Magic Playdom

If anyone harboured doubts about how important social gaming is becoming - and how quickly it is growing into that importance - then this week's acquisition of Playdom by Disney should put an end to them. The media giant is paying out around three quarters of a billion dollars for Playdom - a figure made only more astonishing by the fact that the company is by no means the largest provider of games on Facebook.

Playdom is no minnow, of course, but then again, it's hard to work out how we should be estimating company sizes or even valuations in this brave new world. I'd be stunned if someone paid the best part of a billion dollars for a traditional game publisher whose games I'd never heard of or played, yet that's exactly the status of Playdom. Like most people who follow social gaming, I was aware of the company itself, but I'd never actually encountered any of the games it makes, eclipsed as they are by the success of titles from rival firms such as Zynga and Playfish.

That probably doesn't bother the company's new owners very much, however. Disney's acquisition of Playdom is unlikely to have had much to do with a particular desire to add the firm's IPs, such as Mobsters and Sorority Life, to its own library. Instead, this expensive investment was motivated by two key factors.

The first driver for the acquisition is that Disney is one of the largest holders of IP in the world, and much of its focus lies in finding new ways to monetise those IPs. Social gaming is a rapidly growing sector, both in terms of audience figures and in terms of revenues, and as such it's inevitable that a company such as Disney would view it as a potential new outlet for its IPs.

Equally, however, it's obvious that the skillset involved in creating a successful range of social games is not trivial. The landscape of Facebook is littered with the corpses of underperforming social games, each one laid low by a combination of problems ranging from design issues through to technical mismanagement. If valuable Disney IPs are on the line, building a new team and going through the inevitable growing pains and mistakes isn't really an option - buying in talent was the firm's only choice.

If that explains Disney's decision to buy a social gaming firm, however, it's the second factor which explains why the company was willing to spend such an enormous amount of money on the acquisition. That factor, bluntly, is panic.

Disney is a company in a somewhat odd position. It owns, as I mentioned, one of the largest and most enviable arrays of IP on the planet, and has a knack for bringing existing IPs over even the most unlikely of medium transitions successfully - witness, for instance, the transformation of the Pirates of the Carribean fairground ride into a blockbuster movie franchise.

In videogames, however, Disney is a relatively minor player. It's not for want of trying - Disney has always given the impression of a company that's keen to do well in the videogame space, and to its credit, has taken a much closer interest in the development of games based on its properties than most movie studios.

It remains, however, a movie studio at heart - despite some solid attempts, it has never really seemed very committed to the idea of generating original IP in videogames, or of factoring games into the kind of cross-medium leaps represented by Pirates of the Carribean. There have been a few daring attempts to do something playful and innovative with Disney IPs - Kingdom Hearts is a great example, and Epic Mickey is shaping up to be another - but for the most part, the firm's videogames output has been an exercise in playing it safe, taking few risks, and as such enjoying solid sales but an underwhelming position in the market as a whole.

Now, all of a sudden, there's a whole new area of videogames out there - social gaming, something which is happening online, attracting tens of millions if not hundreds of millions of players, profiting from new types of business model and generally upsetting apple-carts left right and centre.

Disney, which has struggled with traditional videogames, faces being left behind once again - and it was no doubt watching very carefully when Electronic Arts whipped out its chequebook for Playfish some time ago. Disney knew it had to do something to keep up with the market, and just as it was for EA, the most logical answer was to dig into its wallet and buy up a major player.

It remains to be seen just how well that investment is going to work out for Disney. Leaping into the social gaming space in order to prevent being left behind is one thing, but the more detailed plan, the one which involves leveraging Disney properties in the social space, is going to require very careful execution.

The fact is that as yet, we don't know how well existing IPs are going to play in the social gaming space. It may seem like a no-brainer that a social game carrying the Disney brand is simply going to work better than an unbranded game, but the reality is much more complex. Social game development is an unusual beast - when it's working at its best, it's a process of extremely rapid iteration and development, one in which games launch long before they're in anything resembling a "finished" state and in which users are constantly part of a wide-scale beta testing programme, of which they are rarely aware.

Is that a development model which can be made to work with Disney properties at its heart? Possibly, but I confess to being dubious. Watching the development of titles which used valuable IPs like that in the past, one thing has been consistent - the need for sign-off of almost every change by a whole chain of managers, a factor which slows down development significantly. For Playdom to be able to roll out Disney IP based games in the nimble, aggressive way demanded by social gaming, it will require not just hard work on the company's part, but a change in culture throughout Disney's handling of IP - a change which I find hard to see happening in the present climate.

Besides, if there's one thing which we're all slowly learning from the emerging platforms for videogame content, it's that licenses are less valuable than we'd always believed them to be. When games cost $50, a license can be seen by consumers as a guarantee, if not of quality, then at least that the content will be relevant to them. When a game costs 59 pence, or a couple of pounds - or, as with most social games, nothing at all - that guarantee is much less important, vastly reducing the market power of existing IP.

On the iPhone, for example, a vast proportion of the most successful games are original IPs, while on Facebook, existing IPs barely get a look in. Zynga, by far the most successful of the social gaming firms, is presently valued at around $5 billion, if the scale of recent investments is to be believed - a valuation which it has reached without ever having to use someone else's IP for any of its games.

Disney's expensive acquisition of Playdom is another milestone for this burgeoning sector, but it remains to be seen whether it will have a happy ending. Certainly, if anyone is expecting Disney to ride into the market and show everyone how it's done, they will be sorely disappointed. The challenges facing Disney - and to a lesser extent EA, with the implications of its Playfish acquisition yet to fully reveal themselves - are enormous. Zynga and other key players in the social gaming space won't be losing much sleep over Mickey Mouse just yet.