While it’s too early to understand the ramifications and implications of the Playfish acquisition, we do firmly believe that the potential impact of the EA/Playfish combo are enormous. This is the first time the social and video gaming realms have truly merged. In fact, it could prove to be a watershed moment for not only the social gaming industry, but for video games in general.
After thinking about the current state of gaming and how social gaming could affect, we’ve come up with a set of six predictions surrounding how social gaming could affect not only Electronic Arts, but the entire video gaming industry. Here are our predictions:
1. There will be more Social Gaming Acquisitions
Playfish will not be the last social gaming acquisition by a video gaming or entertainment company. Zynga and Playdom are potential targets, and even peripheral companies such as virtual currency platforms could become attractive. There are many smaller, independent social gaming companies that could be snatched up as well.
As to who will acquire them: the possibilities range from console and game makers (e.g. Nintendo and Microsoft) to online content kingpins (e.g. MySpace.).
2. EA Will Find New Ways to Monetize Social Gaming:
Over the last week or so, there has been a backlash against cost per action (CPA) and lead generation offers within social games. The result has been deceptive ad crackdowns and the pulling of these offers from platforms such as Zynga, where they account for a significant chunk of total revenues.
Yet we are not worried about the ability of social games to monetize, especially in light of today’s acquisition. EA knows how to turn a profit and will find unique ways to generate revenue from its newest addition. Subscriptions, console-based virtual purchases, and more prominent advertisers could (and probably will) all become part of the mix. It won’t need CPA ads to monetize.
3. Virtual Goods Will Become Even Bigger Business:
Related to prediction #2, we believe that there is huge upside for the virtual currency, gift, and goods market. It shocks us how big the virtual goods market has already become. The U.S. market alone is thought to be worth $1 billion and the Asian market to be worth around $7 billion.
The virtual goods market hasn’t come close to reaching its potential, though. As more and more users join social games such as FarmVille and become more comfortable spending their hard-earned cash on virtual seeds, that number will go up. Couple that with upcoming payment platforms from Facebook and PayPal, and you have a recipe for a high-growth emerging market.
4. You Will See a Wave of Social Gaming on the Console:
EA’s core competency is creating video games for consoles such as the Xbox, the Wii, and the PS3. Games such as Pet Society or Who Has The Biggest Brain will likely make their way onto the console, either in disc or downloadable form. It’s lucrative and people have proven their willingness to pay for the HD, console-based experience.
Other social gaming platforms will either be acquired or strike lucrative deals to bring their games to the console as well.
5. EA and Others Will Make Even Stronger Moves on Mobile:
As we wrote back in September, game console makers are feeling the heat from Apple. The iPhone has quickly become a powerhouse of a gaming platform, providing a new challenge to your standard handheld gaming device (e.g. the Nintendo DS and Sony PSP).
Social games are already on the iPhone and utilizing Facebook Connect to share scores and allow friends to compete. Zynga’s Live Poker and Playfish’s Biggest Brain are prime examples of social games turned iPhone apps. That trend will only increase exponentially as mobile (especially the iPhone and Android) become stronger gaming platforms.