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Playdom in Peril: is Disney's $400 Million Gaming Acquisition the Next MySpace

Date: Nov 10 2011 01:56:10 Source: BUSINESS INSIDER Views:
KeyWord: Playdom, Disney, Zynga, Playfish, Gardens of Time, GDC Online, Playdom in Peril

By Matt Lynley From BUSINESS INSIDER

Disney

Is Playdom the new MySpace? In July 2010, Playdom was one of the three top social gaming companies alongside Playfish and Zynga. That summer it was acquired by Disney for more than $400 million.

But these days industry sources whisper that Playdom is on track to become the next MySpace, which was the top social network before an old media company acquired it and slowly let it rot.

Since the acquisition, the number of people playing Playdom games has remained the same. Flat growth is not good in such a fast-growing industry.

Flickr/Kevin Krejci

Here below are a statement from Disney.

Attrition and dead weight kept Playdom from regularly producing games

  • After the Disney acquisition, employees who thought they would be millionaires and didn't make money off the acquisition were pissed off and left.
  • The founders and the investors and the executives wanted to have an exit, a source said. John Pleasant was brought on board as CEO because he could build a story about the company and make a lot of money.
  • After the acquisition happened there was a lot of recruiting activity at Playdom. Recruiters were coming and offering very large sums of money and big promotions and equity in smaller startups.
  • "Six top executives at the VP level or above have moved on in the last three months including Playdom's Co-COO," says another source.
  • Playdom had not released a game until around 9 months after it was acquired. One source said it was because Playdom spent the time building and pushing its systems into Disney. "You can't build on the new stack until you build the new stack," said this source.
  • There were a number of acquisitions that didn't even produce anything for Playdom, a source said.
  • There were voices in Playdom saying they didn't see a value in using Disney's intellectual property too because it mainly appeals to kids, an audience that doesn't monetize on Facebook.

Gardens of Time

Playdom employees eventually lost control of the games they were making

  • Disney was not supposed to have any internal oversight of what was being developed in Playdom in the first couple years so Playdom could make its earn out unmolested.
  • It wasn't long after the acquisition closed that Disney started to come in and ask Playdom to work on certain games and drop others.

Playdom can't compete with Zynga because Facebook favors Zynga

  • Playdom sources say the company suffers from a comparison to Zynga, which gets preferential treatment from Facebook. These sources say Facebook has agreed to protect Zynga's monthly-active-user numbers. These sources say Zynga knows what's going to happen and when within Facebook. When a new feature came out, Zynga would launch with that feature already integrated in our apps. Playdom is experiencing "very strong revenue growth"
  • Even though Playdom has a smaller number of users, it doesn't have a reason to spend unprofitably against their games. Playdom's average revenue per daily active user is much higher than Zynga's. Playdom is making three or four times as much money off its users as other social gaming companies, one source said.
  • Playdom has gone through a period of pruning through the least successful studios they had, they are probably down half the number of people they had at peak, maybe lower than that.

Gardens of Time

Over the past year, Playdom has added several successful titles to Disney's portfolio of social games, which have been hits with consumers, and acclaimed by critics. In fact, Gardens of Time became a top 5 game on Facebook and was recently recognized as Social Game of the Year at GDC Online. Social games are a key part of Disney's digital strategy, and will be a critical driver of DIMG's future success.

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