Riffing on the Popcap acquisition rumor

Yesterday Techcrunch broke this story:

Popcap to be acquired for $1+B, which started a rumor mill going. Who could it be? Story points to potential buyers as: Zynga (discounts them as not having stomach for the price & multiple, EA, DeNA, Tencent.

I tweeted about it saying I thought EA just as a gut call. Later though, I started wondering why no one had asked if it could be Google, or even more credibly, Microsoft.

Techcrunch added a story about rumors that it was likely EA.

And then today, VentureBeat had this story pointing to EA (nothing new, just citing the techcrunch article), but being skeptical about it and pointing at other potential buyers: Zynga, DeNA, Media companies like Fox, Activision/Blizzard, and throwing water on any "stingy" chinese companies.

(WTF, why is VentureBeat also not mentioning Microsoft? Does everyone assume they are broke after buying Skype?)

The interesting thing about these pieces is that they are looking at the market rather naively. Techcrunch refers to Popcap as a startup while at the same time mentioning that they've been in business since 2000. VentureBeat mentions their social games but barely mentions mobile let alone all the other platforms they are on.

Anyhow, I believe the EA rumor is most likely accurate (though I still have a side bet on a surprise that it's Microsoft, but I'm crazy like that).

Just for grins and giggles though, here's some alternate takes on the headlines made possible by this acquisition, which I think make it more apparent that this isn't such a bad buy. Allow me my editorial liberties:

If it's EA:

• #1 iPhone games publisher buys #2(3?) iPhone games publisher to further cement leadership
• #2 Facebook games publisher buys #3 facebook game publisher in bid to take lead position away from #1 FB games publisher
• Leading western games publisher buys another entry ticket in race for China gaming market (Popcap has social games/portal play in China, a shanghai studio doing original IP, etc)
• EA buys leading casual games dev, "Popcap is the Valve of casual games" says Someone.

If it were to be Microsoft

• MS buys publisher of popular iPhone, iPad games in bid to secure exclusive content/features for MS phones/tablets
• MS buys publisher of social games in bid to catch up in that race
• See same two above points about traction in Asia and Popcap's production abilities, quality

In any case, my point is that there's a lot more value to Popcap than just "Plants vs Zombies on Facebook or iPad". They are a force in the mainstream games market with recognizable IP, real revenue, good distribution, top notch development talent, international portfolio of games and distribution, etc. You can play their games on almost every platform under the sun - even play bejewelled on airplane headrests!)

$1B is a lot of money, but Popcap is an awesome crew, and likely worth it. I sure hope whoever it is doesn't screw the magic formula.

Extra Credit: An open letter to EA marketing

A bit old, but right on the money. EA really should fire whoever greenlights all this shit.

Playfish's Smart Move in the Facebook Gold Rush

This is a good piece on why Playfish sold itself to EA.

New markets (for game makers or anyone else), the successful ones anyway, tend to turn into gold rushes. Someone takes a chance, stakes a claim, hits gold, and then in come the hordes of followers that heard about the guy that got rich with only a mule, a pan, and the clothes on his back.

In recent years we saw a casual games gold rush, a console downloadable (lead by XBLA) gold rush, an iPhone gold rush, and now it's "Wagons, Ho!" for the Facebook gold rush.

With each of them, the market achieves an equilibrium over time as competition increases faster than consumer spending does, and eventually you get to the same place as the rest of the games industry: A hit driven business in which a minority are profitable, a very small minority are extremely profitable, and the majority go bust trying to get to the top end of the curve.

What *differs* though, in how these markets evolve, is the tactics taken as the marketplace crowds. The strategies available are the same across all of these, but which is the right one, tactically, varies by platform.

They are:

1. Lowball on price: The PC casual download biz eventually went this way, and many are trying this tactic on the iPhone, but I believe it's a fools game, and some of the others below will turn out to be the real winners for that platform.
2. Out-Innovate: This one is easy. Go invent an awesome game mechanic/biz model/etc, that no one else has thought of, and that everyone loves and finds addictive. Oh, and make it hard to imitate. Easier said than done. The problem with this one is that there's no clear path.
3. Spend your way out of the clouds: Spend on development, spend on marketing, etc. Build a better looking title, get pretty screenshots, and then go pound the pavement to get more ink/photons than the other guy. (We saw many XBLA titles go this way as budgets went from $100k to $1M)
4. Out-Brand: This is another flavor of spending your way out of the clouds. Specifically, license IP/Brands, from games or elsewhere, can help your title stand out in a crowded space. This works especially well with a less scrutinous audience (doesn't necessarily mean hardcore, could mean just more price or time sensitive).

The interesting thing about the Playfish acquisition is that they pretty clearly are claiming that #4 is going to be the strategy of choice for Facebook, and I have to believe they are right.

Dropping price doesn't work because the FB games are mostly free/freemium. Innovation is risky everywhere (better to be 'fast follower'), and increasing the game budget... well that will happen, but it's not clear where it ends, or if FB games are ready for Unreal engine license.

So that leaves out-branding, and as the article points out, the EA acquisition gives Playfish the financial resources with which they can go do this, plus a great set of connections at EA with their own IP and licenses from other EA partners.

[note, of course you'll see ALL the above strategies employed in each of these markets, but there will be majority gravitation toward one or two at any given time]

EA Buys Playfish

From Techcrunch today:

Electronic Arts closed it’s anticipated acquisition of social gaming startup Playfish for $275 million in cash. An additional $25 million in stock will be set aside for retaining the top talent at the startup, and another $100 million in earnouts are part of the deal as well if the business hits certain milestones. So the total value of the deal could amount to as much as $400 million when all is said and done.

Wow. $400M is a lot of money. Social games are clearly the hot ticket right now, so it makes sense for EA to jump in, but one has to wonder if that's money well spent.

The stock & earnout will retain the people for some time, which is I'm sure a big part of why they acquired the company.

Still, the titles are cheaper to develop, and there doesn't (as of yet) seem to be the same IP loyalty that there is in hardcore games (are there Farmville fanboys out there dissing Mafia Wars?).

Time will tell if it was a good call, but it certain does seem rash, especially with all of the kerfuffle around questionable sources of social game revenues. (Interesting meta-level piece on the same issue here)

Hecker gets let go, goes Indie

Kotaku and Gamasutra picked up on the news Chris broke that EA laid him off. He's now going to work on an indie game called 'SpyParty', a prototype of which was shown at the 2009 GDC EGW. I'm pretty sure this version was born out of an even earlier prototype done as part of the 2005 Indie Game Jam 3 and shown at the 2005 GDC EGW, in a barrage of 'people interacting' jam prototypes.

Anyhow, SpyParty's got a fantastic core idea, and Chris is f***ing smart and driven, so I'm excited to see the game when it eventually ships.

Putting the toothpaste back in the tube

GamePolitics has this post about how EA sent reviewers a press kit for The Godfather II. The press kit included a set of brass knuckles.

Kind of a nifty piece of schwag, but also an illegal one. As GP points, out brass knuckles are illegal in a number of states, and so EA's trying to put the toothpaste back in the tube but mailing out return mailers to get the contraband weapons back.

If there's a lesson here, its that EA's delicately worded efforts to get the items back are generating more news than if they were straight-up about it. The comments to the press are along the lines of:

"I hope you're enjoying our Godfather II press kit, including the
novelty brass knuckles. To help you take proper care to dispose of the item,
we're sending you a pre-paid shipping package"

And then replying "no comment" to any further questions about it.

'Proper care to dispose of the item'? Please.

What they really should have said was "oops, we fucked up. We thought this would be a good novelty item in keeping with the game's theme, but didn't realize these were illegal in some states. We're making best efforts to make sure we get these all back, and would really appreciate it if our friends in the press could help us out here. We'll send you an even more awesome, but completely legal, piece of schwag afterward for your efforts."

The first wave of bad news

Lots of axe-weilding around the games industry, and in the tech industry in general. A few recent examples:

EA lays off 6% of workforce

THQ plans reduction of 250 heads

Brash hit by layoffs, cancels titles (not surprised, given their initial titles' poor reviews, which seem to stem from an attitude of "hollywood license + low quality game = ok", as others pointed out when they originally announced. Guess you can burn through $400M pretty quickly these days. Fools and their money, etc.)

Wild Tangent closes internal studio, cuts staff

Avalanche lays off 77

Google will give you plenty more examples. 

Unfortunately, i think this is just the battening down of the hatches. The real trouble comes if people tighten their belts a notch or two this Christmas, which I expect will absolutely happen. After that we'll likely see another wave of layoffs.

So much for 'recession proof', which was crazy to think anyway.

Shitty times. And I think it's going to get far worse. The layoffs in other industries have a ripple effect on people's spending; budget clamp downs in all industries are going to cut advertising budgets, which are a big part of the casual games business, etc.

Spore DRM-haters create anti-DRM Spore creatures within Spore

There's a been a bunch of people griping about the SecureROM DRM in Spore. Some of those people have now created creatures within Spore to voice their opinions. Crafty, given that the game is built around the sharing of player-generated content.

At right, the VeROFLaptor, "hails from the planet EADisappointsMe and is known to spray excessive DRM and overhype on it's attackers".

via GameCulture.

Hey EA! Your innards are showing.

I was pointed to this article in adweek about how EA Sports is launching a new "Freestyle" brand aimed at delivering more casual sports fare, for the Wii as well as other platforms.

While it makes sense to target that as a market, does it make sense for a new brand? Couldn't EA Sports Freestyle titles compete equally well under the EA Casual heading?

Perhaps it does, but I'd wager that there was also some internal politicking at work, and that what we're seeing is the creation of a casual brand that doesn't have to reside in Kathy Vrabeck's EA Casual shop. If they are going to create answers to Wii Sports, etc, then will the expertise really come from the Madden team or the Casual team or from Blueprint?

Anyhow, I could be off base, but the announcement smelled a little of office politics to me.

"Lawyers" for 63 points!

Well, they finally did it, Scrabulous is down. The following message gives a hint:

"Scrabulous is disabled for US and Canadian users until further notice. If you would like to stay informed about developments in this matter, please click here."

US & Canada is of course the territory covered by Hasbro's copyright on the Scrabble game. EA licensed that property and launched Scrabble for Facebook earlier this month. My guess is that someone had a "pull it down by end of July, please" notice and well, it's the end of the month.

LATimes has more detail here.

Mattel, who has Scrabble rights for rest of world, is suing the Scrabulous developers in India (where they hail from) and has launched their own game for folks in their territories.

They will of course win, and we'll be stuck with two versions of scrabble for different regions, and an inability to play with friends overseas.

Hasbro, Mattel and EA win. RJ Software loses. However, there are other casualties. The end user loses, and Facebook loses. However small a stain on their service this might be, it's still a loss: A social network app that bifurcates the members of the network. It's unfortunate there couldn't be a more win-for-all solution that came out of this.

Note to IP holders: My friendships matter, your boundaries don't.

I've blogged plenty about the ongoing Scrabulous debacle (e.g. here, here, and here), but have to comment on the latest.

RealNetworks (who hold the PC rights to Scrabble for outside US & Canada) have released Scrabble for Facebook, but only for users outside US & Canada).

Let's ignore for a second that Scrabulous is still available on Facebook, and has the momentum of being the incumbent.

There's a really good example here of how the IP issue is going to poison the property's chance of success.

There have already been examples of online games where players were unhappy about being unable to play on the same overseas servers as friends. This however, is much worse. Here we are talking about a social network and applications that are looking to complement (and leverage) existing connections between people. Connections that previously haven't had to worry about distinctions like what country they may reside in.

If EA (the US rights-holder) ships Scrabble for US & Canada Facebook users, and Hasbro manages to shut down Scrabulous, users will be the loser here, having to figure out with whom they can play, out of their friends list.

Hasbro has the opportunity here to offer a superior offering (see my last post on the subject) to the incumbent, and possibly acquire their user-base in the process. Instead, they'll have partners offer two crippled versions because they did their licensing with an antiquated view of the world.

[Update: I was reminded that the rift goes beyond the digital world, as Hasbro has rights in the US, and Mattel in rest of world. Still the point still holds, their IP rights are going to restrict adoption and push users toward another game entirely.]

Ugh. Just seems so broken.

Busines Model Culture Clash

Kotaku has a post up about the rumored addition of a item-sales/microtransaction model being added to Battlefield: Bad Company, and it's going over about as well as a fart in a space suit.

The rumor is based on the beta test of B:BC displaying some weapons that are locked and labelled as 'available for purchase on Xbox Live Marketplace'. It's not going over well because the Kotakians beleive this is going to lead to people with oodles of spare spending money thrashing the lowly struggling gamer.

The impetus to do this is clear. EA's been talking (as everyone else has) about the popularity of this business model in asia, and are dipping several of their many toes in the water to see if it works over here. However, what is an accepted business model in Asia may not go over so well with traditional core gamer audiences here.

This won't be the last backlash we'll see, and EA will almost certainly botch a few attempts before getting it right. However, they'll likely get some right, and that just means more choice for consumers in the long run. More paths to the cash register is always a good thing in the end.

A precendant:

The B:BC example, and the Kotaku post's jab about 'paying for ammo' reminded me of a precendent that has already been set in the real world: Paintball.

When I used to go semi-regularly with the crew at Matrox (how long ago was that? Yeesh), we set house rules that limited the type of weapons so that everyone was on equal footing, but also allowed for flexibility on ammo. Competing in a round with only 100 rounds, when others might opt for up to 400, became a bit of a personal challenge within the multiplayer game.

On the other hand, I have a buddy that went with a bunch of stockbrokers on a regular basis and they were full-on, buy what you want, so some guys had stock guns, others full automatic, some guys had paint grenades, etc. And for them, that was OK.

Taking this back to B:BC, sounds like EA just has to allow for limiting some matches to 'stock items only', etc.

The "We See Farther" ad

A while back, I'd posted that I was looking for a high(er) res image scan of the famous We See Farther ad from EA from 25 years back.

Found!

If you can resist the temptation to do the standard "Now EA is The Man"-bashing, just read it and admit that it's so fucking ahead of its time. Amazingly visionary. Moving, really.

EA needs to fire its Euro marketeers

At least those responsible for the campaign featuring topless models to promote Need for Speed.

They should be fired not because they didn't 'go through the proper approval process', but rather because they are lazy, uncreative, or more likely both.

We. Can. Do. Better.

(BTW, I almost typo'd the name of the game above to 'Need for Seed'. PAGING DR FREUD!)

On EA's numbers...

A number of people have linked to Gamasutra's look at EA's quarterly results. The eye-catching factoids causing the linkage are (1) the significance of GameStop as their largest retail customer, and (2) that the Xbox360 SKUs were responsible for the lion's share of their revenue (218M, or roughly half of their revenue, the closest other platform being the PS2 at 73M).

It's certainly good information to hear for Microsoft, but it still leaves questions unanswered for me. I'd be very curious to know what the same set of numbers looks like in terms of margin per platform. My guess would be that the DS would one of the top slots on the list. Also, I'm curious if this is indicative of a long-term trend, or if it was offset this particular quarter by any big software releases.

Rockin' Robin

...tweet, tweet.

Robin's got a rockin' review of EA's Rock Band with a bunch of shots of the character creation system. I hadn't heard much about that side of teh game, with most of the early write-ups focusing on either the song list, the peripheral pedantry, or the competition with Rock Band.

She really does make it sound fantastic. Now that I'm hitting my ceiling on GH-III (I aspire to 5-star medium, but alas, that's my limit), this may have to be the next purchase.

The Internets are on FIRE!

Man, there's a lot of stuff going on, and I don't have time to blog it all with the detail I'd like.



Here's a smattering of this week's interesting tidbits, and a quick thought or two on each. More when there's time... work's got me pretty busy right now.

• EA gets caught with their hand in the cookie jar, or rather in the Wikipedia, for makin' a little revisionist history. Jeez guys, I get why some clueless government lackey does this, but a tech company? Don't know know you can't put the toothpaste back in the tube? Also, I just don't get why people think their company's wikipedia entry is what gives tehm their rep. Your company gets it's rep from it's behavior, and thus ya just screwed the pooch a little more, didn't ya?


• Clint Hocking takes PC Gamer's Vederman opening salvo on Far Cry 2 ("will it be art? Will it have the power to affect you emotionally on anything other than a surface level? Probably not.") as a personal throwing down of the gauntlet. One thing about that Clint, he does love his wicked problems (see also here). Go Clint Go! We're rooting for ya!


• Bioshock is getting crazy good reviews. While I'm glad for the developer and for what it's doing for our platforms, I more depressed about it overall, and have a lengthier post I'd like to write about "local maxima and the game industry", but that's for another day.


• Not only is Facebook going to eat the social networking universe, it's also turning out to be a pretty compelling game platform as well - especially for play-by-mail type scenarios. No wonder people say it's a black hole.


• Related to the above, I think it's only a matter of time before Scrabulous (I've been playing the facebook app version) gets sued and shut down. Oh well, enjoy while you can!


• Parks Associates reports that gaming is the most popular activity on the web - more than blogging/reading/socialnetworking/youtubin', etc, etc. (And no, this doesn't contradit my previous post - the games will just move onto facebook - it's the platform, silly).


• EA says user created content is the next big thing in games. I agree. This is another subject I need to do a longer post on, but I have come around 100% on the UGC thing. I will say a couple quick things: (1) I don't think it's going to happen in the way EA anticipates - or likes, (2) there's going to be a TON of interesting discussion on user and creator IP rights, ownership, copyright protection, etc, in the coming years (like I said at the conclusion of my MIGS talk last year - Customer Ownership is going to come by granting customers ownership. Also relevant is this 2004(!) Clay Shirky quote: "So forget about blogs and bloggers and blogging and focus on this -- the cost and difficulty of publishing absolutely anything, by anyone, into a global medium, just got a whole lot lower. And the effects of that increased pool of potential producers is going to be vast."

That's all for now. More once I catch my breath.

Casual Connect 2007: Initial Thoughts

Today was day one of the "Casual Connect" conference. Day 2, officially, I guess, since they held a kind of intro/primer track on Monday.

We also held our Microsoft Casual Games partner day on Monday, an invite-only event for developer partners, and that's one of the reasons I haven't been posting much, as I was working on a bunch of the presentations for that event, including one that I gave. They'll be posted publicly at some point in the near future, and I'll post a link at that time.

The energy at Casual Connect is pretty palpable. Interesting mix of perceptions. Existing player both enjoying the 'vindication' of having been there first, but also seeming a little put off by all these people coming to "our show" (sound familiar, GDC old timers?), and perhaps a little nervous tone to some of their voices about all the big players showing up?

And big players there were. Of course Microsoft is there, but so's Google, and Viacom, and lots of analysts and VCs. Suits! At a casual games conference! Did they not get the memo? :-)

I'm going to have to blog some lengthy posts about impressions of the show and some individual sessions later this week. In the meantime, I'll leave you with two points I think are interesting:

• Among the people at the show, instead of the usual confusion about "what does 'casual' really mean?", there is a lot more agreement, but its falling into several very distinct camps: Casual in the web-or-downloadable-like-you'd-get-from-Popcap sense; Broad-appeal, mostly-retail console titles like Buzz or Big Brain Academy, and the casual-mmo-is-da-bomb-WoW-better-watchout crowd.
• A lot of conversations about all the new casual divisions at big publishers like Ubi, EA, etc. Personally, I htink this is going to be one of the more entertaining spaces to watch. Not because I think the best games will come from there (they might, they might not), but because I think it's going to be *really* interesting to see whether companies used to the process-heavy, gauntlet-running processes used to prudently conceive/greenlight/produce/market/sell $20M games are going to be able to *internally* adapt to the nimble nature of the casual market. I think it's going to be a painful adaptation for many, I beleive.

Another observation: If you hear someone say they beleive the future is in "MySpace + Facebook + MapleStory + YouTube + HabboHotel", you have just heard someone that has no frikkin clue what they are looking for, apart from something that will magically be worth a billion dollars in two years. Just walk away. If they are a VC, feel free to take their money first, by all means :-)

Bizzy

As you may have guessed, I've been fairly busy past few weeks, thus the lack of activity on the blog. Well, ok, slight stretching of the truth there, as I've been fairly busy but have also logged a lot of guitar hero action :-). Priorities and all that.

Last weekend I got down to Portland to see some friends and former co-workers from Intel. A couple of them are involved in the "larabee" project that just got announced (vaguely) at IDF. Got to have some interesting conversations about how life in The Empire differs from life with The Borg. (One of those former co-workers was having his side-project shown in a local fashion show the evening we were leaving. Not exactly what you expect for an Intel engineer, no?)

This past week I got down to San Francisco for one night. Mostly work and little social, but did manage to hook up with Robin for crepes and some interesting discussion comparing life at two different big games industry companies.

Hoping life gets back to normal a bit so I can post a little more frequently. Well, that and I'm almost done the all-songs-on-medium-at-five-stars achievment.

In Defense of Chris Hecker

Just got back from GDC last night. A day has passed and I am still *spent*. Didn't help to get back to the airport to find my car battery dead either. *sigh*. A half-hour and a pair of jumper cables later and I was on my way home.

I plan on doing a pretty lengthy post about GDC, sessions, impressions, etc, but I wanted to first post my thoughts on the Chris Hecker, Wii-rant debacle.

So, for those coming up to speed, here's the short version:

GDC has had a 'rant' session three years running (summary of 2005, 2006, 2007 ). In one of the rants from this year's session, Chris Hecker (who works for EA/Maxis) gave a rant about the Nintendo Wii in which he called it a 'piece of sh**', also claiming that Nintendo doesn't care about games as art. The short version of the fallout is that the game bloggers all had a simultaneous blogo-gasm over the provided provocative headline, the Nintendo fanboys decended upon the internet with torches and pitchforks, and I'd imagine that EA's PR depart told them to get in line and wait till they were done getting medievel on his heiney. Hecker issued an apology the next day, but the torches and pitchforks continue to flame/poke on the web, and I'd imagine there are many calling for his head on a pike around the EA PR office. Perhaps they'll end up getting it.

With all the noise on the subject, I'm not sure my two cents is worth even that, but I'm going to give my opinion on the subject for those who care.

First off, I think it's clear he made a huge mistake, not knowing the weight and impact his statement would have, and more importantly, how it would be associated with his role at EA. Chris has spent the past (10? more?) years working as an indie. He's well known (more on this later), but it's different when the press can say "Spore Developer says...". Now, while I think he made a mistake not thinking about impact, I *agree* with what he said - at least if taken in the context of the talk as well as the rant session.

Chris' talk and it's intent have to be taken with the Rant session's setting in mind. People over state for purposes of firing up the room and to bring issues to the surface in hopes that people will consider those issues, discuss them, and perhaps do something about them.

My own read on Chris' intent with his talk was as follows:

• That while people have raved about their innovative controller and the more risk-taking games they have brought to market, this should not give them a 'get out of jail free card' on the fact that they have delivered an underpowered machine.
• That while it is certainly possible to deliver works of art in a minimalist fashion, artists shouldn't be REQUIRED to do so. (Just because it's possible to render fantastic art using only a piece of charcoal, that doesn't mean artists can't also accomplish a more varied spectrum of work using color, if you'll pardon the pun). This is as valid an argument as that of the people saying that "high def doesn't mean better games". Amen. [Worth noting that Hecker's rant last year was anti-Sony and anti-MS, chastising the two platforms for being graphics-heavy and general-computation-light]
• The other part of his talk was chastising Nintendo's focus on lighter-weight fare and on 'fun' as being detrimental to the industry's efforts on getting games taken seriously as art. While I agree less with this one, I do think it was valuable to state, if for no other reason to get people having the conversation.

Since the talk, Chris has taken a lot of heat, and a lot of people have said some not-so-nice things about him. He's got thick skin, but it's got to be tough to have that many people coming down on you.

The Nintendo fanboys and others that are responsible for coming down on him like that should at the very least put this one rant in perspective with the rest of Chris' work. He won the IGDA community contribution award last year, and a ton of people said fantastic things about him. I still beleive those things are true. I respect Chris a great deal and would ask that those that are reacting to this one rant try to look past it and at the bigger picture.