EA Buys Playfish in Deal Worth Up To $400 Million
Nearly a month ago, we first reported that gaming giant EA was looking to buy Playfish. Today, the deal is official. The purchase price is $275 million in cash, with $25 million in “equity retention arrangements,” according to the press release, as well as “a maximum of $100 million” based on meeting performance milestones over the next two years.
The significance is that EA, one of the largest video-game makers in the world, believes that its future is tied up with social gaming. Playfish has distinguished itself by creating well-polished social games and gaining tens of millions of users.
In fact, as Inside Social Games readers know, we broke the story around a month ago. From our first article:
We have a few more details on what has supposedly been happening with Playfish. A reliable industry source says EA may have even acquired the company several weeks ago, with an announcement possibly happening in the next few weeks. We believe that Playfish could be on track to make as much as $75 million this year.
We and others had heard the deal was for $250 million at the time, but we heard a couple weeks later that it might be more. From our second article:
EA has been doing due diligence on Playfish, we have heard from multiple sources, meaning it has been going through the company’s financial reports and other information to determine that it indeed does want to make the purchase. We do not know if the deal has fully closed yet. Our understanding is that Playfish has been in a “no shop” period, meaning it won’t talk other potential acquirers as EA completes its review. However, some sources have previously said that the deal may have already closed. We have also heard that Playfish’s banker is J.P. Morgan….
One reliable industry insider we spoke with believes the amount is “north of $400 million.” But we have also heard that the number was “less than $200 million.” Hmm. Perhaps the “north of $400 million” number includes some sort of earn-out plan? For sake of comparison, kids virtual world Club Penguin sold to Disney in 2007 for $350 million, with the possibility of earning another $350 million based on performance over the next years.
It’s not clear when the deal closed. EA is announcing its earnings today, and it is has been in its quarterly quiet period until now — which explains the company’s silence on the rumors over the last month.
Most of Playfish’s games are on Facebook, and the largest one is virtual pet-caring game Pet Society, which has 21.5 million monthly active users and 5.24 million daily active users. The second largest is virtual restaurant game Restaurant City, with 18.1 million MAUs and 5.30 million DAUs.
Like most social gaming companies, EA makes the vast majority of its money through direct payments. While it does run some advertising offers, the offers are from TrialPay, a company that focuses on running high-quality ads from major brands. Many offer companies have been running low-quality offers like mobile ringtone subscriptions, and they’ve have been coming under heavy criticism for it. But Playfish’s reliance on direct payments and high-quality offers means it has not and will not be much affected by these issues. Indeed, the biggest way it is affected from that issue is that many people outside the industry have come under the mistaken impression that social games make most if not all of their money from offers.
The bigger issue, now, is that Facebook is introducing a wide range of changes to its developer platform, getting rid of notifications and other features that apps currently use to reach users. Playfish is likely to be less affected than some other game developers, as it has focused on making its games fun, first; instead of users getting tricked into sharing the game with their friends, they happily do it. Now, with EA’s money and large pool of gaming talent, Playfish will be especially well-positioned to compete against market leader Zynga. For example, Zynga may spend up to $50 million this year on Facebook ads, to help it gain more users. With EA, Playfish can easily do the same.
This is also a nice exit for a couple venture firms: The company has raised $21 million from Accel Partners, Index Ventures and Stanhope Capital.
November 9th, 2009 at 8:08 am
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November 9th, 2009 at 8:09 am
I posted this on Alley Insider and I’ll post it here as well:
This is a big deal. Unlike Zynga, Playfish I feel avoided some of the aggressive user grabbing that feel a little dirty. Playfish’s games never made the games about adding more friends as a means of game play.
While you’ll notice that it has less users, it seems to me (especially in Pet Society) that the members are more engaged and less interested in level chasing.
What I am trying to get at is that Playfish is likely the long term better buy than Zynga (and playdom to a lesser extent)
Here at Games.com we’ve discussed this and made the loose comparison to Playfish being Nintendo in-terms of quality, and Zynga being more of a Activision.
We’ll see if EA affects the culture of Playfish but this is a good move and I think the next few months will be interesting.
I wonder if Activision will counter with a social game company buy?
We’ve got an exclusive interview coming soon on the sale.
November 9th, 2009 at 12:18 pm
[...] about a month, EA’s purchase of Facebook social game company Playfish (for $300 million) has been confirmed today. Playfish are known for their popular games Restaurant City and Pet Society, which are both in [...]
November 9th, 2009 at 12:47 pm
[...] that gaming giant EA (ERTS) was looking to acquire large social game developer Playfish. Today, the deal was made official: EA is acquiring Playfish for $275 million in cash plus up to $125 million more in earnouts and [...]
November 9th, 2009 at 11:16 pm
Things are definitely about to get very, very interesting in the social games world.
November 11th, 2009 at 2:29 am
[...] | InsideSocialGames Condividi questo [...]
November 13th, 2009 at 10:40 am
[...] this week, game giant EA announced the acquisition of social game developer Playfish in a deal valued up to $400 million, that we first reported on a few weeks ago. The move was a [...]
November 17th, 2009 at 7:23 am
[...] you get purchased by someone as huge as Electronic Arts (EA), there is definitely a bit of turmoil as everyone tries to understand how the two companies will [...]
November 23rd, 2009 at 1:03 pm
[...] acquisition for up to $1 billion, we heard last month. Instead, EA bought smaller rival Playfish in a deal worth up to $400 million. But, the $1 billion price tag has shown itself again, in a Bloomberg report that cites a number of [...]
November 24th, 2009 at 11:29 am
[...] off its up-to-$400-million purchase by Electronic Arts, Playfish is getting ready to roll out a Facebook poker game, called Poker [...]
December 24th, 2009 at 10:56 am
[...] why EA is partnering with another Facebook app developer when it just bought a market leader, Playfish, in a deal worth up to $400 million. “Anything going live now was in progress well before Playfish acquisition was known,” [...]
December 29th, 2009 at 5:34 pm
[...] After its seminal sale to Electronic Arts earlier this fall in a deal worth up to $400 million, the company has appeared somewhat distracted as its leaders and teams are integrated into the [...]
January 6th, 2010 at 3:42 pm
[...] both MAU and DAU over the last 30 days. Playfish appears to be continuing their decline since the purchase by Electronic Arts in early November. Pet Society rebounded a bit with the launch of a daily lottery in early [...]
January 18th, 2010 at 3:01 pm
[...] virtual currency sales at over $1B in 2009 and growing at a clip of 60%. Recent events such as EA’s $400M acquisition of Playfish, Playdom’s $43M Series A and DST’s $180M investment in Zynga demonstrate that investment and [...]
January 23rd, 2010 at 11:56 am
[...] developer will be following in the footsteps of Electronic Arts, in reference to its recent purchase of social developer Playfish. At the moment, the speculations are all merely rumors, but based on past confirmations from [...]
February 11th, 2010 at 10:26 am
[...] November, Electronic Arts acquired Playfish in a deal that could total up to $400 [...]
February 17th, 2010 at 1:15 pm
[...] also makes games on Facebook, has owned the license to SimCity for years. Especially now that it owns Playfish, one of the successful social game developers on [...]
April 6th, 2010 at 8:56 pm
[...] That gives the company more than four times as many monthly active users as Playfish, which was recently bought by Electronic Arts for $400 million. China’s Tencent Holdings is the only online game company that is larger [...]
April 30th, 2010 at 2:26 pm
[...] those of you who may not know who Kristian Segerstrale is, he is one the founders of Glu Mobile as well as Playfish (which was later sold to EA for $250M). Kristian held a brilliant keynote, [...]
July 27th, 2010 at 3:37 pm
[...] of Playdom’s biggest rivals, Playfish, was bought by Electronic Arts last year in a deal worth up to $400 million, a watershed acquisition in social gaming that until today had been the largest purchase in the [...]
October 26th, 2010 at 5:26 pm
[...] hits, Ubisoft is substantially behind competitor Electronic Arts, which boosted its own figures by acquiring Playfish, but ahead of competitors like THQ that haven’t yet put significant effort into social [...]
February 8th, 2011 at 9:49 am
[...] move falls in line with their massive purchase and investment in the social games studio Playfish last year and makes a lot of sense for all [...]
February 15th, 2011 at 12:09 pm
[...] purchase of social game developer Playfish in late 2009 was a watershed event. The deal, valued at up to $400 million, signaled that traditional gaming companies believed social games and the Facebook platform are a [...]
April 3rd, 2011 at 1:13 pm
[...] Cow Clicker into a social game satire. Where these big names went, bigger companies followed. EA bought Playfish in 2009 and Disney acquired Playdom less than a year later. Today, even core game franchises like [...]
October 27th, 2011 at 2:23 pm
[...] average revenue per user for a sixth consecutive quarter. EA acquired the Restaurant City developer in late 2009 and since sunsetted several of its older titles in favor of developing Facebook games around [...]
November 30th, 2011 at 6:07 pm
[...] KlickNation would add a core gamer-focused studio to the two social gaming ones the company currently has in Dragon Age Legends developer EA2D and Playfish. These two studios mainly produce social games related to EA’s existing franchises like Dragon Age, The Sims and FIFA. Playfish also maintains the original intellectual property it created like Restaurant City before it was bought in 2009 for $300 million in cash and stock plus $100 million in earnouts. [...]
January 27th, 2012 at 10:28 am
[...] A former naval officer, he joined as the company in 2008 as its first game producer, where he shepherded the development of its first big simulation game, Pet Society. Having figured out how to monetize virtual goods with it, he went on to launch the company’s next big hit, Restaurant City. These two games inspired competing ones from Zynga and many other developers, and provided the revenue and traffic numbers that got Electronic Arts to acquire Playfish in the fall of 2009 in a deal worth up to $400 million. [...]
May 1st, 2012 at 9:54 am
[...] the top restaurant simulation games on Facebook in 2009; it maintained that momentum through 2010 after EA acquired the developer. The game recently marked its third birthday on Facebook in April — having shrunk by more [...]