News: PopCap Bought by EA, Earns $750 Million Bonus Points

PopCap Bought by EA, Earns $750 Million Bonus Points

Electronic Arts is the biggest game publisher in the world, and have been for years. And yet, their only successful internally developed games nowadays are the EA Sports mega-franchises like Madden. Most of their success has stemmed from their ability to buy other companies on their way up, squeeze the creativity out of them, and then sell them to someone else or just let them go. This week they made their largest acquisition ever when they purchased PopCap Games for $750 million upfront—as much as $1.3 billion counting multi-year performance incentives.

Can the company that made Plants vs. Zombies...

PopCap could have been considered the most successful indie game company in the world up until this decision. Founded in 2000 and based in Washington state, they have produced several of the most popular casual games of all time, including Bejeweled and Plants vs. Zombies. Unlike most of their competitors in the casual space, they have succeeded at getting people to pay for their games, and thus take in $100 million in revenue annually. They employ more than 400 people at several offices, and were reportedly considering an IPO for later this year before EA made them an offer they couldn't refuse.

EA also recently bought the social media company Ohai, and PopCap bought social game developer ZipZapPlay in April. This frenzy of consolidation between a large publisher, a casual game developer/portal, and two social media game companies seems to indicate that EA is making a concerted push towards dominance of the casual and social game spaces. These are new(ish) and lucrative markets where EA won't be burdened by their lackluster reputation among hardcore gamers, which could make it a perfect fit for them.

Play nice with the folks that makes Madden?

Stock analysts see some potential problems though. One has pointed out that EA should be focusing on burnishing their internal development rather than acquiring more companies, another that PopCap had mostly succeeded based on copying others' ideas, which limits their long term potential.

I see this working out well for both companies. EA can put their massive fiscal might behind promoting PopCap's well made (if not terribly inventive) games. PopCap in turn will give EA a well established gateway into a whole new market for them to control. This new combined entity could come to rule casual games or go the way of AOL Time Warner. The fickle whims of casual gamers will determine the outcome.

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Didn't EA recently buy Playfish for $400 milliion? I wonder how that has worked out for them. That's a billion invested in casual gaming (Playfish+Popcap). For that money they could have made a casual brand from scratch. MS did it with Kinect, and it only cost them $500m!

I tend to think this is more about buying out the (future) competition than acquiring the talents of the PopCap staff. Also PopCap is more of a marketing company than a game developer, they had complete market saturation with games that were fun but not really anything new or unique.

Yeah, at first I didn't quite get why they bought them. Popcap games are in a weird area where they are not huge games that the average gamer expects, but they are also not as casual as they could be since they require download and installation. The real casual games are the app games or the browser based games (facebook games, etc..). Since a lot of the money is made in casual games from digital items, I didn't think popcap was the right buy because they deal mostly with full single player games and little to no digital item sales.

But EA released this powerpoint highlighting the positives of the purchase, here it is in pdf form:
Looking at slides 9 and 10 it was surprising to see EA and Popcap dominating iOS sales and that popcap is a top 5 facebook game publisher. Maybe not such a bad deal but popcap can't sit on their success. they have to continually come up with new hits because they can only milk their current franchises to a certain extent.

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