Zynga Gunning Up (And Lawyering Up) For War Against Facebook With Zynga Live

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The relationship between Facebook and its biggest gaming partner, Zynga, are at an all time low, we’ve heard from multiple sources. The level of stress, says one source, is “intense.”

Some of the frustration goes back to last year’s limitations on messaging users. But a much bigger concern now is Facebook’s force feeding of Facebook Credits as the only payment platform that Zynga and others can use. Facebook takes a massive feee – 30% – for Credits, and the big publishers like Zynga see it as little more than a protection racket.

To make matters worse, say sources, Facebook is trying to get Zynga to agree to a long term deal where Zynga remains primarily on the Facebook platform. During negotiations Facebook has taken some steps to punish Zynga, such as shutting off notifications for Farmville and other games, and Facebook has threatened, say multiple sources, to simply shut some of Zynga’s games down permanently.

Zynga has already taken steps to distance itself from Facebook in the event of a breakup, such as launching Farmville at Farmville.com. And they have been extra aggressive about trying to get users’ email addresses so that they can communicate with them off of Facebook.

On Thursday evening at 5 pm, we’ve confirmed, Zynga CEO Mark Pincus held an all hands meeting to tell employees that they may need to prepare for a break with Facebook. We received this email from one anonymous source, and we’ve confirmed it is largely accurate:

Pincus announced at a 5pm meeting yesterday at Zynga that Zynga was going to launch a social game network called Zynga Live. The Zynga Live initiative was a social gaming network. Facebook and Zynga has been negotiating on Facebook Credits and the talks turned for the worst. In the negotiation process, Facebook shut off Zynga\’s feeds and threatened to shut down games. Zynga in the process threatened to completely leave Facebook and prepared to do so in the previous upcoming weeks.

If Zynga does pull away from Facebook, I’d imagine they’d still let users log in via Facebook’s open graph as well as third party solutions from Twitter and perhaps MySpace. But Zynga would remain in control of their own platform and they certainly wouldn’t be forced to pay a 30% tax to Facebook for Facebook Credits.

Will this happen soon? “It could be tomorrow, it could be in six months,” says one source.

Zynga declined to comment on this story. We’ve reached out to Facebook.

Update: Facebook’s statement: “We have conversations with our large developers all the time and we don’t typically comment on specific discussions. But generally, our priority is to ensure a quality experience for Facebook users while fostering an innovative and dynamic environment that offers meaningful opportunities for all developers on Facebook Platform.”


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