Microsoft in talks to acquire Discord, report

Discord may choose to go public if it does not get an acceptable offer

Microsoft is reportedly in talks to buy chat platform Discord for over $10 billion (£7.25 billion).

Citing people familiar with the matter, Bloomberg reported on Monday that the Discord in currently exploring sale and has reached out to potential buyers. The company has also held discussions with Amazon and Epic Games, according to media reports.

Xbox chief Phil Spencer is reportedly talking to Discord about the potential deal.

One source told Bloomberg that company may choose to go public than sell itself if it does not get an acceptable offer.

Earlier in the day, VentureBeat reported that Discord was in final talks with a party regarding sale of its chat software. However, the source also told VentureBeat that it was difficult to tell the difference between "a serious acquisition attempt and a fishing expedition."

"It can fall apart at any time," the source said.

The acquisition talks between Microsoft and Discord are taking place as the pandemic has boosted prospects of gaming firms in the past one year. Many people are currently staying at home and turning to video games for entertainment.

San Francisco-based Discord is a gaming-focused platform that enables people to chat via voice, text, or video in real-time. The app is popular as a video game chat platform, with around 130 million monthly active users.

The firm is now expanding its platform to turn it into a "place to talk" rather than just a gamer-centric chat platform.

Discord is not yet profitable, however, as it offers free software to most users. The revenue is generated through Nitro subscriptions that give users more advanced features like extra sticker packs, higher resolution screen sharing, and larger upload limits.

Discord's last valuation was $7 billion (£5 billion) after a funding round in December last year generated $100 million (£72.5 million). It generated $130 million (£94.2 million) in revenue in 2020, and many people believe its acquisition would boost Microsoft's gaming business.

Microsoft has acquired many online communities in recent years, including GitHub, LinkedIn, and the gaming developer that created Minecraft. Last year, it was seeking to buy Chinese social media app TikTok.

In September, Microsoft also acquired ZeniMax Media, the owner of many big gaming studios, for $7.5 billion (£5.4 billion).

"Microsoft possibly acquiring Discord makes a lot of sense as it continues to reshape its gaming business more toward software and services," said Bloomberg intelligence analyst Matthew Kanterman.

"There's a big opportunity to bundle Discord's premium offering, Nitro, into the Game Pass service to drive more subscriptions from the last reported 18 million."

"We expect Xbox to remain acquisitive to keep bolstering the value proposition of Game Pass and drive subscriptions higher."