Contact: Brian Satterfield
In an expensive nod to the ever-increasing importance of online social media and mobile gaming, Electronic Arts has reached deep into its pockets to purchase Seattle-based PopCap Games for $750m. The transaction, which could end up costing EA as much as $1.3bn if the full earnout is hit, stands out as not only the priciest acquisition in EA’s history, but also the largest-ever deal in the online videogame sector.
This isn’t the first time that EA, best known for its console titles, has had to pay big to bring its gaming portfolio up to date. In 2005, the company entered the mobile sector with the $680m acquisition of Jamdat Mobile, then took out social gaming vendor Playfish for $300m in late 2009. However, the diversification has been slow. Sales of console-based games still accounted for 70% of EA’s total revenue in the just completed fiscal year. Overall revenue at the company was flat and EA guided for only slight growth in the current fiscal year.
In contrast, sales at social gaming upstart Zynga more than quadrupled last year. It’s all but certain that when Zynga, which filed its IPO paperwork earlier this month, hits the market, it will be valued higher than EA’s current market cap of just less than $8bn.
With the acquisition of PopCap games, EA now boasts six of 2010’s top 10 revenue-grossing iOS games and roughly 10 million daily average players on Facebook. But EA still has a long way to go if it hopes to grab a larger slice of Zynga’s daily average user base on Facebook, which currently numbers about 53 million.