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EA's Schappert Talks Social Gaming, Amid $250 Million Playfish Buy Rumors

EA's Schappert Talks Social Gaming, Amid $250 Million Playfish Buy Rumors Exclusive

October 14, 2009 | By Leigh Alexander

October 14, 2009 | By Leigh Alexander
More: Console/PC, Exclusive

Electronic Arts COO John Schappert won't comment on media rumors that EA has quietly acquired social gaming giant Playfish -- or might be just about to -- for a stunning $250 million.

"I'm not going to speculate on rumors about our M&A strategy," Schappert tells Gamasutra today, and Playfish is equally hushed. "We don't comment on rumors. Full stop," the Pet Society and Restaurant City social network game creator told finance sites.

But Schappert is full of ideas on how the social gaming landscape may shape up, and his comments offer key clues as to EA's heightened level of interest in the space.

"We've seen some very creative developers move to social gaming and deliver experiences that are generating a lot of eyeballs on sites like Facebook and MySpace," he tells us. "The traffic has attracted a lot of attention -- and dollars -- from the investment community."

Interestingly, Schappert himself returned to his executive role at EA somewhat recently -- after former COO John Pleasants departed to focus on social network games as CEO of Playdom.

Lazard Capital Markets analyst Colin Sebastian also recently pointed to social gaming as a major area for EA: "In particular, EA views the social networking platforms (e.g., Facebook) as a large growth opportunity, with relatively low barriers to entry, high margins, and attractive viral marketing characteristics," said Sebastian.

But Schappert implies interest must be taken carefully. To illuminate the trends he predicts for social gaming, he points to the cycle the industry has seen on both mobile and iPhone platforms: "There's a big rush of content to start, but when the smoke clears, it's strong brands and quality that stays on the top of the chart," he explains.

"There's no question that some social game sites will succeed, and that others will find themselves on a bubble," he continues. "The sites that avoid the bubble will have three things: great game quality; strong brands; and multi-platform capability."

It certainly seems Playfish has sidestepped that social gaming bubble, at least for now. The company's games, including Pet Society, Word Challenge and Country Story, have become mainstay brands on social networks -- to the tune of 135 million installs across the social and mobile platforms it serves. It's also claimed 50 million monthly active users playing over 1 billion sessions per month across all nine of its titles. "Multi-platform capability -- serving the game on PCs, mobile and consoles -- is the key to building a long-term relationship with the players," Schappert stresses.

As for multiple platforms, just recently, the London-headquartered Playfish opened its second office in San Francisco, focused on original social games for Facebook, MySpace, Bebo, iPhone and Android.

Electronic Arts has long and publicly looked to PC-based social gaming as a necessary diversification strategy for its business, and has publicly pegged that space as a core focus for growth and stability ever since its restructuring began at the end of the last fiscal year. "PC... is actually growing faster than console, but it's appealing to a bigger and different audience," CEO John Riccitiello has said in the past, when discussing survival strategies for challenging economies and evolving business models.

So while the parties involved will neither confirm nor deny the rumors that a major merger is underway, it's at least within the realm of possibility, considering the publisher's keen interest in the space. It's possible on paper, Wedbush Morgan analyst Michael Pachter tells Gamasutra today: "They have almost $2 billion in cash, so not an issue to pay $250 million. Strategically feasible? Again, of course," the analyst adds. "EA is in the casual games space with, and has been trying to expand its presence globally."

But would a Playfish buy make sense? If the rumored $250 million were to be true, it would mean EA is paying about three times revenue for the company. "That's not a crazy price, but it begs the question of what exactly EA is getting for its money," says the analyst.

Adds Pachter on the as-of-yet hypothetical acquisition: "I suppose that the company desires a broader reach for its casual games, and expansion onto Facebook is desirable. I'm not sure that EA needed to buy their way in, as I think that they could have taken the more patient route of organic growth, but that's a management decision based upon factors that I have no real knowledge about."

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