The Zynga Move Is Risky

| About: Zynga (ZNGA)

In an effort to return to profitability, Zynga (NASDAQ:ZNGA) is shutting down 11 different games. This seems very ill-advised and potentially catastrophic for Zynga. The basic logic of redeploying engineers towards other franchises is sound enough, but the method is wrong.

There was no need to shut down the games. The ongoing costs to keep the games alive but without updates can't be too large. It's hard to believe that just supplying processing power without new content would not be surpassed by marginal revenues from the games. It's also hard to believe that those franchises were impossible to be monetized by possibly selling them to some other company, even if for small consideration.

Instead, Zynga has decided to shut the games down, and in doing so it points the players towards their other "still running" games. This is not very bright. What gamer that invested months or years of his time is going to "just play some other Zynga game instead?" What gamer is going to risk going into another Zynga game that might be shut down in the future, when the precise objective of these social games is to invest time to develop the pet/character/ville over time?

If Zynga is counting on the players that were still playing these games to just flock into their other offerings, that's almost sure not to happen. But worse still, it might create a loose movement in the gaming community where people actively avoid Zynga's other offerings, so that they're not subjected to a similar shut down.

Selling the games or keeping them alive without updates would have been much better. It wouldn't pass the message that Zynga shuts down the games you're playing, and even if the games were to be shut down a lot further in the future, such an event could then take place under another different brand. As it stands, there's a good chance that Zynga is burning itself down.


The decision to shut down these games seems ill-advised and with potentially catastrophic consequences for Zynga. Keeping the games alive without updates or selling them would achieve the same cost cutting objectives without running the risk of destroying Zynga and its other franchises.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.