Quietly, Amazon.com Inc. (NASDAQ: AMZN) has announced its entrance into the social game business. It will be joining a slew of companies in that nascent business. Due to the number of visits to its websites, its opportunities to lure developers and the capital available because of its balance sheet, the world’s largest retailer will disrupt yet another industry.
Amazon revealed its plan in a blog post:
We’re so happy to finally be able to reveal the social game we’ve been hard at work on — Living Classics. But before we jump into that, a little bit about us, since it’s not just our game, but also our team, Amazon Game Studios, that we’re announcing with this post.
Amazon Game Studios is exactly what it sounds like: a new team at Amazon that’s focused on creating innovative, fun and well-crafted games. Our first title, Living Classics, is debuting on Facebook today.
At the end of the post, Amazon Game Studios said it was “hiring.” The initiative appears to be a big one.
The first reaction of investors and people in the social game industry is that Zynga Inc.’s (NASDAQ: ZNGA) problems will become deeper than they already are. The premier social game company has lost the respect of investors. Its shares trade close to an all-time low. And the Amazon threat probably will push the stock even lower.
The competitive threat reaches a much broader set of companies than just Zynga. Electronic Arts Inc. (NASDAQ: EA) has tried to muscle into the field with “The Sims Social.” King.com, Wooga and SocialPoint are among dozens of smaller rivals. The sector has become fractured, likely because of what business school professors like to call “the low cost of entry.” Creative game programmers do not need a great deal of capital to do well. Brains will suffice.
Amazon has the kind of fire power that allows it to dominate a market quickly. The dominance has allowed it to crush competitors, large and small. Zynga has reason to be worried about Amazon Game Studios, but so does an entire industry that is still in its infancy.
Douglas A. McIntyre