Disney is in talks to buy ‘social’ game maker Playdom
Walt Disney Co. is looking to become Hollywood’s biggest player in the fastest-growing segment of the video game business.
The Burbank media giant is in talks to acquire Playdom Inc., one of the largest makers of online “social” games, in which people play games together on social networks such as Facebook, according to people familiar with the situation.
The main sticking point is price: Negotiators for Disney and privately-owned Playdom, the people said, have discussed amounts ranging from $400 million to $750 million.
Should the deal go through, it will continue Disney’s push into the world of “casual” video games, which are played by a much broader demographic than popular Xbox and PlayStation system games that appeal mostly to younger males. The company in 2007 acquired kids-targeted online virtual world Club Penguin for $350 million and earlier this month bought iPhone game developer Tapulous Inc.
No other Hollywood entertainment company has moved so aggressively into the market.
Acquiring Playdom would bring Disney a new avenue through which to pursue Chief Executive Robert Iger’s strategy of deploying well known characters and brands across as many media platforms as possible. The talks for Playdom also underscore how Iger is shifting Disney’s resources away from slow-to-no-growth businesses such as Miramax Films, which is in the process of being sold to an investor group headed by Ron Tudor, and allocating capital to higher-growth entertainment markets created by digital technology.
Disney would probably tap Playdom’s expertise to develop games for social networks including Facebook and MySpace based on classic characters such as Mickey Mouse and Donald Duck, popular Pixar Animation favorites like Buzz Lightyear and Woody, and superheroes such as Iron Man from its Marvel Entertainment subsidiary.
One Disney division, ESPN, is already working with Playdom to develop social games. Disney could also bring Playdom’s original titles, such as Sorority Life, Social City and Tiki Farm, to its other divisions, such as consumer products.
While retail video game sales have been declining for the last year, a growing number of people have been playing, and spending money on, social and casual games on the Internet and mobile phones.
Unlike many sectors of the digital media world, social game companies such as Playdom have a profitable business model. Although the majority of players generate no revenue, a small percentage known in the industry as “whales” spend significant amounts, sometimes more than $100 a month, to download virtual goods that improve the game-playing experience. According to recent research from Screen Digest, players will spend more than $639 million this year in social games, a market that could be worth $1.5 billion within three years.
Playdom, based in Mountain View, Calif., is one of the biggest companies in the social gaming space behind industry giant Zynga Game Network Inc., maker of the popular Facebook game FarmVille.
Playdom has scheduled a board meeting next week to decide whether to accept the buyout offer, people familiar with the matter said. The two sides have been negotiating for more than two months.
Disney is already an investor in Playdom through its venture capital fund, Steamboat Ventures, which recently participated in a $33-million financing round for the social game company.
Technology blog TechCrunch first reported the acquisition talks. Representatives of Playdom and Disney could not be reached for comment.