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.