Why would Microsoft buy Discord for $10 billion?

Earlier today, news broke of reported talks between Microsoft and Discord over an acquisition deal worth $10bn.

The two companies have yet to confirm a deal, however, according to Bloomberg, with Discord also considering listing itself as a public company instead.

This would bring Discord into Microsoft's growing collection of communication-based products that currently include Skype and Microsoft Teams. The deal also comes after Microsoft has finalised its purchase of ZeniMax - the parent company of Bethesda - for around $7.5bn.

So, why would Microsoft want to buy Discord?

Xbox Integration

Since Mixer's demise, Microsoft could be seeking new opportunities to gain access to a wider community of gamers. Discord brings in over 100 million users each month, with a main focus on gaming. Microsoft could tap into this large community to expand its gaming community.

Discord's premium service - Discord Nitro - could also be integrated into the Xbox Game Pass ecosystem, offering players on PC further incentives to join the subscription service.

Alongside this, integrating Discord into the Xbox Social hub could further enhance Microsoft's offerings over to players over PlayStation, allowing them to communicate with a wider group of players and have discussions in servers.

Xbox E32018 Phil Spencer Presenting On Stage
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Is Microsoft continuing to expand its gaming portfolio?

Competition from Slack

Microsoft is facing challenges from the likes of Slack, purchased by Salesforce for a whopping $27.7bn in late 2020.

While Discord's primary function is for gaming-based communities, it has strikingly similar features to the workplace software and is seen as a cheaper alternative for many.

With Teams and Slack battling it out for the collaboration software market share, integration with Discord and its server functionality could be the key ingredient Microsoft needs to fend off Slack.

Competition from Amazon

Reports from Bloomberg also suggest both Amazon and Epic Games expressed an interest in acquiring Discord. Microsoft may see the purchase as a defensive move to retain its share of the gaming and workspace communities.

An Amazon acquisition could see Discord become integrated with Twitch, offering Discord Nitro as a part of its Prime subscription.

Microsoft's Mixer streaming service infamously failed to eat into the Amazon-owned Twitch market share. Microsoft could see this as a chance to expand its gaming services out and simultaneously shut Amazon out.

Azure Support

Currently, Discord runs on the Google Cloud Platform infrastructure. If Microsoft was to buy Discord, it would attempt to migrate the product over to its own cloud platform - Azure.

While this may not result in many changes for consumers, it would be a victory for the Azure team that would gain a huge client for its cloud-based services. It could also see third-party services that utilise Discord migrate from Google to the Azure program.

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