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Disney in talks to buy social games company Playdom

July 24, 2010 |  3:29 pm

Walt Disney Co. is in discussions to buy game developer Playdom Inc. for as much as $750 million, according to three people familiar with the matter.

The Hollywood entertainment giant wants to get into social and mobile games to market its shows and characters.

Playdom has scheduled a board meeting next week to decide whether to accept the buyout offer, the people said. The two sides have been negotiating for more than two months.

"I'm pretty sure it's going to happen. The money is pretty big," said one person. But, he cautioned, there is still a chance the deal will fall apart.

Playdom is concerned about the amount of risk that Disney wants it to shoulder, the person said.

L.A. investment banker Michael Montgomery said Playdom offers Disney strong leadership, opportunity for growth and a toehold in a hot market that is shaking up the multibillion-dollar gaming industry.

The Mountain View, Calif., gaming company plays second fiddle to Zynga Game Network Inc. in the red-hot and increasingly crowded space of social games that are played on Facebook and elsewhere. These games have developed a significant following, generating revenue from advertising and virtual goods. Last year Electronic Arts Inc. bought Zynga rival Playfish for more than $300 million.

Zynga, led by Silicon Valley entrepreneur Marc Pincus, is the hottest start-up in Silicon Valley, on track to generate $835 million in revenue this year and contemplating an initial public offering. Internet giant Google Inc. is rumored to have invested in Zynga, with which it is exploring a partnership.

Disney is already an investor in Playdom through its venture capital fund, Steamboat Ventures, and recently participated in a $33-million financing round. Playdom, which has raised a total of $76 million, has itself has been on a buying spree: It's been snapping up game studios to compete with Zynga, which it trails in users and in revenue.

Disney recently bought Tapulous, which makes music-related games for Apple Inc.’s iPod and iPad. Its ESPN sports cable channel announced a deal with Playdom in May.

Technology blog TechCrunch first reported the acquisition talks, causing a stir in Silicon Valley. Playdom and Disney could not be reached for comment.

-- Jessica Guynn

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