On his post-earnings conference call with investors on Thursday, Bwin.party co-CEO Norbert Teufelberger confessed that he’d “underestimated” the appeal of the social gaming sector. Teufelberger said he “never believed it was something that’s going to materialize,” but Bwin.party had since changed its tune. Teufelberger claimed the company had looked at over two dozen potential social gaming product acquisitions, but found “valuations were not what we wanted to pay.” While International Game Technology (IGT) thought it proper to acquire Double Down Interactive for $500m in January, Teufelberger found it “an inferior product and software.” Instead, Bwin.party is constructing “a dedicated business unit distinct from our real-money operations” that will “use our own content which is hard to replicate for people in the social space.”
Bwin.party is just the latest company to recognize the coming tsunami that is social gaming. Frank Gibeau, president of console game developer Electronic Arts, calls social gaming’s move towards real money gambling “a blue ocean opportunity. So yeah, we’re going fishing.” Bloomberg claims at least one gambling company has discussed a joint venture with EA’s competitor Activision. IGT CEO Patti Hart said her outfit had held discussions with Activision, as well as Zynga and others “to bring the two separate universes together.”
But it ain’t all gravy; Seattle-based social game developer GameHouse considered real-money play, but VP Ken Murphy claimed dealing with the regulatory and technological hurdles would be too expensive for small firms like his. Gambling industry consultant John Acres says some of these social game firms haven’t yet grasped that financial costs are just the start of the headaches that real money play can produce. These companies are “going to find their creativity hitting a brick wall. Regulation does not like creativity.”
Zynga has long been accused of being creatively bankrupt, but financially, Zynga’s top execs are about to cash in big time. On Wednesday, CEO Mark Pincus announced that shareholders would be putting 43m more Zynga shares on the market at a price of $12/share ($2 above December’s IPO price). The total haul will be worth $516m, with Pincus’ personal offering of 16.5m shares worth $198m. The sale is designed to offset the even larger flood of shares that’s expected to hit the market in three more months time, when the post-IPO ‘lock-up’ period expires and early investors are free to move their shares at will.
The extra bucks might even help Zynga pay the salary of the new Zynga Poker girls. On March 26, Zynga launched the Zynga Poker Girls Challenge, a March Madness bracket-style competition to pick four lovely ladies to represent each suit in a deck of cards. That’s right – Zynga’s building a bevy of buxom booth babes. Guess they really are a proper online gambling company after all.
