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)

Playfish CEO misses the point of FB Connect

This caught my eye (via Alice): 'Playfish CEO unsure of Facebook Connect'.

Speaking in a panel at the Develop Conference 2009, Playfish CEO Kristian Segerstrale as revealed he is yet to be convinced by the prospect of the Xbox 360's forthcoming social networking service, Facebook Connect.

"I'm not too sure about social networking and Facebook integration on the Xbox 360, because not everyone has one, [snip] Social Networks do open up games to a far wider audience, but it has to be just a click away, and you don't want to have to buy a 360 just to get at it."

Hmm... has he even USED a 360?

One of the more groundbreaking elements of the 360 was that it shipped with a social network, Xbox Live. FB Connect is about building bridges between customers existing social networks, not starting a new one.