Zynga and Facebook haven’t exactly gotten a divorce, but they’re free to date other partners now.
Social-gaming giant Zynga filed a document with the Securities and Exchange Commission today that says it renegotiated its partnership agreement with Facebook when it comes to publishing games on the social network. Facebook also filed its own 8K filing.
The amended deal is important because of the symbiotic relationship between the two players: the largest social-gaming company depends on the largest social network and vice versa.
Both companies are now free to do more outreach to other partners. The deal reflects the changing conditions in the market in the two years since the companies created their five-year agreement. Much of the momentum in social games has shifted from social networks to mobile, and Zynga wants to be free to pursue its options to take its products to more platforms. On top of that, Zynga’s own Zynga.com is now established, and the company wants to have more flexibility there.
In a statement, Zynga chief revenue officer Barry Cottle said, “Zynga’s mission is to connect the world through games. In order to do this, Zynga is focused on building enduring relationships with consumers across all platforms from Facebook and Zynga.com on the web to tablets and mobile. Our amended agreement with Facebook continues our long and successful partnership while also allowing us the flexibility to ensure the universal availability of our products and services.”
In after-hours trading, Zynga’s stock price is down 10 percent, while Facebook’s is flat.
In particular, Zynga is no longer required to use Facebook as the official platform for Zynga.com. That means it does not have to use Facebook Credits, the virtual currency issued by Facebook. In Facebook Credits transactions, Facebook takes a hefty 30 percent cut. Zynga could theoretically create its own virtual currency or adopt one from another vendor that takes a smaller cut of transactions. Zynga is no longer required to use Facebook display ads either.
This is a big deal for Zynga, since it will allow it to fully exploit the benefits of creating its own game portal. Now, rather than pay 30 percent to Facebook, Zynga can theoretically keep a much higher profit margin for revenues associated with games published on Zynga.com.
But if Zynga uses Facebook data for Zynga.com games, then it has to abide by the Facebook terms of service. Zynga also has a guarantee: No other developer will get better terms for Facebook-related deals than Zynga. On mobile, Zynga is not required to prompt users to log in with Facebook. And Zynga is not required to put its future real-money gambling games on Facebook alone, as exclusives. If Zynga launches such real-money gambling services, it will make them available on Facebook but be free to put them on other platforms, too.
In return, Facebook gets the promise that Zynga-made games will be made available on Facebook. Facebook is also not prohibited from developing its own games. It’s not clear if Facebook wants to do that, but the restriction is no longer there. Zynga is not obligated to publish any of its third-party games made by external developers on Facebook.
And, also in Facebook’s favor, Zynga is also not allowed to promote its Zynga.com off-Facebook portal within Zynga’s own games that are running on Facebook.
In a statement, Facebook said, “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. We will continue to work with Zynga, just as we do with developers of all sizes, to build great experiences for people playing social games through Facebook. ”
And regarding building its own games, Facebook said, “We’re not in the business of building games, and we have no plans to do so. We’re focused on being the platform where games and apps are built.”
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