RealNetworks Inc. has agreed to acquire
GameHouse Inc., which provided many of the games for its RealArcade service, in a deal valued at about US$35.6 million, RealNetworks said Monday.
The acquisition adds a games development and publishing business to RealNetworks, which has been distributing games through RealArcade for more than two years, RealNetworks President Larry Jacobson said in an interview. RealArcade is available to users of Windows only.
GameHouse makes casual games for the Mac and PC platforms, many of which are playable on the Web. The company’s games have been licensed in collections for retail publication by United Developers’ MumboJumbo and MacPlay subsidiaries. Apple has also made free GameHouse titles available to subscribers of Apple’s .Mac subscription-based service.
The market for online PC games is booming. Revenue in the U.S. will total about $648 million in 2004 including money from subscriptions, advertising and sponsorships, according to research company IDC. About $120 million of that will be generated by games downloaded for purchase.
GameHouse was founded in 1998 and is based in Seattle, RealNetworks’ home town. The company has sold more than a million copies of its games since its inception. In 2003 it earned $5.5 million on revenue of over $10 million, according to RealNetworks. It employs 26 people, all of whom will join RealNetworks, Jacobson said.
RealNetworks will pay about $14.6 million in cash and about $21 million in shares for the company, based on Friday’s closing share price. About $18.3 million of the purchase price is subject to certain restrictions over a four-year period. The restrictions include the continued employment of key GameHouse personnel, RealNetworks said.
RealNetworks’ RealArcade competes with products including Microsoft Corp.’s MSN Games, Yahoo Inc.’s Yahoo Games and Electronic Arts Inc.’s Pogo.com. Users of RealArcade can try a game free of charge for an hour and then have the option to buy it for between $15 and $20, RealNetworks said. RealArcade is also offered through partnerships with Internet service providers (ISPs).
“By acquiring GameHouse, RealNetworks now has control over the content and no longer has to depend on what third parties develop,” she said. RealNetworks can now match the content to its business strategies, such as targeting a specific audience, she said.
There was no immediate word on whether the acquisition would affect GameHouse’s future Macintosh game development.