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.

Kabam doubled its revenue in 2013

Kabam, the social games colossus known for its strategy games, had had a great 2012, making more than $180 million in gross revenue (70% more than in the previous year). Based on its mobile success in China, the company forecasted earning $270 million in 2013.

However, the Warner Bros. backed developer ended 2013 reporting $360 million in revenues, doubling its previous year. According to Kabam CEO Kevin Chou, most of that money came from their mobile ventures, although around $100 million were generated by browser games on Facebook and Kabam.com.

The Hobbit: Armies of the Third Age (2013)

Regarding the general gaming scene, Chou acknowlodges the initial success of the PlayStation 4 and Xbox One, but still isn’t sold on developing games for them:

…over time, free-to-play mobile gaming revenues will dramatically overtake traditional game sales as more people worldwide download and play games on smartphones and tablets from freemium content companies like Kabam.

Source: Gamasutra