Amazon (Officially) Leaps into Social Games

8/6/12Follow @curtwoodward

It’s been speculated for months that e-commerce titan Amazon would begin publishing its own casual games. Today, the company made it official with the release of “Living Classics,” a fairy-tale-themed game for Facebook.

Amazon (NASDAQ: AMZN) didn’t indicate whether Amazon Game Studios would concentrate specifically on social games, which are generally light and entertaining “casual” games that can be played on Facebook. Casual game developers are increasingly taking their wares across many platforms, moving titles from mobile-device apps to Facebook and even Internet streaming subscription services.

As I reported in January, Amazon had been staffing up for a new game studio, but hadn’t said anything about the effort publicly other than its solicitations for employees. And while those pitches were made through the Orange County branch of Amazon’s a2z research and development arm, the company says today that Amazon Game Studios is based in Seattle and San Francisco.

At the beginning of the year, back when the game studio was mostly a rumor, there was some difference of opinion in the casual games industry about whether Amazon was going to become a full-fledged game publisher, or if the company would pump out a few titles as demos to show other developers what was possible with the company’s platforms.

Amazon now has its Kindle Fire tablet and app store to tout as destinations for game developers, along with the growing array of Amazon Web Services offerings that can power the cloud-computing back end. The iPad remains the king of tablets, but Amazon is angling to become a strong challenger by developing its tablet on top of the Android operating system.

The push into publishing games mirror’s Amazon’s increasing appetite to own more pieces of the value chain in digital media. That encompasses the company’s sometimes controversial moves into publishing its own books, along with more experimental approaches like the Amazon Studios project to develop movies and original TV shows.

Games is a natural next step after books. TV and movie production still requires lots of deep-pocketed partners, but a casual game can be made for between $50,000-$400,000, according to statistics from the Casual Games Association.

And, unlike a lot of speculative apps and consumer Web experiments these days, games can  make good money. The Casual Games Association estimates that the worldwide social games market will be worth more than $6 billion this year, and grow to more than $8.5 billion by 2014 (PDF report). Social games typically are free to play, and make money primarily by selling add-ons and upgrades that enhance a player’s abilities. They can also incorporate advertising.

Social games have seen an interesting few years in the U.S. market. While the phenomenon was more widely established in Asia, it only really took off in the states when Zynga (NASDAQ: ZNGA) began aggressively developing casual games on the Facebook platform. Zynga rocketed in size and became the first publicly traded company to be built on Facebook (it actually went public before Facebook itself).

But Zynga has fallen on some harder times recently. The company’s most recent quarterly earnings report disappointed Wall Street, and the company’s shares have suffered. So it will be interesting to see if Amazon sticks to the social-game model, or diversifies its portfolio to include new platforms—especially considering that it owns a lower-priced tablet and has millions of credit cards on file.

But digging into social games does give Amazon a foot in the door of social networking-based commerce, a tempting area that is still in its early days. Perhaps the data alone generated from playing with the economics of in-game purchases and selling of virtual goods is worth it for Amazon. Then again, it wouldn’t be surprising to see Amazon and Facebook clash over something here—Amazon has already gone a few rounds with Apple about the cut Apple gets for having Amazon products and services on its computer platforms.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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