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Social game titan Zynga (Nasdaq: ZNGA ) has a problem: its ability to internally come up with creative and innovative content is highly questionable. If you look through the history of its most popular games, you’ll find that many, if not all, of them were either developed by someone else and then acquired, or developed by someone else and then copied.
If you can’t beat ‘em, copy ‘em
Most of the time, Zynga’s targets are small-time players that may not have as much recourse against the larger company. For example, when Zynga ripped off NimbleBit’s Tiny Tower, which even won Apple’s (Nasdaq: AAPL ) iTunes Rewind iPhone Game of the Year award in January with Dream Heights, it was hard to imagine the three-person company starting a drawn-out and expensive legal battle.
Source: NimbleBit co-founder Ian Marsh's Twitter feed in January.
NimbleBit had spurned an acquisition offer from Zynga, leading Zynga to blatantly copy its popular game instead. There’s no shortage of examples of this behavior. Here’s one of Zynga’s most popular games, FarmVille, and its "inspiration," Farm Town.
Source: SF Weekly.
The list goes on.
|FishVille||TallTree Games’ Fish World|
|Café World||PlayFish’s Restaurant City|
|PetVille||PlayFish’s Pet Society|
|Word Twist||GameHouse’s TextTwist|
|Zynga Bingo||Buffalo Studios’ Bingo Blitz|
|Mafia Wars||Psycho Monkey’s Mob Wars|
|Bubble Safari||Taito Corporation’s Puzzle Bobble (known as Bust-a-Move in the U.S.)|
|Ruby Blast||PopCap Games’ Bejeweled|
In fact, most of these companies don’t opt to sue Zynga but, sometimes, Zynga lands in hot legal waters, like when Psycho Monkey sued Zynga years ago over Mafia Wars.
Messing with the big wigs
Now, Zynga has chosen to rip off a heavyweight that isn’t taking too kindly to the company’s ways. One that is willing to duke it out in copyright court: Electronic Arts (Nasdaq: EA ) , who, incidentally, owns PopCap Games.
One of EA’s most popular game franchises is The Sims, dating as far back as 2000, with the newest addition to the family being The Sims Social on Facebook’s (Nasdaq: FB ) platform. Zynga followed up with The Ville, which was just released, and is a clear knockoff of the game. EA has responded by filing a copyright infringement suit against Zynga. This time, EA is even taking it one step further than mere copying, alleging that the social gaming slumlord poached high-level execs, who had internal knowledge of The Sims Social for the specific goal of ripping it off.
The older game maker maintains that Zynga even copied the smallest of details, from the specific color palette, to the animation sequences, and the character personality types. Its court filing is chock-full of examples of what it calls "obvious replication."
Source: Court filing.
For example, both games feature eight possible skin tones for characters and, out of 16 million possible colors, Zynga used the exact same eight that EA used in The Sims Social, measured in their component red, green, and blue, or RGB, numerical values. EA’s court filing says, "There is an infinitesimally small chance that the use of the same RGB values for skin tone in The Ville as The Sims Social is mere coincidence."
There are also three high-level execs that Zynga has poached from EA, while The Sims Social was on the home stretch of its development: Barry Cottle, John Schappert, and Jeff Karp.
Cottle now leads Zynga’s acquisition strategy, playing a key role in the controversial purchase of OMGPOP. Schappert was EA’s COO, and took the same role at Zynga, while Karp has become Zynga’s Chief Marketing and Revenue Officer. All three were hired between early 2011 and early 2012, and had sensitive strategic information on The Sims Social, according to EA.
A bad playbook
This goes beyond a limited number of transgressions. Instead, it seems like Zynga’s entire business strategy hinges on either acquiring strong brands, like its With Friends franchise through the Newtoy acquisition, or simply copying them when an acquisition isn’t possible, such as with Dream Heights and The Sims Social.
All of Zynga’s most popular games fall into one of these two categories, which doesn’t inspire any confidence in its ability to come up with creative or innovative titles internally. Instead, it relies on others to do the hard work. EA aptly sums up Zynga’s business strategy in its filing:
As The Sims Social increased in popularity and visibility, Zynga turned to its well-known competitive playbook: Steal someone else’s game. Change its name," then cross-promote the Zynga clone to its extensive user base.
Source: Court filing.
That’s hardly what I’d call a sustainable business worthy of your investing dollars.
For even more on why Zynga might not be worthy of a spot in your portfolio, grab yourself a copy of this brand new premium research report on Zynga, penned by yours truly. You’ll also get quarterly updates included, as Zynga reports earnings and other developments occur. Sign up today.