Last week we reported the rumors that VC-backed Playfish, the social games startup which has had phenomenal growth, was in the process of being acquired by games giant Electronic Arts for $250 million. However, nothing was confirmed at the time, and despite several press reports to that effect none of the companies involved has made a sound. That’s odd, because normally if an acquisition has really happened the companies get a statement out quick to quash the gossip mongers.
The $250m figure was equally odd because Playfish had not looked like it wanted an early exit by any stretch and was known to be looking for a much bigger figure. CEO Kristian Segerstrale has always said he wanted to “kill EA”, for instance. The startup has also raised $21m in funding from Accel Partners and Index Ventures.
In fact, we’ve learned that Playfish is still in play, and in all likelihood EA leaked the $250 million figure as a negotiating tactic, as this is more or less what it wants it wants to pay. Our sources say that Playfish is holding out for another offer, somewhere between $350m at the low end and $500m at the top end, either from EA or another suitor. Independently, Inside Social Games has uncovered similar chatter.
There is a further twist to the tail. Another source tells us EA was supposedly looking at casual games site King.com. However, we understand Index Ventures has been trying to convince EA of the merits of Playfish instead. King has backing from Apax Partners and Index, but at $43m, much more than Playfish.
In other words, if Index is an investor in both, perhaps they feel they’ll get a better exit multiple from Playfish than from King?
In addition Accel is probably keen for the Playfish deal as well. Despite backing promising big win companies like Kayak, GameForge, Qliktech, Alfresco, Seatwave – it has not yet had an exit from its current European fund.
In which case I wonder what Apax feels about possibly missing out on King.com being acquired? I think we can guess.
It probably won’t turn a profit till 2083.
Guarantee they are turning a profit right now.
With the amount of media they buy, no chance.
Any amount of money paid to purchase Playfish would be too much. While I initially enjoyed playing a couple of their games on Facebook, they’ve become as buggy as Twitter used to be. The only difference is that Playfish doesn’t have a cute fail whale.
More than 80% of the time, the games won’t load for me. I’ve tried every fix on in the FAQ and their customer service is non-responsive. They just don’t care that I can’t play any of their games.
Good point, Playfish is worth nothing because they didn’t pay enough attention to your computer problems. Clearly it’s a front for the russian mafia.
Although the TechCrunch editors have started to pay attention to the social gaming space, it seems most of the users here have not (based on sparse comments on each Playfish/Zynga thread that isn’t about Mark Pincus being crazy).
If console and PC gaming is bigger than the movie industry that requires you to buy a $250-300 console and $60 games, what’s the potential for a globally accessible microtransaction model that supercharges its userbase by plugging into Facebook and other social feeds? Even bigger, I’d think?
Playfish is certainly profitable. I read somewhere their current revenue is around £75 Million/year. I don’t know what the profit margin is exactly, but the description I have heard is “very profitable”, so that probably makes it a pretty decent acquisition target.