Disney Buys Playdom in $763 Million Deal, Becoming Hollywood Leader in Social Games

LOS ANGELES — The Walt Disney Company on Tuesday became Hollywood’s leader in the booming social game business by acquiring Playdom in a deal worth as much as $763.2 million.

Playdom is one of a cluster of tech start-ups that make simple online games and sell virtual goods — like a $2.50 outfit for a character in Playdom’s Sorority Life, in which players shop, party and go to a spa. Such companies have grown by taking advantage of rapidly expanding social networks like Facebook.

Disney will initially pay $563.2 million for Playdom, which is the No. 3 social game company on Facebook with about 42 million monthly players. The deal includes $200 million in additional payments if Playdom achieves growth thresholds that were not made public.

John Pleasants, Playdom’s chief executive, will join Disney as an executive vice president and will report to Steve Wadsworth, president of the Disney Interactive Media Group. Mr. Pleasants, who impressed the Disney board with a presentation on social games at a recent company retreat, is expected to work to develop titles based on Disney characters and franchises.

As social games becomes a more crowded and difficult field — several hundred new games are introduced on Facebook weekly and most go nowhere — brands that can be used as the basis for titles are becoming more important.

“When deciding how to place a bet we thought we should do it at a significant level and not just take a little shot,” Disney’s chief executive, Robert A. Iger, said in an interview. “Too often traditional media companies only put a toe or two in, and they deprive themselves at the opportunity for real growth.”

He said Playdom furthered his goal of providing entertainment to “a new generation of fans on the platforms they prefer.”

The purchase continues Disney’s effort to strengthen and diversify its digital media portfolio by betting on casual Internet games, in contrast to more complex games for platforms like Xbox and PlayStation.

Casual games are blossoming in part because players of all ages embrace them. In June, Disney made a small investment in a $33 million financing round for Playdom. On July 1, Disney announced its acquisition of Tapulous, which makes music-based iPhone games.

Sales of virtual goods in social games are expected to reach $835 million this year, according to Inside Network, which researches the industry.

The leading company in the arena, Zynga, has raised $520 million in venture capital and is widely expected to go public. Zynga’s games, which include FarmVille, have 211 million players every month, according to AppData.com.
Source: http://www.nytimes.com/2010/07/28/technology/28disney.html?hpw