Not Playing Around. EA Buys Playfish For $300 Million, Plus a $100 Million Earnout.

After lengthy negotiations, Electronic Arts closed it’s anticipated acquisition of social gaming startup Playfish for $275 million in cash. An additional $25 million in stock will be set aside for retaining the top talent at the startup, and another $100 million in earnouts are part of the deal as well if the business hits certain milestones. So the total value of the deal could amount to as much as $400 million when all is said and done. Although, earnouts have a tendency to come up short (see Skype).

Playfish is based in London, and has raised $21 million from Accel Partners and Index ventures. The Accel investment is from its European fund. Playfish’s estimated annual revenues are $75 million.

Last year at a presentation at the Founder’s Forum in Hampshire, England, CEO Kristian Segerstrale put up a slide with a dinosaur and expressed his desire to “kill EA.” Now he’s joining them instead. Funny how that works.

Playfish operates social games on Facebook, MySpace, Hi5, and other social networks which have been installed more than 150 million times, and claims 60 million monthly active users. It’s top games include Pet Society, Restaurant City, Country Story and Who Has The Biggest Brain?

Social games are increasingly popular and Electronic Arts needed to buy one of the top players: Zynga, Playfish, or Playdom. The issue is that all three make their money from trading in-game virtual currency for advertising offers. Many of these offers are outright scams, which may explain why Playfish got less in upfront cash than the $350 million to $500 million range it was looking for, and the last $100 million is in the form of an earnout. Playfish perhaps also is not as exposed to these scammy offers as its competitors.

Kevin Comolli, a partner at Accel, tells us that the “vast majority” of Playfish’s revenues do not come from lead generation or other types of advertising offers for virtual currency. His take on the whole Scamville affair is that “exposure is ultimately helpful. It needs to be a durable business. Cleaning this up important.”