Electronic Arts is currently competing with Zynga for the top slot in both the mobile and social space. He didn’t name Zynga, but EA CEO John Riccitiello clearly struck out against the publisher when talking about acquisitions such as the one for OMGPOP and Draw Something.
“In terms of acquisitions, to be honest with you I’m pretty anxious about acquiring instant one-hit wonders in this space. There’s an awful lot of noise that grows up around an individual franchise as it rises, not so as that individual franchise when it declines,” said Riccitiello. “At lot of times when people are acquiring individual new intellectual properties in mobile and social, they try to put an earnings multiple on it, typically a 10x or a 20x. The problem is, to put anything on it more than a 3x or a 4x you have to have a belief that this thing is going to last a very, very long time. If something’s gonna come and go in three or four years, you can’t put a multiple, you’ve got to add up three or four year’s profitability to figure out what to pay for it, and then do some sort of a risk-adjusted discount on that.”
“We actually think with The Sims, Sim City, what we’ve got in Bejeweled, and the rest of the PopCap IP, we are blessed with an unbelievable portfolio of brands. We don’t need to buy a brand just to get a temporary lead on top of the charts for whatever is hot this quarter,” he added, saying, “That doesn’t mean that we would never buy or never invest; we would. But right now, what I’m starting to see, is valuation expectations that assume that these things are all hockey sticks moving up and to the right with no end in sight. I think those are bad assumptions. Some of them will work, some of them won’t, but they can’t all be worth the multiples that I’m seeing in the market right now.”
Source: GamesIndustry.biz
