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Topic: Disney Buying Online Game Maker Playdom?< Next Oldest | Next Newest >
CarolKoster Offline
Carol Koster

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Posted: July 24, 2010, 11:03 am Quote

There are a lot of news references today in Google News Advanced Search about the possible acquisition by The Walt Disney Company of Playdom, an online game designer.  These are two such articles, but if you want to browse around for additional factual tidbits, feel free.  The articles below state an agreement could be reached within the next week.  

This may be Disney's way of understanding how to make that kind of online social culture work to their promotional and ad-partner advantage, understand the pitfalls in order to avoid those, get someone else to design, manage, and moderate them, before jumping into that end of the pool, etc.

One implication some online Disney fans might want to cross fingers for is the return of a Virtual Magic Kingdom-like social and gaming environment.   Disney had this kind of social-gaming online presence before (VMK opened to celebrate the 50th Anniversary of Disneyland and the founding of the theme parks division of Disney back in Summer 2005-Summer 2008 or so.  When WMK  left online there were howls of protest and the wailing and gnashing of teeth.  Fans can only hope that this news means VMK possibly could live again sometime in the future.

Quoting Bloomberg:

Disney Said to Discuss Buying Playdom, Maker of Games Played on Facebook
By Douglas MacMillan and Andy Fixmer - Jul 24, 2010

Walt Disney Co. is in talks to buy Playdom Inc., maker of video games played on the Facebook social-networking website, according to a person with knowledge of the negotiations.

An agreement may be reached as soon as the coming week, said the person, who sought anonymity because a deal hasn’t been reached. Playdom may be sold for more than $500 million, the Wall Street Journal reported yesterday. reported the talks earlier.

Playdom would extend Disney’s expansion in online and mobile games. This month, the company acquired Tapulous Inc., a developer of music-related games for Apple Inc.’s iPod and iPad. Disney, the world’s largest media company, is attracted to the growth of mobile games and mobile media, Steve Wadsworth, head of the Internet unit, said in a July 1 interview.

“Playdom is the biggest guy left that’s independent that’s not crazy expensive,” said Michael Pachter, a Los Angeles-based analyst with Wedbush Morgan Securities.

Jonathan Friedland, a spokeswoman for Burbank, California- based Disney, declined to comment.

Mountain View, California-based Playdom raised $33 million in June, from venture capital groups including Disney-backed Steamboat Ventures, which invests in digital media, consumer and technology companies. The funding brought the total raised by the company to $76 million.

Playdom announced a content partnership with Disney’s ESPN sports cable channel in May.

Disney rose 54 cents to $34.13 today in New York Stock Exchange composite trading. The shares have gained 5.8 percent this year.

Quoting online Wall Street Journal:

JULY 24, 2010
Disney in Talks to Buy Playdom

Walt Disney Co. is discussing a deal to acquire Playdom Inc. for more than $500 million, people familiar with the matter said, as the burgeoning category of games played on social networks heats up.

Disney is keen to use Playdom to develop a bigger presence in social games, in which players compete against friends for high scores and other achievements on social networks. The popularity of social games like Farmville, made by Playdom rival Zynga Inc., has skyrocketed by piggybacking onthe growth ofFacebook Inc., which makes it easy for players to rope members of their social circles into playing the games too.

People familiar with the matter say Disney plans to use Playdom, based in Mountain View, Calif., to incorporate more of its iconic brands and characters into social games. Disney already has a deal for Playdom to develop social games using Disney's ESPN brand and is already an investor in Playdom through the entertainment company's venture-capital fund, Steamboat Ventures. The Disney fund recently participated in a $33 million financing round, bringing to $76 million the total financing raised by the start-up, Playdom said at the time.
Disney has steadily increased its investments in the games market, including a recent deal to acquire Tapulous Inc., a maker of music games for the iPhone and other Apple devices.

The talks with Disney, based in Burbank, Calif., are another sign of the eagerness of established entertainment companies to tap into the growth of social games. Last year, game publisher Electronic Arts Inc. agreed to pay up to $408 million to acquire a social-games start-up, Playfish Ltd. The clear leader in social games, Zynga, is believed to have a value in the billions of dollars based on recent rounds of private financing and is considered to be a likely candidate for an initial public offering, according to people familiar with the matter.

News of talks between Disney and Playdom was reported earlier by TechCrunch.

Playdom currently ranks third among makers of social games on Facebook, with about 42 million active monthly users of its games, compared with 211 million for Zynga and 52 million for Electronic Arts, according to AppData, a firm that monitors applications on Facebook. Playdom's most popular games include Social City, which allows players to build and run their own virtual cities.

In a research report published last December by investment bank ThinkEquity, Playdom CEO John Pleasants said the company makes 90% of its money by selling virtual goods within its otherwise-free games, with another 10% coming from advertising. In its popular Mobsters 2 game on Facebook, for example, users can purchase virtual weapons, cars and explosives to help carry out vendettas.

Mr. Pleasants said the company generated north of $50 million last year and was profitable. At the end of last year, Playdom had 220 employees, tripling its head count in the fourth quarter of last year. Compared with traditional video games, Web-based social games tend to be cheaper to produce and easier to grow thanks to the viral nature of social networks.

—Ethan Smith contributed to this article.

End of quoted articles.
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CarolKoster Offline
Carol Koster

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Posted: July 31, 2010, 9:44 am Quote

Online news bottom lines that Disney is indeed buying Playdom, entering the social networking game business through the acquisition.  News is "confirmed".  Google News Advanced Search "Disney Playdom" and lots of references pop up confirming earlier reports.
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CarolKoster Offline
Carol Koster

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Joined: April 1992
Posted: May 28, 2011, 1:47 pm Quote

This article makes no mention of Virtual Magic Kingdom that many online Disney gaming fans loved and fought unsuccessfully to keep going a few years ago.


Disney's bet on games not yet paying off
The company's $563-million investment in game developer Playdom has racked up losses, frustrating analysts who have expected Disney to move faster to stop the red ink.

By Dawn C. Chmielewski and Alex Pham, Los Angeles Times
May 20, 2011

Walt Disney Co. wagered that its acquisition last summer of game developer Playdom Inc. would help bring Mickey, Snow White and other familiar characters to a new generation of fans who play games on social networks. The bet has yet to pay off.

Disney's $563-million investment was a key component in a broad restructuring of its interactive group intended to put the perennially money-losing division on the road to profitability. It signaled a strategic shift away from traditional console video games, to focus on emerging opportunities online and on mobile devices.

But, so far, Disney hasn't found the magic to fix what ails its Interactive Media Group, which includes Playdom, Disney's Web properties and its games business. Losses widened to $115 million in its most recent quarter ended April 2, compared with $55 million in the same period a year earlier. Wall Street analysts pounced on the performance, saying they had expected the company to be making swifter strides in stemming the tide of red ink. Disney executives acknowledged it's "a work in progress" and that they don't expect the games division to post a profit until 2013.

"The bigger question that Disney investors are focused on is whether the company has a rational strategy in interactive gaming that can produce solid returns over the next several years," said Richard Greenfield, media analyst for BTIG. He calculated that the Burbank entertainment giant has invested at least $1 billion in interactive acquisitions during the last four years — and racked up nearly as much in operating losses over that same time: $915 million.

Disney isn't the only big media company struggling to gain a foothold in the $50-billion global games market. Viacom Inc., News Corp., Warner Bros., DreamWorks, Universal Studios and others have alternated between pouring hundreds of millions of dollars into developing games internally and simply selling licenses to outside game publishers. Earlier this year, Viacom sold Rock Band video game developer Harmonix Music Systems — which it paid $175 million to acquire in 2006 — for virtually nothing in exchange for a big tax write-off and offloading its liabilities.

Executives at Disney Interactive Media Group, led by co-presidents John Pleasants and Jimmy Pitaro, declined to comment. However, in remarks made during last week's second-quarter earnings call, Disney Chief Executive Robert A. Iger said the company is seeking to capitalize on social gaming, suggesting it is still in its "infancy."

"The opportunity for growth on the social games side — at least at this point of our entry — is probably greater than it had been when we entered the space on the console side," Iger said.

Indeed, Playdom's recently released Gardens of Time has landed among the top 20 most popular social games with about 2.5 million daily users who play time-traveling detectives in search of hidden objects needed to solve a mystery. Such games are popular among adult women.

"In a hits-driven business, they've just scored a hit," said David Stewart, Playdom's former senior director of product, who has joined San Francisco start-up Yammer.

Nonetheless, analysts point to Disney's failed attempts over the years to capitalize on the long-held promise of interactive entertainment, first by investing heavily in console games, and more recently in online social games. The interactive division, which has not reported an operating profit since 2007, has been buffeted by a combination of brutal changes in the console market, Disney's inability to internally define its priorities for the business, and the company's late arrival to the cutthroat competitive social games market, according to analysts and others familiar with the situation, who declined to be identified because they had not been authorized to speak on the matter.

As losses mount, Disney is coming under increasing pressure by investors who are impatient for the company to develop a coherent strategy to turn around the troubled unit.

"We assumed the company would be making progress towards demonstrating profitability," wrote Dave Novosel, media and technology analyst for independent researcher Gimme Credit. "At this pace, Disney could lose well over $200 million this year … so investors will need to endure more pain."

Much of the pain stems from Disney's acquisition in August of Playdom, a Bay Area company that makes games such as "Sorority Life" and "Social City" for Facebook and other online networks.

Since the transaction closed, however, Playdom's audience has fallen precipitously amid an unplanned five-month hiatus in launching new products — time Disney executives said they took to elevate the quality of the games and bolster their technical capacity. In that fallow period, the number of monthly Playdom users slipped to 20.7 million in late March from 42.3 million in early October, according to, which measures usage of applications on Facebook.

Even though the social game arena is relatively new — barely in existence four years ago — it appears that a clear winner has already emerged. San Francisco's upstart Zynga Inc. boasts 248 million monthly players, dwarfing all others, including the No. 2 game developer, Electronic Arts Inc.'s Playfish, which has 33 million users, according to AppData.

"This space has started to mature," said Justin Smith, founder of Inside Network, the research firm that publishes AppData. "Things have gotten much more competitive over the past three years."

Playdom has issues beyond a dwindling audience. Last week, Disney paid a $3-million fine to settle charges that online virtual worlds once operated by Playdom violated federal rules designed to protect the safety and privacy of children on the Internet. Disney also paid an undisclosed sum last fall to settle a trade secret dispute with Zynga. Zynga alleged that Playdom recruited four former employees and encouraged them to steal trade secrets — including the "playbook" that contains the "secret sauce" of Zynga's successful games.

Even as the gap widens between Playdom and its dominant rival, the life cycle of social media games is getting shorter and shorter and the economics are growing more challenged. Facebook is implementing its own virtual currency as the payment mechanism on the social network — and as of July 1 will collect 30% of every transaction — a huge blow to the bottom line of game developers such as Playdom.

"I think Disney has to do a lot of work to have any chance of making back the money that they put into this," said media analyst Doug Creutz.

End of quoted news story.
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