Disney Buys Playdom For Up To $763.2 Million


Walt Disney (NYSE: DIS) is making a big move into social games, with the purchase of fast-growing social game developer Playdom for up to $763.2 million. The deal includes a “total consideration” of $563.2 million, in addition to a performance-linked earn-out of up to $200 million.

In a release, which is included in full after the jump, Disney says that by buying Playdom it “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 and MySpace.” The company hints that it will now be bringing its “characters, stories and brands” to games on social networks.

By acquiring Playdom, Disney will also be getting an existing portfolio of popular social games, which includes Mobsters, the top title on MySpace (NSDQ: NWS). Over the last year, Playdom has been rapidly expanding its lineup of titles through the acquisition of eight gaming startups. It now ranks as the top social game developer on MySpace and the fourth largest on Facebook. The company, which is profitable, said late last year that its sales were near an annual run rate of $50 million.

The deal price represents a big return for Playdom’s investors, who had put $73 million into the company since last November. Just last month, Playdom had raised $33 million in an add-on to its first round. That round included an investment by Disney venture arm Steamboat Ventures. Other backers included New Enterprise Associates, Lightspeed Venture Partners and Norwest Venture Partners.

The acquisition shows just how quickly the valuations of social game startups are soaring. The last major acquisition in the space was last fall when Electronic Arts paid $275 million in cash and up to $100 million in earnouts for Playfish, which had 60 million monthly active players of its titles at that time. Playdom, by contrast, claims only 38 million monthly active users.

Playdom CEO John Pleasants, the former Electronic Arts (NSDQ: ERTS) COO who Playdom hired away last fall, is joining Disney Interactive Media Group as an EVP and as general manager of Playdom. He will report to Disney Interactive Media Group President Steve Wadsworth.


BURBANK, Calif.—(BUSINESS WIRE)—Advancing on its goal of bringing consumers its well-known stories, characters and brands in ever more engaging ways, The Walt Disney Company (NYSE:DIS) has agreed to acquire Playdom Inc., one of the leading companies in the fast-growing business of online social gaming.

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

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.

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 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 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.

The transaction, which is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act and certain non-U.S. merger control regulations, is expected to close by the end of Disney’s 2010 fiscal year.


GameStop Buying Social Gamer Kongregate


Retail chain GameStop is acquiring Kongregate, the San Francisco, CA-based game community, as the company looks for ways to expand its online presence. Terms of the deal, which is expected to close next week, were not disclosed.

Kongregate claims to host about 10 million monthly players who spend approximately 23 million hours per month on the site. GameStop says that the site will continue to be run by co-founders Jim and Emily Greer.

While it may look like a disconnect to add a free-to-play games site to an online and offline retailer like GameStop, the Grapevine, TX-based chain believes it can use Kongregate to help extend and cement its marketing reach to mobile devices. Plus, it’s a good way to build relationships with game buyers.

GameStop has been overhauling its business over the past year to try to build a significant revenue stream out of digital. Late last year, the company bought a stake in UK-based online gaming news, info and distribution platform JOLT as a way to test the digital distribution model of games, instead of just trying to find ways of “protecting” the core retail business. Release


Ready for 3-D Web Video? Break Media Is Serving It Up Anyway

Sometimes marketers come late to a trend. Sometimes they show up early, panting and desperate to write checks.

Such is the case with 3-D, says Keith Richman, who is happy to help them out.* Richman’s Break Media, the dude-centric Web site network, is launching a 3-D Web video channel aimed at advertisers who want to connect themselves with anything 3-D right now. Oh, and people who want to watch 3-D Web video on their TVs and PCs, too.

How many of the latter group are there? Who knows. Can’t be that many, for the time being. But certain brands, like Dell’s (DELL) Alienware, which makes game-centric PCs, are happy to pay up for 3-D content, so Break is happy to make it for them. A sample:

Unknown Title – Watch more free videos

Richman says 3-D video is about 300 percent more expensive to make than run-of-the-mill Web video, because the equipment is expensive and the talent pool that knows how to use it is limited. Cameras for 3-D, at least, will get cheaper within the next few months, but this stuff will be pricey for some time.

If 3-D joins Laserdiscs and Betamax in the great technology graveyard in the sky, then that’s wasted money for Richman and his sponsors. But if he’s right, the payoff is something like the one that HDNet’s Mark Cuban got for betting early on that technology about five years ago: A big head start on something that everyone now takes for granted.

*I’m paraphrasing, of course–Richman is much too politic to describe marketers as “desperate.” I’m sure he said “enthusiastic” or something like that.

Cloud-Based Gamer Gaikai Adds Intel and Limelight As Backers

Gaikai Logo

Gaikai, a much-buzzed about startup that promises to let users play PC-based games in their web browsers, has added two big names to its list of backers. The company says that both Intel (NSDQ: INTC) venture arm Intel Capital and content delivery network Limelight Networks (NSDQ: LLNW) have made undisclosed “strategic” investments. (via Engadget).

Gaikai installs its PC games—which would typically require a DVD-install—on its own servers and then lets subscribers “stream” the games on the web. It says that Intel’s processors power its servers, and it is also partnering with Limelight to “ensure that the fidelity of our cloud-based gaming service is as graphically rich and responsive as a traditional console experience.”

Gaikai’s service is expected to launch later this summer, which will put it several months behind rival OnLive, which launched its own games on demand service in June. Gaikai had already raised more than $15 million, including $10 million in a round in late May.


Liberty Media Hands Off Overture Films To Relativity Media


Liberty Media (NSDQ: LINTA), which had said five months ago it was evaluating “strategic alternatives” for Starz’s Overture Films division, is handing over the business to Relativity Media. The deal ends a nearly four-year-old effort by Starz to up the amount of original content it was producing by releasing 8 to 12 full-length films annually.

Starz is still trying to boost the amount of original content it produces—but specifically for TV. Late last year, Liberty Media hired former HBO CEO Chris Albrecht to oversee Starz as part of that effort. In a release, Albrecht says that “it no longer makes strategic sense for Starz to make theatrical motion pictures” because of the company’s “increased focus on original content.”

Under the terms of the deal, Relativity is taking over “distribution and marketing operations and some assets” of Overture, which has produced titles including Capitalism: A Love Story and Sunshine Cleaning. Two-thirds of Overture’s employees are moving over to Relativity.


RockYou Is Latest Developer To Sign On To Facebook Credits


Facebook has gotten another top app developer to agree to use its Facebook Credits payment system. The latest to do so is RockYou, the sixth biggest app developer on the social network, which says in a statement that Credits will be the “exclusive virtual currency” in its games and apps for the next five years. That follows similar agreements Facebook has reached with CrowdStar and with Zynga, although the latter wasn’t an exclusive deal.

The deals come as Facebook is finally beginning to emphasize Credits worldwide after more than a year of testing.

The payment system represents a large non-advertising revenue opportunity for the social network, since it takes a 30 percent cut of Credit sales. For now, though, Facebook is downplaying the money-making possibilities. In a recent interview with VentureBeat, Facebook Developer Network director Ethan Beard said Credits “will bring very little or marginal profit” to the social network because the company will be reinvesting all of the money it does make “back into the product for the next several years.”


Did You Know There Wasn’t a YouTube Music Site? Now There Is.

Music videos are a core part of YouTube, but until now the site hasn’t had a landing page for them. Now that it does, you can sort of understand why Google’s (GOOG) video site hasn’t needed a landing page for music: People don’t search for “music,” they search for a band, or a song, or maybe a genre.

On the other hand, you can see why YouTube would want a page like this: It makes a nice, cleaning landing page to send traffic to and from, just like the “shows” and “movies” pages it has previously set up. You could probably get a nice premium for ads, too, though so far the page is banner-free.

Note that this is separate from Vevo, the “Hulu for Music” joint venture set up by Universal Music Group and Sony (SNE) that YouTube is supporting but not investing in. The YouTube music page ends up linking to a lot of Vevo stuff, but it’s not doing that exclusively. You might get a link to Sony/Vevo’s AC/DC, or you might get one to an oddity like “Jersey Shore” semi-celebrity Pauly D, promoting his new single. (Pauly D has a new single!)

The page is self-explanatory, but in case you’re itching to start hearing something immediately, here’s a sample of what YouTube is currently promoting there–a little “Jersey Shore.”