Secondly, the widespread shift away from social gaming to mobile gaming may be another nail in the coffin. Although Zynga has on several occasions hinted that it is porting games to mobile platforms, it will have to face off with a host of other startups in the frontier- some of which were started by former Zynga executives. TrapZen, a free online gaming model started by Zynga’s former chief creative officer, is one of these startups that target tablets. Although Zynga has control in TrapZen though a $10 million investment, it has no control over the other dozens of similar startups hatched by its former top employees.
Trying to overhaul social gaming or transition to mobile at this time could therefore be too involved for a company that needs to plug its cash outflows and increase revenues.
Related sectors present a bottleneck
The PlayStation 4 and Xbox One video game consoles were recently unveiled. Traditional gamers who were passing time on social gaming are likely to direct their attention toward these two platforms once they are released. The platforms also support robust Internet features, particularly the Xbox One.
Electronic Arts Inc. (NASDAQ:EA), which is itself struggling to improve its outlook, has already named 11 titles for the new console generation; some of these are for the PlayStation 4 and others are for the Xbox One. The games, scheduled to grace shelves later this year and in 2014, will focus on action and sports. I believe that this will present an obstacle for Zynga, though perhaps not significantly. Considering Electronic Arts Inc. (NASDAQ:EA)’ past disappointing earnings, I believe that it will market its games intensively. In the quarter that ended in March, Electronic Arts Inc. (NASDAQ:EA) posted profits of $323 million. Despite low sales, the company’s profits offset its past rickety performance. I believe that it will move heaven and earth to maintain if not improve this trend.
Conclusion
There are no two ways about it. Zynga Inc (NASDAQ:ZNGA) may maintain its current social gaming front as spin-off, but real-money gambling is the only way to go. If not, the company may go under.
The article Zynga May Ultimately Have to Gamble on Its Future originally appeared on Fool.com and is written by Lennox Yieke.
Lennox Yieke has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Lennox is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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