Disney buys social gaming firm Playdom for US$563.2m

28 Jul 2010

Entertainment giant Disney has revealed it is buying social gaming company Playdom for US$563.2m, making a resounding statement that the company intends to be a major force in the computer game industry globally, especially in social gaming.

Playdom shareholders will receive total consideration of $563.2m, subject to certain conditions, and a performance-linked earn-out of up to $200m.

The reason why media giants like Disney and retail giants like GameStop are busy acquiring social gaming companies is primarily driven by the realisation that more and more people are spending their time online thanks to the recession and broadband, opening up a lucrative market for micropayments and online advertising.

In just two and a half years of operation, Playdom has established itself as a pacesetter in building popular games for social networks enjoyed by consumers around the globe. Through well-known titles like Social City, Sorority Life, Market Street and Bola, Playdom engages an estimated 42 million active players each month.

One player in the social gaming space, Zynga, is just two years old and this year will achieve revenues of US$500m and possibly US$1bn next year.

What Playdom means for Disney

By acquiring Playdom, Disney will strengthen its already-robust digital gaming portfolio, acquire a first-rate management team and provide consumers new ways to interact with the company on popular social networks, like Facebook.

“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 Robert A Iger, president and CEO, The Walt Disney Company.

“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,” Iger added.

“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,” said Playdom chief executive officer John Pleasants.

“Disney is an incredibly forward-thinking company that shares our vision and is the ideal partner to further our mission to bring great entertainment to people around the world.”

Playdom, which has 15 game development studios, will remain headquartered in Mountain View, California. Pleasants will become an executive vice-president of the Disney Interactive Media Group (DIMG) and general manager of Playdom, reporting to DIMG president Steve Wadsworth.

Disney expects Playdom’s expertise in social gaming software tools, business intelligence and rapid innovation to broadly benefit DIMG, which already has a substantial global presence in online, console and mobile gaming.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years