Walt Disney Co (NYSE: DIS ) is all set to take a leading market share in fast-growing online social gaming space with its $563.2 million deal to buy social game-start-up Playdom.
The Disney-Playdom deal could also be a stepping stone in the consolidation of booming social gaming industry.
The Playdom deal follows Disney's purchase of iPhone app developer Tapulous earlier this month for an undisclosed amount
Social Gaming Consolidation
Social games are free to play and generate revenue by charging users to buy virtual goods.
Just hours before the Disney-Playdom deal, U.S. video game retail giant GameStop Corp. (NYSE: GME ) announced its purchase of social gaming website Kongregate for an undisclosed sum to diversify its business to digital game distribution.
"FarmVille"-maker Zynga, the giant in the social gaming space, said to be generating revenue between $500 million and $700 million a year and many analysts expect the company to pursue an initial public offering as early as next year. Zynga boasts over 200 million monthly users on Facebook.
Recently, social games company Playfish was acquired by Electronic Arts (Nasdaq: ERTS ) -- one of the biggest video-game-makers -- for about $400 million.
Under the deal that was announced Tuesday afternoon, Disney will pay a performance-linked earn-out of up to $200 million to Playdom.
The acquisition of Playdom, which makes social games for Facebook, sets the stage for Mickey Mouse and Iron Man to feature in games on the world's largest social networking site.
In just two and a half years of operation, Playdom has established itself as a pacesetter in building popular games for social networks including Social City, Sorority Life, Market Street and Bola. Playdom also engages an estimated 42 million active players each month.
By acquiring Playdom, Disney will strengthen its already-robust digital gaming portfolio, acquire 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," Robert Iger, CEO of Walt Disney, said in a statement.
"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.
Playdom, which has 15 game development studios, will remain headquartered in Mountain View, California. Playdom Chief Executive John Pleasants will become an Executive Vice President of the Disney Interactive Media Group (DIMG) and General Manager of Playdom.
Disney also 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 customary closing conditions, is expected to close by the end of Disney's 2010 fiscal year.
California-based Disney shares closed Tuesday's trading session at $34.28 on NYSE.
International Business Times, The Global Business News Leader