Zynga fires 314 people but buys NaturalMotion for $527 million

Zynga’s last 2 years have been riddled with missteps: underperforming games, studio shutdowns, and failed mobile attempts. In a couple of years, it went from being the social games king to an overcrowded company, struggling to find its place in a world now ruled by tablets and smartphones. In that scenario, on July 1, 2013, Zynga founder Mark Pincus handed his CEO job to Don Mattrick, responsible for the Xbox label at Microsoft.

Don Mattrick (CEO) and Mark Pincus (Founder)

Don Mattrick (CEO) and Mark Pincus (Founder)

Yesterday, in the strongest move since he replaced Pincus, CEO Don Mattrick and COO Clive Downie (also a new manager) moved up their investor call planned for February 6 to share some news.

As expected, 2013 was a rough year for the company, with a net loss of $37 million and lots of players. It was better than the previous year, though, which had resulted in a  $209 million loss. However, the notheworthy announcement isn’t so much the company’s expected weak numbers, but the news that came with that:

  • As part of the plan to reorganize, reduce costs and save between $33 and $35 million, Zynga is laying off 314 people (15% of its workforce).
  • At the same time, in order to finally compensate its late switch to mobile, Zynga is acquiring Oxford based NaturalMotion for $527 million. The English company is well known for 2 achievements: the amazing simulation engine behind games like Grand Theft Auto V, and their mobile hits CSR Racing (created by Boss Alien and later acquired by NaturalMotion) and Clumsy Ninja.
NaturalMotion's CSR Racing (2012)

NaturalMotion’s CSR Racing (2012)

75 percent of all new games in development are mobile-first. For the first time in our company’s history, we expect mobile bookings to surpass web bookings.

Zynga is betting heavily on mobile gaming to make 2014 a turning point, and the “market” seems to trust it: following this announcement, the company’s stock went up around 20% (even if it’s projecting a $50 million loss for the first quarter of 2014).

There are a lot of questions regarding see how Zynga and NaturalMotion will work together. Will Zynga jump to less-known genres? Will this affect AAA games that are used to license NaturalMotion’s technology? Will they produce games hand to hand, or each one will take care of different areas (monetization, gameplay, etc.)? I’m eager to see their approach to the current state of the industry.

You can find a Gamasutra analysis here, and Don Mattrick’s thoughts here.

Nintendo president cuts his pay in half… and drops 2 bombs

"Hi. We're on Mr. Iwata's list"

“Hi. We’re on Mr. Iwata’s list”

These have been really busy days for Nintendo. After forecasting a surprise $240 million loss for the current fiscal year, and among different kind of rumors, Nintendo president Satoru Iwata spoke yesterday at an investors meeting in Tokyo and dropped some unexpected news. Since I can’t speak or read Japanese (and since the official Nintendo translation doesn’t include everything), I’ve spent some time researching different outlets and in order to bring you a proper summary.

As part of Nintendo’s new strategy, Iwata is reducing his salary in half. Other seven executives (including Shigeru Miyamoto) will get pay cuts between 20% and 30%. The salary reduction starts in February and will last until June, when the situation will be reviewed based on the company’s progress.

“We still have THIS money left…”

This move may be unusual for the rest of the industry but not for Nintendo: over 2 years ago, Iwata had made a similar decision following disappointing 3DS sales. Those also were rough times for the company, making its former president Hiroshi Yamauchi lose $500 million in one day.

In the long run, the handheld business proved to be healthy for Nintendo. The Wii U, however, seems to be more problematic, having to compete against its classic opponents (Sony, Microsoft) and the emergence of mobile gaming.

Regarding the company’s next steps, Iwata used the same investors meeting to drop 2 bombs:

  • There are no plans to launch Nintendo games for non-Nintendo platforms, BUT…

Therefore, we would like to, instead of directly expanding our business on smart devices, focus on achieving greater ties with our consumers on smart devices and expanding our platform business. (…) Accordingly, I have not given any restrictions to the development team, even not ruling out the possibility of making games or using our game characters. However, if you report that we will release Mario on smart devices, it would be a completely misleading statement. It is our intention to release some application on smart devices this year that is capable of attracting consumer attention and communicating the value of our entertainment offerings, so I would encourage you to see how our approach yields results.

  • Iwata’s next 10 years in the company will focus on “quality of life through entertainment”. In that line, Nintendo’s next platform will be a non-wearable device to monitor the user’s health, and will be launched during the fiscal year ending March 2016.

Nintendo’s leapfrog strategy

You can read the official translation of the presentation here. It’s full of interesting quotes.

Sources: Eurogamer.net, Polygon, The Wall Street Journal, Kotaku

Nintendo openly admits the need for a new strategy

“Stay close, Mario!”

Nintendo president Satoru Iwata gave a press conference yesterday in Osaka (Japan) to admit they need a new business model. What provoked that change was the forecast of a surprise 25 billion-yen ($240 million) annual loss, instead of the original projected profit of 55 billion yen ($538 million) for the year ending March. That $778 million difference between the old and new forecasts forced Nintendo’s management to reflect on their missteps a little.

The way people use their time, their lifestyles, who they are have changed. If we stay in one place, we will become outdated.

The key element for Nintendo’s new strategy seems to revolve around mobile gaming outside its stellar 3DS console. In other words, the expansion of smartphones. Historically, they have rejected the idea of releasing mobile versions of their properties (Mario, Zelda, Pokémon and Donkey Kong, just to name a few).

Mario runs alone. Touch the screen to jump.

Some even say that Nintendo should follow SEGA’s steps, ditching the hardware business and focusing only on their software skills. Fortunately (at least for me), that isn’t the path Iwata is willing to follow, and he addresses that embracing a new market (in this case, mobile) isn’t an easy move. Or, in his own words,

It’s not as simple as enabling Mario to move on a smartphone.

Source: Bloomberg via Gamasutra

Less than half of Rovio employees work on games

Pick yours!

Finnish developer Rovio, well known for its Angry Birds franchise, has become an entertainment behemoth, using its main property as a foundation for merchandising, cartoons and other outlets.

Now, almost 5 years after the first Angry Birds, Rovio employs 800 people. However, less than 400 are currently working on games. However, for Jami Laes, executive VP for games, the company will keep finding its future hits in his department, and not all the way around.

But games will always be at the core of Rovio. That’s our heritage. The majority of the folks who have come from different industries to work on different areas of our business, they all experienced the game as their first encounter with the brand. When it comes to future franchises, they’ll most likely see the light of day from the games department, rather than another area of our business.

And now, build yours!

Regarding Rovio’s future and ambitions, he ackowledges the current state of connectivity as the biggest barrier for online gaming.

There’s enough pixels, enough power, enough fidelity to build great games on mobile, with great UI and great controls and so on. But building that long-lasting server-backed experience right now is pretty difficult on mobile.

I’m not a big fan of online-mandatory games, especially for the impossibility of accessing them at any time.  Actually, most of the times I pick my phone for playing, I tend towards experiences that rely more on consuming content than on social interaction (like I did lately with Badland or Injustice). However, that may change when overall connectivity improves… and only when it makes sense.

Source: VentureBeat via develop

Apple to pay more than $30 million for kids’ in-app purchases

Apple has agreed to refund consumers for at least $32.5 million for in-app purchases made by kids without parental consent.

Under the terms of the settlement with the FTC, Apple failed to tell parents that, by entering their password, they open a 15-minute window in which children can purchase unlimitedly.

Besides, the original complaint alleges that Apple’s password screen doesn’t explain to the account holder that password entry will confirm a purchase.

Besides, according to the FTC report, “Apple also will be required to change its billing practices to ensure that it has obtained express, informed consent from consumers before charging them for items sold in mobile apps.”

Source: Inside Mobile Apps