ConsolidationVille Coming to Social Games Market in 2012

Even more social game consolidation is coming this year.

And here’s the reason why: There are hundreds of game companies competing on Facebook, and Zynga is single-handedly grabbing 15 percent of all the revenue.

A report published by Digi-Capital, an investment bank focused on videogames, says this year will be a strong one for consolidation, based on the number of discussions it is having with investors and management teams.

The bankers said the catalyst for the consolidation is either lack of revenue, or profitability, or both. The report said that Zynga, Wooga, King, Electronic Arts and Peak Games are all doing well, but as you get further down the list, many others are struggling to gain momentum.

Meanwhile, the leaders in the space — and particularly Zynga — are constantly having to come up with new games to keep their user base engaged, which is good news for companies that have strong games or teams and are looking for a buyer.

In the first quarter of 2012, Digi-Capital reports, 30 deals closed across all game sectors for a total value of $1.7 billion. In particular, casual, social, mobile and massively multiplayer online games were in demand.

In 2011, a total of 113 games transactions took place, for a total value of $3.4 billion.

Zynga, which recently spent $180 million to acquire OMGPOP, said it is looking to purchase more companies — and has the deep pockets to do it. Besides the leading social games company, the report noted that other companies looking acquire or invest are from China and South Korea, and they are specifically interested in social, mobile or other free-to-play games in domestic and international markets.

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work