Disney to buy Playdom for at least $563.2 mil

Entertainment giant buys into red-hot social gaming space

NEW YORK -- The Walt Disney Co. has struck a deal to acquire social gaming firm Playdom Inc. for $563.2 million, plus a potential added performance-dependent earn-out of up to $200 million, and further strengthen its burgeoning gaming business.

Disney already is one of the investors in privately-held Playdom, which is the third-largest player in the red-hot social gaming space. It makes casual games that consumers play on such social networks as Facebook and MySpace. 

"We see strong growth potential in bringing together Playdom's talented team and capabilities with our great creative properties, people and world-renowned brands like Disney, ABC, ESPN and Marvel," said Disney president and CEO Robert Iger. "This acquisition furthers our strategy of allocating capital to high-growth businesses that can benefit from our many characters, stories and brands, delivering them in a creatively compelling way to a new generation of fans on the platforms they prefer."

Earlier in the day, video game retailer GameStop had also placed a bet on the social gaming sector, unveiling the acquisition of Kongregate, an online platform for social games. Financial terms weren't disclosed.

The Playdom business will become part of the Disney Interactive Media Group (DIMG) unit.
Playdom CEO John Pleasants, who previously was COO and president of publishing at Electronic Arts, will become an executive vp of DIMG and general manager of Playdom, reporting to DIMG president Steve Wadsworth.

"We are at the start of a once-in-a-generation opportunity to transform the way people of all ages play games with their friends across devices, platforms and geographical boundaries," Pleasants said. And Wadsworth told THR: "The social media category is exploding, and games are a key component of entertainment" in the space and an area where Disney felt it had a gap it could fill.

The deal talks between the two firms first emerged last week.

The transaction comes after Zynga, the firm behind such hit social games as Farmville, emerged as one of the hottest up-and-comers at the recent Allen & Co. media mogul gathering in Sun Valley, Idaho, earlier this month.

It also comes at a time when Disney and other entertainment giants have been looking to expand their presence in the gaming space without acquiring big video game companies.

Mountain View, Calif.-based Playdom boasts the No. 1 game on MySpace with "Mobsters," in which players must try to rise in the crime ranks. Other games include socialite training camp "Big City Life," city building and management game "Social City," action-strategy game "Wild Ones," chip-earning challenge "Poker Palace" and vampire game "Bloodlines."

Playdom also touts more than 42 million monthly active users, compared to more than 200 million for Zynga. Its Web site says "we may be the fastest growing social gaming company on the planet."

Disney already owns a stake in Playdom, which makes most of its revenue from selling virtual goods and some from advertising, via its venture investment arm Steamboat Ventures. Disney earlier this year also unveiled a deal with the firm to develop social games for ESPN.

In a telephone interview with THR, Wadsworth said Playdom will continue developing original product, as well as Disney-themed games. He said the two sides have been discussing possible ideas, but don't have a roadmap or time for the first Disney-themed product to share at this stage.

But moms are a key demo for casual games and Disney alike. "Moms will be an interesting (group), but Disney fans are in a lot of areas (thanks to such brands as ABC, ESPN and Marvel), so we will reach out to everyone," Wadsworth told THR.

Pleasants told THR that his firm has grown from 50 to 550 people over the past year and now has 15 groups working on 1-2 releases each year. He said the Disney brand has such a strong reputation for quality that his team will give games with Disney characters particular attention to ensure high standards are met.

Disney recently also acquired Tapulous, a maker of music games for the iPad, iPhone and iPod.

"With the opportunity to get a footprint in the fastest growing segment in digital media, Disney now has a foundation – with both Playdom and Tapulous - to leverage and understand social gaming on the two most important platforms, right now, Facebook and Apple," said Chris Cunningham, co-founder and CEO of appssavvy, a New York-based company that has worked with Playdom on integrating brands into its games. "The opportunity and challenge ahead is sustaining the traffic and growth on these complex platforms."