Video-game giant Electronic Arts Inc. shook the mobile gaming world last week with the announcement it would shell out $680 million to acquire publisher Jamdat Mobile Inc.
EA said it would pay $27 per share for Jamdat under terms of the long-rumored deal, sending shares of the pure-play wireless publisher skyward from $22.77 to more than $27 in after-hours trading on the Nasdaq last Thursday. Shares of EA dipped slightly on the news, finishing the week at $55.14.
The two mobile businesses will be combined as one team, with Jamdat Chief Executive Officer Mitch Lasky at the helm. EA announced plans to publish more than 50 wireless games in the year after the deal is completed, which is expected to happen early next year.
The world’s largest publisher of console games waded into the wireless waters earlier this year with an in-house effort, but industry watchers expected the company to buy its way into the market with a blockbuster acquisition. The fact that many in the industry expected such a move didn’t soften its impact.
“I think it’s like a 7.0 earthquake just rippled through the mobile-gaming industry,” said Mike Yuen, senior director of Qualcomm Inc.’s gaming group. “Overnight, all of a sudden, they become this big monster. I think it’s huge.”
The move follows an established pattern for EA: dipping its toe into the water on its own before spending big money to buy its way in. It lumbered onto the casual online gaming playground four years ago with the purchase of Pogo.com, an established portal that boasted more than 17 million registered users, and ventured into the hot simulation-gaming arena with the $125 million buyout of developer Maxis, which eventually developed the popular Sims franchise.
And it appears Jamdat was ripe for the picking. The publisher saw its value skyrocket after a much-publicized initial public offering last year, and its market capitalization neared the $1 billion mark. But with the stock languishing for the last few months, EA’s buy-in price represents a marked premium for recent investors.
Jamdat seems a good fit for EA, which failed to gain traction on its own in wireless despite a knockout portfolio of high-profile franchises. Jamdat is perhaps the premier publisher in wireless gaming, with top-selling casual titles including Bejeweled and several branded bowling offerings.
Lasky’s company also owns the mobile rights to several notable titles, including Doom and the classic Tetris, for which Jamdat spent $137 million earlier this year. The company leads the industry with 422 titles garnering premium real estate on carrier decks, according to a November study from M:Metrics. And Jamdat boasts relationships with more than 80 wireless carriers around the world, potentially giving EA access to dozens of new markets.
The acquisition could signal a coming trend of well-heeled big brands entering the market by swallowing up mobile publishers.
“I think this is actually just the beginning” of a wave of acquisitions, said Yuen. Yahoo Inc. already has begun work in the space, and Yuen said he “wouldn’t be surprised if even traditional media companies are looking at mobile gaming.”
If so, the industry could be in store for a number of big-money acquisitions. So while pure-play mobile game-makers must now find ways to counter their newest and biggest competitor, they’re likely keeping an eye on outsiders attracted to the space.
“The pure-play guys have really got to re-evaluate their position,” Yuen said. “How do you compete against the brands, the money, the resources (of EA)? I think they’re probably scrambling.”
Yuen said he expects EA to leverage its big names by integrating games across PCs, consoles and wireless phones. While it’s commonplace for titles to be published for a number of platforms, Jamdat’s mobile expertise could allow EA to offer a complement to console gaming on mobile phones.
A mobile version of a soccer game could feature drills allowing players to hone their skills, for instance, or fighting games could offer players a way to accrue weapons on their handset for use later on the console.
“I think you’ll see more of the cross-platform games, instead of (publishers) just taking a brand from a console or PC game and slapping on a mobile version,” said Yuen, adding that the acquisition accelerates EA’s evolution by as much as a year-and-a-half. “I think a major earthquake has happened. All of a sudden they’re a huge, major player.”
