Zynga forges new Facebook agreement, loses favored status
updated 07:30 pm EST, Thu November 29, 2012
Game developer free to sell games, refuse Facebook advertisements
Facebook and social game developer Zynga have revised terms of a partnership that gave Zynga preferential treatment on the social network. The modification of the deal was noted on regulatory filings from the two companies earlier today. Zynga has been given more flexibility to sell its own games by the agreement, but makes the game developer subject to the same rules as other game makers, if it wishes to publish on Facebook.
Also in the agreement, Facebook has been granted permission to develop its own games -- but sources familiar with the matter claim that the company "was not in the business of building games and we have no plans to do so." Zynga also now has the right to not use Facebook's payment methods to collect revenue, and does not have to display Facebook advertisements.
"We have streamlined our terms with Zynga so that Zynga.com's use of Facebook Platform is governed by the same policies as the rest of the ecosystem," a spokesman said in a statement. "We will continue to work with Zynga, just as we do with developers of all sizes."
Brokerages and market analysts have dropped price targets on Zynga stock by up to 40 percent after the social game maker slashed its 2012 guidance further due to revenue damage from departing gamers. Zynga said it was losing paid customers from Facebook games CityVille and FarmVille, and reduced its annual guidance for the second time this year. Since the IPO in December 2011, the company has lost 75 percent of its market value.
Two insider trading suits have been filed against the company, and follow investigations of Zynga staffers and CEO Mark Pincus. He and other high-ranking Zynga employees are accused of selling 43 million shares of stock in April at $12 per share, when employees and other early investors were banned from selling until May. By then, the stockholders claim, the business had already begun to slump.
Zynga is also facing a lawsuit from gaming giant EA, claiming the social games developer has violated copyright law. The complaint focuses on Facebook game The Ville, where Zynga is accused of infringing on The Sims Social, EA's own casual gaming endeavor. EA believes The Ville "blatantly mimic[s] the entire framework and style of gameplay," making the two games "nearly indistinguishable."
