SEC: Facebook And Zynga Have Exclusive Relationship

Facebook and Zynga really do have a sweet relationship: an exclusivity agreement.

Facebook and Zynga really do have a sweet relationship: an exclusivity agreement.

The social network filed an amendment with the Securities and Exchange Commission today disclosing details about exactly how Facebook earns 12 percent of its revenues from Zynga.

The filing amends Facebook’s initial public offering registration, using a great deal of legalese to pad the fact that the two companies try to increase each other’s user base by amounts determined on a quarterly basis.

The legal agreement requires gamers to have Facebook accounts in order to play Zynga games.

Zynga can terminate the agreement only if Facebook agrees, otherwise the arrangement lasts five years effective May 14, 2010.

This same information appeared in Zynga’s own amendments filed prior to the game maker’s IPO, according to our sibling blog Inside Facebook.

Our peers over there also say that today’s filing includes “an agreement from 2010 with Russia’s Digital Sky Technologies when the late-stage investment firm held an 8.2 percent stake in the company.”

Now, here’s the legalese version, right from the SEC filing (no edits made):

The parties acknowledge that FB desires to enable Zynga to build the Zynga Platform on top of the Facebook Platform, and the parties desire to, amongst other goals set forth herein, work together to increase the number of users of each party’s products and services.

The parties further acknowledge that Zynga is making a significant commitment to the Facebook Platform (i.e., using Facebook as the exclusive Social Platform on the Zynga Properties and granting FB certain title exclusivities to Zynga games on the Facebook Platform).

In exchange for such commitment, the parties have committed to set certain growth targets for monthly unique users of Covered Zynga Games.

…Each month during the Term, for all Properties on which you implemented, during the previous month, the Facebook Ad Unit, we will pay you a percentage of Net Revenue (“Ad Share”) arising from such Properties for the previous month.

Readers, do you think the agreement between Zynga and Facebook makes it hard for other developers to compete?