Looking for a comeback, Zynga embraces austerity and FarmVille



By Gerry Shih

SAN FRANCISCO (Reuters) - In the past twelve months, Zynga Inc has struggled with a contracting player base, a deflated stock price and waves of layoffs. Now it is coming to terms with downsized ambitions.

As Chief Executive Mark Pincus, 47, leads the online games developer he founded in 2007 through perhaps the most crucial year of his tenure, he is pushing to restore revenues by doubling down on "FarmVille," the franchise that took Facebook users by storm four years ago and launched Zynga to stardom.

Though some industry observers had declared farm simulation games a fad and predicted FarmVille 2's early demise, the sequel to Zynga's best-known title has defied expectations at its San Francisco headquarters, Pincus said in an interview. FarmVille 2 has clung to its perch near the top of Facebook charts and the number of people who play the game each day still hovers near all-time highs of 8 million, even six months after launch.

Given a glaring weakness in mobile games, however, one of Zynga's current priorities is porting FarmVille 2 to mobile devices so players can move from PCs to smartphones and back without losing their data. That presented technical challenges that the company is ironing out, Pincus said.

"The ideal is to make that one seamless experience between Web and mobile so you can take your farming experience from work to home," Pincus said. "We're having to retool and reinvent around our process and technology."

Pincus badly needs a reliable hit franchise. In the past nine months, Zynga has shuttered 20 titles and closed offices in Baltimore, Boston and Tokyo. It has trimmed 5 percent of its workforce, though its headcount of nearly 3,000 still dwarfs that of fierce rivals like Supercell, a Finnish company with 100 people that claims an equivalent amount of revenue, or the 600-strong Rovio, the publisher behind the "Angry Birds" games.

Gone is the swagger that defined the early years, when Zynga's army of developers flooded the market with dozens of new titles from cooking games to bingo variations, its dealmakers splashed money to snap up smaller rivals, and its managers opened studios in cities around the world.

Wall Street is viewing Pincus' shift with cautious approval, having been singed by Zynga's abysmal stock performance an 80 percent decline over the past year that began around the time it invested $180 million in then-promising game studio OMGPOP.

"Certainly their shareholder base wants to see more discipline," said Sean McGowan, an analyst at Needham and Co. "When you have limited resources, it makes sense to start with a proven winner, then expand that franchise. But it needs to be a blend of sticking with the proven brands and realizing when people might say: 'FarmVille 4? No, I'm done with that.'"

Investors place much stock on Zynga's future prospects in Internet gambling, because of its massive poker-playing community and existing game software. But with meaningful income from real-money casino efforts likely to be months, if not years, away, it may have to risk "sequelitis" for now.

TABLES TURNED

Almost 18 months after going public, Zynga is staving off fierce competition from newer or nimbler rivals that mimic its games.

Supercell, founded in 2010, has scored with "Hay Day," an iPad game that contains elements resembling FarmVille. With just one other game under its belt, Supercell says it is on track to make more than $800 million in revenue this year, roughly equal to the $860 million that Wall Street expects from Zynga in 2013.

Veteran video games publisher Electronic Arts Inc, one of Zynga's earliest rivals, in recent weeks said it would lay off an undisclosed number of employees and focus on core franchises like Battlefield and sports titles.

Activision Blizzard Inc, another publishing heavyweight, has fared better thanks to the strength of series like "Call of Duty," which has brought in more than $8 billion in cumulative sales since the first title launched in 2003. Yet even Activision is struggling to sustain revenue growth.

Zynga's bottom-line could be shored up through a more streamlined pipeline, Pincus argued. Since FarmVille first launched, it has gradually honed its development process to reduce the resources and development costs required for each significant update by more than 80 percent, he said.

"As long as our players are interested in farming, we'll offer a Farmville," Pincus said. "It could be the Seinfeld of our era in gaming, a multi-season show that has a quality and a consistency that you can rely on."

Zynga declined to address its game pipeline. Bing Gordon, an investor at venture capital firm Kleiner Perkins Caufield & Byers and a Zynga board member, said he has repeatedly nudged the company to develop FarmVille 3.

"Coca Cola has learned not to change their formula," said Gordon, a game industry veteran who formerly served as chief creative officer at Electronic Arts. "If you've got something people want, keep doing it."

BOLD BEATS

Even as Zynga seeks greater efficiency, it acknowledges it has been pressed to invest more to stay competitive.

At the heart of the company's strategy has been its "bold beat" schedule, a roadmap first laid out by Pincus in 2009 to release significant upgrades and new features to games every quarter to keep players hooked.

Once criticized in the industry for low-quality graphics and rudimentary gameplay, the company's latest launches and "bold beats" have placed a greater emphasis on elements like visuals that were once considered superfluous, game designers said.

"Player expectations are higher than they used to be," said Zynga Senior Vice President Todd Arnold, who oversees FarmVille and FarmVille 2. "You're not able to launch a minimalist product as we used to be able to."

For its leading franchises, the company is also investing more in quantitative and analytical tools. Every week, it shuttles players into a room deep inside its offices, where they are shown minute new design features. Their reactions are recorded by video cameras as well as a team of game designers sitting behind a two-way mirror in an adjacent room.

The company also holds periodic panel discussions with its most loyal fans to solicit suggestions for new features.

Linda Zoccoli, a retired daycare business owner in Moraga, California, suggested at a session in March that water was too scarce a commodity in FarmVille 2. Weeks later, she noticed the game began to feature periodic rainfall.

She has spent three hours almost daily for the past eight months tending her plot but hasn't found it repetitive.

"As long as they come out with new quests, new items, it keeps it interesting," she said.

(This story was fixed to correct spelling in paragraph 22 to oversees instead of overseas, corrects spelling in paragraph 25 to Zoccoli instead of Zoccolli)

(Reporting by Gerry Shih; Editing by Edwin Chan, Jonathan Weber and Chris Reese)

Panasonic sees profit rising 55 percent in shift from consumer gadgets



TOKYO (Reuters) - Panasonic Corp forecast its operating profit will rise 55 percent in the year to March 31 as it steps back from struggling operations in TVs and other consumer gadgets in favor of selling machinery, components and electronic equipment to other businesses.

The company expects operating profit to rise to 250 billion yen ($2.52 billion) in the current business year from last year's 160.9 billion yen. That compares with an average 241 billion yen forecast from 18 analysts surveyed by Thomson Reuters I/B/E/S before the company released its latest earnings figures on Friday.

Panasonic's CEO, Kazuhiko Tsuga has promised to weed out within two years any loss-making or low-profitability units that fall short of a 5 percent annual operating margin threshold. Further restructuring, however, could add to costs and squeeze its bottom line.

Panasonic's strategy to pull away from consumer electronics contrasts with domestic rival Sony Corp, which is doubling down on mobile phones, cameras and game consoles in a bid to revive the fortunes of its core consumer electronics business, which still accounts for more than half of revenue.

At Tsuga's company, TVs, DVD players and other home entertainment gadgets represent less than one-fifth of sales, leaving it more options to pursue profits elsewhere. Panasonic's biggest earning segments are appliances, such as washing machines and refrigerators, and the division it dubs "eco solutions", which makes light fixtures, toilets, ceiling fans and other household fittings that hark back to the company's beginnings in 1908 making electrical extension sockets.

In October, Tsuga bit the bullet on non-performing businesses by writing down billions of yen in tax-deferred assets and goodwill related to its businesses making mobile phones, solar panels and small lithium batteries. The result was a net loss of 754.25 billion yen last business year, nearly matching the prior year's record 772.17 billion yen loss.

Like Sony, however, the company is relying on asset sales to underpin its finances as it tries to revive profit growth, pledging to keep annual free cashflow above 200 billion yen. Its disposals have included a Tokyo office building and $1 billion worth of stocks in companies such as Toyota Motor Corp.

The value of the company's assets fell to 5.4 trillion yen at the end of the latest business year from 6.6 trillion a year earlier, as a result of asset disposals and writeoffs.

Over the next two years, Panasonic, which has seen its sales shrink by one-fifth from a peak of $92 billion six years ago, plans to spend $2.5 billion to revamp its businesses.

It has yet to announce additional staff cuts, after shedding 40,000 jobs over the past two years. With 300,000 workers it remains one of Japan's biggest employers.

Since the start of the year, the company's shares have gained 43 percent, keeping pace with a 40 percent rally in the benchmark Nikkei average as weakness in the yen boosted the outlook for exporters. Panasonic's shares rose 3.7 percent on Friday to close at 749 yen before it released its latest earnings figures.

($1 = 99.3050 Japanese yen)

(Reporting by Tim Kelly; Editing by Edmund Klamann)

China probes reports of film director Zhang Yimou's seven children



BEIJING (Reuters) - Chinese authorities have begun investigating reports that Zhang Yimou, one of China's best-known movie directors, has seven children in violation of strict family planning rules, which could result in a fine of 160 million yuan ($26.05 million), state media said on Thursday.

Online reports have surfaced that Zhang, who dazzled the world in 2008 with his Beijing Olympic ceremonies, "has at least seven children and will face a 160 million yuan fine," said the website of the People's Daily, the Chinese Communist Party mouthpiece.

An unnamed official at the Wuxi Municipal Population and Family Planning Commission said "based on the current policies and regulations, an investigation is currently being carried out", according to the report.

It is unclear where Zhang's children were born, the report said, citing a worker at the Jiangsu Province Population and Family Planning Commission.

Both the Wuxi and Jiangsu Population and Family Planning Commission could not be reached for comment.

Zhang, 61, once the bad-boy of Chinese cinema whose movies were sometimes banned at home while popular overseas, has since become a darling of the Communist Party, despite long being a subject of tabloid gossip for alleged trysts with his actresses.

Zhang's newest project, a film to depict wartime Nanjing under Japanese occupation starred Hollywood actor Christian Bale in a leading role.

There are signs that China may loosen the one-child policy, introduced in the late 1970s to prevent population growth spiraling out of control. The policy has long been opposed by human rights and religious groups but is also now regarded by many experts as outdated and harmful to the economy.

Last December, authorities in southern Guangdong said they were investigating a family for having given birth to octuplets through in-vitro fertilization, a case that sparked intense public debate about China's one-child policy and how wealthy families were able to circumvent the rules.

The one-child policy was meant to last only 30 years and there are now numerous exceptions to it. But it still applies to about 63 percent of the population. ($1 = 6.1410 Chinese yuan)

(Reporting by Sui-Lee Wee, Additional reporting by Sally Huang; Editing by Michael Perry)

Actor Neil Patrick Harris returns to host 67th Tony Awards



NEW YORK (Reuters) - Actor Neil Patrick Harris will return to host the 67th Tony Awards at Radio City Music Hall on June 9th in what will be his fourth stint on the show that honors the best of Broadway, organizers said on Thursday.

The Emmy Award winner and star of the TV comedy "How I Met Your Mother," who won plaudits for hosting the Tony Awards last year, said he was very excited to be back.

"It'll be more impressive than ever - if my math is correct, it will be 267 times bigger than last year," Harris said in a statement.

"Oh wait. No. That can't ... hold on ... carry the one ... I'm awful at math. But rest assured, the show will rock."

The Broadway League and the American Theatre Wing, the presenters of the Tony Awards, praised Harris for "his creativity and passion for Broadway."

The actor is a three-time Emmy Award winner for his guest roles on "Glee" and as host of the 2009 and 2011 Tony Awards.

"Kinky Boots," a musical with a score by pop star Cyndi Lauper, earned 13 Tony nominations, followed by "Matilda," a British import, which received 12.

Both shows will be vying for the best musical award along with "Bring It On: The Musical" and "A Christmas Story: The Musical." Lauper was nominated for best score along with book writer Harvey Fierstein and three members of the show's cast.

Actor Tom Hanks, who made his Broadway debut in the Nora Ephron play "Lucky Guy," is up for the best actor award. Other Hollywood stars including Cicely Tyson, Laurie Metcalf, Holland Taylor and David Hyde Pierce have also been nominated for awards.

The Tony Awards show will be aired live on TV.

(Reporting by Patricia Reaney; Additional reporting by Chris Michaud; Editing by Vicki Allen)

Christie to guest-host 'Today' later this month



TRENTON, N.J. (AP) Gov. Chris Christie will guest-host the "Today" show later this month.

NBC announced Tuesday that Christie will be a co-host for an hour of the May 24 show, which will broadcast from the Jersey shore as part of its "Great American Adventure" road trip. A location for the appearance hasn't been finalized.

The road trip segment involves the show's anchors traveling together to five U.S. destinations in a single week. Christie has stressed the Jersey shore's importance as a tourist destination in the wake of Superstorm Sandy.

Christie joins Sarah Palin and Laura Bush as other political figures who have co-hosted an hour of the morning show.

The Republican governor is running for a second term. A spokesman confirmed Tuesday Christie had undergone weight loss surgery in February.

Hip hop star Lauryn Hill gets three months for tax evasion



By David Jones

NEWARK, New Jersey (Reuters) - A U.S. magistrate judge sentenced Grammy-winning hip hop artist Lauryn Hill to three months in prison, three months in home confinement and a $60,000 fine on Monday for federal tax evasion.

Hill pleaded guilty last year to three counts of failing to file tax returns on more than $1.8 million of income between 2005 and 2007 and faced up to three years in prison.

Hill has attributed her failure to pay taxes to years of pressure she experienced as a recording star while raising six children, forcing her to go underground and stay out of the public eye.

On the eve of her scheduled sentencing, Hill paid $504,000 in back taxes to the Internal Revenue Service and another $420,000 to the state of New Jersey, her attorney told the court. She still owes another $285,000 in interest and penalties.

"When the government is asking for 36 months and the judge gives three months, I think the judge gave a fair and reasonable sentence," Hill's attorney Nathan Hochman told reporters.

Prosecutors had asked for a sentence of 30 months to the maximum of 36 months.

U.S. Magistrate Judge Madeline Cox Arleo cited Hill's lack of a criminal record, her six children and her repayment of the back taxes as mitigating factors in the sentence.

Hill must report on or before July 8. Her attorney asked the court to assign the native of South Orange, New Jersey, to a facility close to home. The three months of home confinement following the prison stay is part of one year of supervised probation.

Hill told the court she pulled away from society because her life was in crisis, received veiled threats and was blacklisted because she did not conform to the norms of the music industry.

"I was being perceived as a cash cow, not a person," Hill said.

A new single by Hill, her first in several years, called "Neurotic Society," was posted on iTunes on Friday.

"Here is a link to a piece that I was 'required' to release immediately, by virtue of the impending legal deadline," her Tumblr social media page said on Saturday.

Her lawyers confirmed that she signed a new contract with Sony Worldwide Entertainment and was working on her first album of new material in more than a decade.

Hill's seminal 1998 solo album "The Miseducation of Lauryn Hill" won the singer, a former member of the Fugees rap trio, five Grammy awards.

(Editing by Daniel Trotta, Andrew Hay and Philip Barbara)

Beyonce reigns as forest queen in animated 'Epic'



LONDON (AP) Beyonce loved voicing Queen Tara in the new children's movie "Epic" at least once she stopped crying.

Queen B has gone from pop royalty to screen royalty, becoming the forest queen in an animated movie that she hopes her 15-month-old daughter Blue Ivy will be proud of one day.

The film was her first work since giving birth and she says her hormones were raging.

"I literally had tears when I played the voice," Beyonce told The Associated Press in an interview between concerts in London. "There was a scene where Queen Tara picks out her pod and I just imagined seeing my child."

From the creators of the "Ice Age" and "Rio" series, "Epic" follows a teenager who is transported into a secret forest world then embroiled in a battle between good and evil and has to protect a special flower pod to save the forest. The film is being released in the U.S. on May 22.

This role in "Epic" is not the superstar's only brush with royalty of late. When performing in London last week on her "Mrs. Carter Show" world tour, the singer inadvertently singled out Princess Eugenie in the crowd to sing with her. The 23-year-old is sixth in line for the British throne. Beyonce giggled as she revealed that she had no idea who Eugenie was.

"'I didn't know, and I still don't know. Someone told me and I don't know what's going on, but I hope they had a great time and I hope I didn't insult anyone, making them sing into the mic," Beyonce said. "But you know royalty likes to have fun and have a good entertaining night."

Her sellout world tour has also caused some controversy for its racy costumes and explicit lyrics in the song "Bow Down (I Been On)," but for Beyonce it's simply all part of the show.

"I'm an artist and I love being able to express myself and I'm not one-dimensional," she said. "I have different feelings every day and now that I've done movies I feel like I can try and recreate these characters on the stage."

Utah cabin had uninvited guests 60,000 bees



SALT LAKE CITY (AP) It was the biggest beehive that that Ogden beekeeper Vic Bachman has ever removed a dozen feet long, packed inside the eaves of a cabin in Ogden Valley.

"We figure we got 15 pounds of bees out of there," said Bachman, who said that converts to about 60,000 honeybees.

Bachman was called to the A-frame cabin last month in Eden, Utah. Taking apart a panel that hid roof rafters, he had no idea he would find honeycombs packed 12 feet long, 4 feet wide and 16 inches deep.

The honeybees had been making the enclosed cavity their home since 1996, hardly bothering the homeowners. The cabin was rarely used, but when the owners needed to occupy it while building another home nearby, they decided the beehive wasn't safe for their two children. A few bees had found their way inside the house, and the hive was just outside a window of a children's bedroom.

They didn't want to kill the honeybees, a species in decline that does yeoman's work pollinating flowers and crops.

So they called Bachman, owner of Deseret Hive Supply, a hobbyist store that can't keep up with demand for honeybees. Bachman used a vacuum cleaner to suck the bees into a cage.

"It doesn't hurt them," he said.

The job took six hours. At $100 an hour, the bill came to $600.

"The bees were expensive," said Paul Bertagnolli, the cabin owner. He was satisfied with the job.

Utah calls itself the Beehive state, a symbol of industriousness. Whether this was Utah's largest beehive is unknown, but Bachman said it would rank high.

"It's the biggest one I've ever seen," he said. "I've never seen one that big."

He used smoke to pacify the bees, but Bachman said honeybees are gentle creatures unlike predatory yellow jackets or hornets, which attack, rip apart and eat honeybees, he said.

"They just want to collect nectar and come back to the hive," he said. "Most people never get stung by honeybees it's a yellow jacket."

Bachman reassembled the hive in a yard of his North Ogden home, while saving some of the honeycomb for candles and lotions at his store. He left other honeycombs for the cabin owners to chew on.

"We caught the queen and were able to keep her," Bachman said. "The hive is in my backyard right now and is doing well."

Samsung, BlackBerry devices cleared for use on U.S. defense networks



By David Alexander

WASHINGTON (Reuters) - The Pentagon on Thursday cleared BlackBerry and Samsung mobile devices for use on Defense Department networks, a step toward opening up the military to a wide variety of technology equipment makers while still ensuring communications security.

Lieutenant Colonel Damien Pickart, a Pentagon spokesman, said the department cleared the use of BlackBerry 10 smart phones and BlackBerry PlayBook tablets using its Enterprise Service 10 system, as well as Samsung's Android Knox.

"This is a significant step towards establishing a multi-vendor environment that supports a variety of state-of-the-art devices and operating systems," Pickart said in a statement.

The Pentagon said on Wednesday it also expected to clear Apple mobile devices using the iOS 6 system at some point in early May.

The move to open up Defense Department networks is expected to set the stage for an intensified struggle for Pentagon customers among BlackBerry devices, Apple's iPhones or iPads and units using Google's Android platform such as Samsung Electronics' phones.

The Pentagon currently has some 600,000 users of smart phones, computer tablets and other mobile devices. The department has 470,000 BlackBerry users, 41,000 Apple users and 8,700 people with Android devices. Most Apple and Android systems are in pilot or test programs.

The move to open up the networks to a broader array of mobile devices is part of a Pentagon effort to ensure the military has access to the latest communications technology without locking itself in to a particular equipment vendor.

To ensure security, mobile devices and operating systems go through a security review process approved by the Defense Information Systems Agency. Once their Security Technical Implementation Guide - or STIG - is reviewed and approved, the devices can be used on the network.

Pickart said the decision on Thursday did not result in product orders. But it will enable user groups within the Pentagon to purchase the devices most appropriate for their work as the need arises.

"We are pleased to add Blackberry 10 and the Samsung Knox version of Android to our family of mobile devices supporting the Department of Defense," he said. "We look forward to additional vendors also participating in this process."

(Reporting By David Alexander; Editing by Tim Dobbyn and Eric Walsh)

Keira Knightley says 'oui' to rocker James Righton



PARIS (AP) A French mayor says Oscar-nominated actress Keira Knightley has said "oui" to rocker James Righton in a small wedding ceremony in southern France.

Aime Navello said Sunday the couple followed French tradition when he married them at the Mazan town hall on Saturday. Navello read the service in French and the couple responded in French and English. He said about 10 people were present.

Righton is keyboard player for the rock group Klaxons. He and Knightley got engaged a year ago.

Knightley first won notice for her role as a soccer-playing teenager in "Bend It Like Beckham."

She went on to star in the first three "Pirates of the Caribbean" movies and was nominated for an Oscar for playing Elizabeth Bennet in an adaptation of Jane Austen's "Pride and Prejudice."