OPINION: Sims topples Zynga, and EA’s future is sealed

Electronic Arts has landed a haymaker on Zynga, its nearest rival in the social games space, with its new Sims Facebook game accumulating a bigger audience than erstwhile champion Farmville.

Independent analysis, provided by AppData, suggests that around 36 million customers have played The Sims Social in a single month. That surge in popularity makes it one of the fastest-growing Facebook games of all time and, at the time of going to press, more popular than Farmville by about 250,000 monthly active users.

But though the Sims Social has become the forth most-played game on Facebook – an achievement that will surprise as much as it will delight EA’s executives – Zynga still owns the top three.

Texas Hold’em poker draws in 36.5 million monthly users, while Empires & Allies takes 40 million. The grand champion of them all is Cityville, which commands an extraordinary active monthly audience of 75 million.

But, by Surpassing Farmville and edging closer to Texas Hold’Em, EA is in a strong position to argue to shareholders that it’s finally, finally back on the right path.

The last five years have been tumultuous for the Californian games publisher, having undergone a painful root-and-branch reform that has seen many hundreds of jobs go. The problems had spread across EA’s business like a cancer. Expensive, licence-based games offered an increasingly enfeebled ROI, while a – let’s be frank – headless policy of annual sequels meant EA had begun to flood its own target market with poor titles.

Now, under the unremitting pressure of analysts who question every turn, the EA executive circle has reshaped its triple-A business to release “fewer, better” games.

The big gambles, it transpired, were made elsewhere in the social space.

In 2009 EA purchased social giant Playfish in a deal worth up to $400 million. While the acquisition reaction was mixed, Playfish quickly proved itself as a vital cog in EA’s business. The group most recently built Sims Social under the same winning philosophies of its own founding games, and has helped Electronic Arts become the second biggest Facebook app developer in the world, with about 78 million monthly active users.

EA CEO John Riccitiello (pictured) and his fellow chiefs are often broken-records when talking-up the pre-eminence of digital gaming, social gaming, casual gaming, mobile gaming, anything aside from retail gaming. Having just spent at least $750 million on casual and mobile kings PopCap, one would hope so.

What is clear is that EA is now thriving in these areas, and has accelerated at the same break-neck speed of the social/mobile space itself. Its App Store games are as popular as its Facebook games and – apologies for more broken records – no traditional games publisher has been as successful in reaching new audiences.

The real question is whether EA’s policy is as lucrative as it is popular. Being the second-best player on the table is one thing, but how much richer will EA be when it’s time to cash in its chips? In the ‘old model’, EA sold more than 140 million boxes of The Sims, which brought in about $3 billion in revenues.

The financial importance of 36 million Sims Social players is trickier to quantify. In fact, the answer to that question could provide clues to the bigger conundrum; is social gaming in a bubble? Are valuations of the leaders in the space disproportionate to how much money these companies are actually making?

Yet the job of shareholders is not just to look at a company’s current business performance, but how it will do in one year’s time. In five years’. It is in this context that Zynga is being mooted as a company worth at least $10 billion.

If the long-term financial value social gaming proves to be a myth, both EA and Zynga will be the first to fall on their swords. Then again, the old triple-A retail business isn’t exactly the safest neighbourhood to park your business in either.

It’s too late anyway. EA has spent more than $1 billion on acquiring social and mobile games companies. There’s no turning back, but the magnificent success of Sims Social may suggest there’s no need to. After an unbearably long succession of quarterly losses, its painful reinvention may finally, finally, be paying off.