October 20, 2010 / 5:07 PM / 7 years ago

UPDATE 3-Electronic Arts to buy mobile game publisher

* EA to pay under $20 mln in cash as part of deal-source

* Chillingo publishes the popular “Angry Birds” game

* EA will not own “Angry Birds”- company

* EA spending too much on social games- analyst

* EA shares close down 1.16 percent at $15.40 (Adds details of deal, analyst comments, updates share price)

By Liana B. Baker

NEW YORK, Oct 20 (Reuters) - Electronic Arts ERTS.O said it plans to buy the publisher of “Angry Birds,” one of the most popular games on Apple’s iPhone, pushing the second largest U.S. video game publisher deeper into the hot mobile games market.

A source close to the deal told Reuters EA will pay under $20 million in cash plus other undisclosed considerations.

An EA spokeswoman confirmed the deal, but did not disclose the financial terms. Under the deal, EA will not receive the intellectual property rights to “Angry Birds,” which will remain under Rovio, the Finnish company that developed the game, the company said.

Some analysts were surprised that EA would not acquire “Angry Birds”. Neither company commented on what games or intellectual property would be included in the terms.

“I‘m kind of wondering what they bought,” said Todd Mitchell, a Kaufman Bros analyst. “But in light of EA not getting the IP, they’re buying the development platform to put their own IP on it in hopes of driving social networking and customers back to their own properties.”

Electronic Arts, which owns Medal of Honor and Madden NFL franchises, can push its established brands through new social games in the same way that Disney, which bought social gaming company Playdom for $563.2 million in July, has used with its ESPN brand in the ESPNU College Town game for Facebook.

Chillingo publishes other mobile games but none have been quite as successful as “Angry Birds,” which allows players to help angry birds destroy pigs with a huge slingshot in various game stages.

The company also publishes “iDracula”, a shooter game where players are vampire hunters and Predators, a sci-fi game.

“By acquiring Chillingo, EA Mobile is increasing its market leadership on the Apple platform as well as reaffirming its position as the world’s leading wireless entertainment publisher,” EA spokeswoman Holly Rockwood said in a statement.

EA might be spending too much on social games, a nascent market that has potential, but fragmented and does not have a proven revenue stream, some analysts said.

“The concern is that EA is chasing and paying a lot of money,” Kaufman Bros analyst Todd Mitchell said.

Mobile and social games are the fastest growing segments of the video game industry. Research firm Gartner expects global revenue from mobile gaming, the segment that includes games for smartphones, to rise 19 percent to more than $5.6 billion this year, while it is forecast to grow to $11.4 billion in 2014.

EA’s mobile division already holds some top titles, like Tetris, Scrabble and versions of Tiger Woods PGA tour and Need for Speed.

Last November, EA purchased Playfish, a start-up company that makes social games, in a deal valued at up to $400 million.

EA shares closed down 1.16 percent at $15.40 on Nasdaq. (Reporting by Liana B. Baker; Editing by Tim Dobbyn, Kenneth Li and Bernard Orr)

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