloaded 400 million times.

Despite the game’s warm reception, Minecraft has faced controversy. For example, Persson, the game’s creator, has been accused of racism for tweets about his belief that white privilege doesn’t exist.[6]

 

Business Model of Minecraft

Minecraft operates on a traditional video game business model. The company makes money primarily from video game sales. However, the company also uses an in-game purchase model where they sell an in-game currency that allows players to purchase additional resources or features.

Minecraft can be said to be a virtual or metaverse world that is part of the move towards Web3, the next iteration of the internet. It is often talked about in relation to other virtual worlds and popular gaming platforms like Roblox and Fortnight.

Minecraft’s success is likely due to a few key factors. First, the game is highly adaptable. By offering a number of different gameplay modes, players are able to choose the one they like best or choose different play modes based on the type of gameplay they want to experience. This increases the game’s replayability and keeps players engaged.

The open-ended nature of the game also offers several different gameplay possibilities. Players can customize their homes and build things that they find interesting. That gives players a sense of ownership over their Minecraft world and is time-consuming. This encourages players to spend longer amounts of time playing Minecraft and to play more frequent Minecraft sessions.

The ability to play with friends on your own server also helps encourage more investment in the game. It becomes a way to create worlds while having fun with your friends. This social aspect also encourages longer and more frequent gaming sessions.

All these factors increase player investment in the game. Longer gameplay and more frequent sessions are also things that encourage players to spend more on in-game purchases. Minecraft’s Marketplace allows the company to continue to sell to people who have already purchased the game. It likely generates significant revenue for the company.

In fact, Minecraft China operates on a freemium model. In China, the game itself is free, but the company makes off of in-game purchases. The ability to customize characters or to get additional building material is something people are happy to pay for. You can also find entire pre-built worlds in the Minecraft Marketplace.

Minecraft also offers a subscription. Their subscription allows people to play with up to 10 friends at a time on a dedicated server. They offer recurring subscription plans and plans that can last up to 180 days. For players who enjoy social play, this is a great way for Minecraft to generate ongoing revenue from its userbase.

While Minecraft is similar to Roblox, the company has taken a very different approach to brand participation in their game world. Brands have tried to engage in the popular virtual world. For example, Verizon once created a working video phone, and Disney created a map of Tomorrowland to advertise their Tomorrowland movie.

However, in 2016 Microsoft limited how brands could engage with Minecraft for promotional purposes.[7] In comparison, the gaming platform Roblox has invited brands to participate in their game world. For example, Spotify has a Roblox world, and Nike and other brands sell branded digital merchandise in the Roblox platform.

That choice has likely meant that Minecraft has lost out on potential revenue they could make from in-game advertising. The company has instead focused on building other revenue streams and keeping Minecraft free of advertising. Despite this, Minecraft makes more than Roblox and has more active monthly users.[8]

Like most video games, Minecraft likely has significant staffing and hosting expenses in order to run the platform. Because Minecraft is now owned by Microsoft, it is hard to understand how much is spent annually on Minecraft related expenses since Microsoft does not break down their expenses by individual subsidiaries.

However, Microsoft, as a whole, spent $20.7 billion on research and development and $20.1 billion on sales and marketing in 2021.[9]

How Does Minecraft Make Money?

Minecraft makes money in five different ways: through video game sales, the sale of in-game currency, subscriptions, Minecraft Marketplace fees, and the sale of Minecraft merchandise.

Microsoft does not break down the revenue it makes off of Minecraft in its annual report, so it is unclear how much each of these revenue streams brings in.

Video Game Sales

The primary way that Minecraft makes money is by selling licenses for the game. The company has a number of different editions including:

  1. Minecraft Java Edition: This is for PC and is priced around $26.95
  2. Minecraft: Bedrock Edition: This offers a collection of different Minecraft versions. It’s available on different platforms, from Nintendo Switch to iOS. These range in price from $6.99 to $29.99.
  3. Minecraft: Education Edition: This is an educational tool that can be used in a classroom to create lessons. These range in price from $5 to $12.
  4. Minecraft: Dungeons: This is a spin-off game in the form of a rogue-like dungeon crawler. It is priced around $19.99.

While the company does not list how much revenue they make per year via Minecraft, it is estimated that the game generated over $380 million in revenue in 2021 with $161 million of that coming via the game’s mobile edition.[10] This amount, however, encompasses all revenue from the game and not just game sales.

 

In-Game Currency

Minecraft sells players in-game currency called Minecoins. These can then be used for in-game purchases in the Minecraft Marketplace. Players can purchase things like skins for their characters, items, texture packs, or even entire pre-designed worlds.

Minecoins can be purchased in the game, through Microsoft, through other gaming platforms, or via gift cards from other retailers.

The cost of Minecoins can fluctuate, but in September 2022, they were priced at:

  • 320 Minecoins: $2.90
  • 1020 Minecoins: $8.70
  • 1,720 Minecoins: $14.50
  • 3,500 Minecoins: $29.40
  • 4,380 Minecoins: $36.40
  • 8,800 Minecoins: $72.90

 

Subscriptions

Minecraft sells subscriptions that allow players to create servers where they can play with anywhere from 2 to 10 friends. These are called Realms for Minecraft, and they offer different plans for the Java and Bedrock editions.

The cost of subscriptions can vary, but in September 2022, they cost:

  • Bedrock Realms (only three players total) – $3.99 monthly
  • Bedrock Realms Plus (11 players total) – $7.99 monthly
  • Java Realms (11 players total) – $7.99 monthly

Minecraft offers discounts for getting recurring or multi-month subscriptions. Prices vary depending on the country.

 

Minecraft Marketplace

Minecraft sells a number of digital products in their marketplace in the form of in-game purchases. To buy anything in Minecraft, users have to first purchase Minecoins. They can then choose from skins, textures, tools, and worlds created by either Minecraft itself or individual modders and creators.

While the amount the company makes annually is not released, in 2021, Minecraft said they had made over $350 million on sales by modders in their marketplace.[11] Microsoft shares the revenue from these sales with the creators of the digital goods, with up to 50% going to the creators.

 

Minecraft Merchandise and Licensing

As a popular brand, Minecraft makes money by selling merchandise in their Minecraft Store and by licensing their brand to sell Minecraft toys, apparel, and other items.

Minecraft also makes money from licensing their brand in other ways. For example, Netflix produced an interactive story in 2015 called Minecraft: Story Mode. The show allows viewers to make decisions to shape how the story unfolds.[12]

 

Minecraft Funding, Valuation & Revenue

Minecraft is a subsidiary of Microsoft, so it is hard to know exactly how much the company is currently worth. However, in 2014 Microsoft paid a staggering $2.5 billion to acquire Minecraft and Mojang Studios, the development company that created it. Minecraft’s valuation has likely increased significantly since.

It is unclear if Minecraft, or its parent studio Mojang Studio, raised funds prior to releasing the beta version of Minecraft or being purchased by Microsoft. The company instead seems to have released early versions of the game and funded the rest of the development process off the proceeds from that.

Microsoft does not list Minecraft’s financials separately in their financial report. However, there are estimates around how much Minecraft makes available online based on sales and other projected revenue. In 2021, it is believed that Microsoft made $380 million off Minecraft.[13] That is down from an estimated $415 million in 2020, based on sales.

YearTotal Revenue
2019$375 million
2020$415 million
2021$380 million

In the company’s 2020 annual report, Microsoft reported that gaming content revenue increased by $943 million or 11% that year due to growth that Minecraft partly helped fuel.[14]

Microsoft has greatly increased its revenue in recent years, going from $125.8 billion in 2019 to $168 billion in 2021.[15] That resulted in net income growth from $39.2 billion in net income in 2021 to $61.2 billion in net income in 2021.[16]

YearTotal RevenueNet Income
2019$125.8 billion$39.2 billion
2020$143 billion$44.2 billion
2021$168 billion$61.2 billion

 

Is Minecraft Profitable?

Minecraft is, indeed, profitable. While Microsoft, Minecraft’s parent company, does not release financials for Minecraft separately, the game is the most successful video game of all time on the basis of sales. It brought in an estimated $380 million in revenue in 2021.[17]

Microsoft is also profitable. The software company made $61.2 billion in net income in 2021.[18]

While it did not mention Minecraft in its most recent annual report, Minecraft was credited in Microsoft’s 2020 annual report with helping to boost its Xbox content sales by 11%.

 

Conclusion

Minecraft is a game that has won the hearts of many people. It is easy to see why: it can be played by anyone, regardless of age or skill level. The game’s appeal is broad, and its business model is simple.

At the end of the day, Minecraft is a game that’s been around for a long time, and it still has a lot of momentum. It’s not going anywhere anytime soon.

The real key to its success is its ability to provide a social environment where players can interact with each other and express themselves creatively, all while having fun playing a game they love.

The thing that Minecraft does best is that they have been able to create a community around their game. They have created an online environment where people can meet and play together. It gives people a chance to be creative and find new ways to use the game.

This makes them feel like they are creating something special and gives them an opportunity to express themselves in a way that they cannot do anywhere else.

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Sources

  1. IGN
  2. Techspot
  3. Influencive
  4. The Conversation
  5. Game Rant
  6. GQ
  7. IPG Media Lab
  8. Sportskeeda
  9. Microsoft
  10. Business of Apps
  11. GameRant
  12. Netflix
  13. Business of Apps
  14. Microsoft
  15. Microsoft
  16. Microsoft
  17. Business of Apps
  18. Microsoft