Scrabble Wars: Hasbro, Mattel, and Two Guys from India

When logging onto Facebook, many users once headed straight for the Scrabulous board.

If they’re in the U.S. or Canada, however, they can do that no more.

Last week, upon logging in, they got the message that it had been disabled in the U.S. and Canada. 

On July 24, Hasbro (HAS), which owns the North American rights to the board game Scrabble, sued the creators of Scrabulous, Rajat and Jayant Agarwalla, from Calcutta, India, for copyright infringement.  On the same day, it demanded that Facebook remove the application.

In response to the lawsuit, the Argwalla brothers blocked Scrabulous for U.S. and Canadian Facebook users.  Scrabulous is still accessible from its own Web site (www.scrabulous.com).

Mattel (MAT), which owns rights outside of the U.S. and Canada, has not filed a formal suit, though it had sent a letter to Facebook in January requesting that the social networking site remove the game. 

Hasbro’s lawsuit came two weeks after the launch of an official licensed version of Scrabble, created by Electronic Arts (ERTS), was launched on Facebook.  EA has also created Scrabble games for Apple’s iPod, iPhone, and other social networking sites.           

As of January 2008, 2 million registered Facebook users had added the Scrabulous application, but it remains to be seen how many of those users switch over to the new, animation-heavy, slower Scrabble game.

What does all this mean for investors, Scrabulous players, or both? 

It may be that one of the end results of all this furor is an increase in the popularity of the old-fashioned board game of Scrabble itself.  As users get introduced to the game online, sometimes for the first time, they may go out and buy the actual board game for their offline time. 

Sure, the cardboard-and-wood version of the game doesn’t have an instant dictionary, and your playing partners will have to call you out if you use a nonexistent word, since the board itself won’t say anything.  But you can certainly chat when you’re sitting around the table playing the game, and you get a lot more face-to-face contact than you do online.

Whether the demise of Scrabulous, at least its Facebook version, translates into higher sales of the board game Scrabble certainly remains to be seen.   And whether Scrabulous fans will flock to the EA version of the game is also an open question.

It is certain, however, that word games are in.  And that might mean something to any game manufacturers or investors who care to pay heed.

Vivian Wagner
Analyst, Bourbon & Bayonets