Riccitiello: PopCap Acquisition Accelerates EA To $1B Digital Business

Author: by Frank Cifaldi, Leigh Alexander

EA's acquisition of Peggle creator PopCap will provide the company with an immediate boost in social and mobile presence, driving the company to what it predicts will be a $1 billion annual digital business. "Bringing PopCap to the EA family represents a leap forward in our digital transformation," said EA CEO John Riccitiello in a Gamasutra-attended conference call. Along the way, the Electronic Arts head underlined that the acquisition "will add to EA's already strong growth in digital, help to expand our leadership to mobile, and establish EA as the clear number two on Facebook." EA isn't the only winner in the deal: in addition to the obvious benefit of a payout that could go as high as $1.3 billion, PopCap will also take advantage of EA's global infrastructure to accelerate its own growth. "PopCap could continue to grow to its business, add to its business, and we've essentially created an environment where they get a lot more bang for their buck," said Riccitiello. A Surprise Deal When rumors of the acquisition first materialized late last month, some analysts were skeptical, as EA recently implied it was veering away from any large mergers or acquisitions following its $400 million Playfish deal. But Riccitiello conceded: "circumstances change, is the headline". As the EA CEO explained to investors in its conference call, the company miscalculated PopCap's plans: it expected the company to file an IPO in 2012. "PopCap has been an attractive target for us for years," Riccitiello explained, saying that the company is "certainly the best content creator of casual in this space." In fact, PopCap has been entertaining offers for "months," according to the Seattle-headquartered company's CEO David Roberts, saying in the call that the company has "been flattered by the interest [many] companies have shown in PopCap." Mobile Growth As SEC-filed slides on the acquisition note, with Bejeweled 2+Blitz and Plants vs. Zombies, PopCap was responsible for two of the top ten highest-grossing iOS games in 2010. Combined with titles published by EA itself (including #1-ranked Angry Birds, published by the recently-acquired Chillingo), a total of six of the top ten iOS games of last year are now a part of the EA family - with notable Android presence for the brands, also. "Clear Number Two On Facebook" The acquisition is also a huge boost to EA's presence on Facebook: the estimated 10 million daily active users between EA's and PopCap's games between April and June of this year are second only to Zynga's 53.6 million, and more than double the 4.5 million of third place Wooga. According to current figures from AppData, PopCap's Bejeweled Blitz alone contributes over 3 million daily active users, with Zuma Blitz adding another 792,019. By comparison, EA's biggest games -- Pet Society and Restaurant City -- contribute 1.3 and 1.1 million DAU's respectively. It is worth noting that both of these titles were developed independently by Playfish before its EA acquisition in 2009. The combined entities have a strong Facebook lineup going forward, with PopCap set to introduce versions of its Plants vs. Zombies and Peggle franchises, and EA readying Risk Factions and The Sims Social. A $1 Billion Annual Industry EA expects PopCap to deliver $140 million in revenue this calendar year, driving what EA predicts will ultimately be a billion-dollar annual digital business. But this year is just the beginning, as EA says that the synchronicity between the two companies over social networks will ultimately grow the business even further. "In social and in mobile there are strong network effects," said Riccitiello. "Just like a social network, one app points to another app. We literally double our footprint in a number of these platforms adding EA and PopCap together. That's a direct and important revenue driver." Joining The EA Family According to Riccitiello, the acquisition means more than just PopCap's IP and products: it also brings the company's succesful management into the EA fold. "I think they actually add to our management bandwidth," he said. "It would not surprise me to see them take on additional roles in the company over time. "We were spending a lot of cycles trying to figure out how to do new IP in the casual space... and the net answer I came up with was they'll actually relieve of us that challenge," he added, saying that PopCap's senior management and founders provide the company "the entrepreneurial spirit with the skill that we want."