We pointed out the incongruity between Disney and its 50 year old cutesy cartoon characters and social gaming specialist Playdom and predicted that the merger of the two, back in July, would come to grief. But even we couldn’t predict the pace of the downturn in social gaming and the rapid fall from grace of the $763 million Playdom.
Actually we should scratch that, Disney paid $563 million plus it could have paid a further $200 million on great performance, but given that this week it laid off half of all gaming staff, including Playdom people (it had a total of 700), that other $200 million doesn’t look like it is going to be paid.
The incongruity we spoke about is that Playdom courts casual gamers from places like Facebook, which is probably an age group that begins at 12 and is heavily skewed towards 20 year olds, while Disney characters perhaps begin their appeal at 6 or 7 and that appeal ends when kids suddenly become interested in Facebook. We felt that in buying Playdom, and buying it for a huge premium in the biggest ever social gaming deal to date, Disney was changing its business, and looking for a new age group to court.
Not that it hasn’t done this before. Disney of course owns ABC, the US national broadcaster which has very adult programming, and its ESPN franchise is for adult sports fans, but the noise around the Playdom deal was that there was synergy with the studio itself and its characters. Whether that meant the old generation of Disney cartoon characters or the modern generation of Marvel characters like the X-Men and Iron man, we weren’t sure. Most of the film franchises for the Marvel characters are with other studios anyway, Spiderman with Sony Pictures, Iron Man with Universal and X-Men with 20th Century Fox. But Disney paid $4 billion to buy Marvel Entertainment in mid-2009.
Regardless, the Playdom CEO John Pleasants, who took over as Executive Vice President of Disney Interactive Media, has now left and other departing executives signal that the business is failing or at best overstaffed. It’s not too big a surprise given that Playdom’s strategy was one of rapid acquisition and over the year prior to its own acquisition it has bought Hive, Metaplace, Acclaim, Merscom, Three Melons, a piece of MetroGames and Offbeat Creations, Trippert Labs and Green Patch. Not only must there have been plenty of extraneous people, no-one can have had time to think very much about the integration of so many businesses. At least a hiccup was expected and it may turn out that it is far worse than that.
Disney figures come out on February 8, and it’s likely that they will need to accompany either impairment details in the balance sheet or at least revised forecasts for the games segment, along with details of the financial provisions for these layoffs.
CNBC reported on the layoffs in the US, and multimedia newsletters have repeated and extended the story over the past two days. There were clues when ‘Pirates of the Caribbean: Armada of the Damned,’ was dropped in the Fall, despite almost being ready to go to market. Other games have been weak because they were targeted at the traditional consoles, such as the Wii, and ignored new opportunities like the App Stores at Apple and Android Market. We pointed out last week that gaming is in a transition phase, so expect more stories of this type.