UK based social gaming specialist Playfish has been snapped up by Electronic Arts for €183 million in cash.
The purchase positions EA into the increasingly lucrative ‘social or casual’ online community gaming space, when consumer confidence is declining in traditional packaged video game sales.
In addition to the upfront cash payment, EA will tip in up to €66 million in cash if Playfish hits certain financial targets though December 2011. The deal includes €16.6 million in equity-based retention agreements with employees.
In unfortunate timing, EA later announced plans to cut 17% or 1,500 jobs as part of a massive restructure. The new cuts include 900 developers, 500 in game publishing, and 100 corporate positions. Earlier this year, EA culled 1,100 employees as part of a restructuring initiative. The layoffs are forecast to save about €66 million a year.
"We are focusing on what works and what matters," EA chief financial officer Eric Brown said.
Digital content comprises about 12% of EA's revenue.
Two year old start-up Playfish, will operate as a standalone business within EA Interactive, which also houses EA Mobile that publishes casual games for the iPhone. Playfish has received around €14 million in VC funding from Accel Partners, Index Ventures and Stanhope Capital.
Playfish's co-founder and CEO Kristian Segerstrale describes social gaming as "a massive addressable market and games are moving from physical products to digital services.
Playfish makes money by selling virtual items for its free games via micro payment systems. Its games such as Pet Society boast 21 million addicted, monthly players.,