Making Fun debuts as the video-game arm of Rupert Murdoch’s empire

Media baron Rupert Murdoch is going into video games — but not in his usually splashy way. Although he could easily drop a billion dollars on the burgeoning games business, he’s instead placing an uncharacteristically cautious small bet.

News Corp., Murdoch’s media conglomerate, quietly got in the game business by purchasing Making Fun, a San Francisco social-game startup that is run by video game veterans John Welch, cofounder of PlayFirst, and Lee Crawford, cofounder of Twofish. Welch said in an interview that the division of News Corp. Digital Media Group will make social games for social networking sites, smartphones, tablets and other devices.

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Welch and Crawford started Making Fun in March 2009, about the time both left their former companies. They had both worked together before at Shockwave.com and Sega. They self-financed the company and started doing work for hire for various brands: For example, the company made a game for amusement-park operator Six Flags on Facebook.

“We were very excited to be free at the same time,” Welch said. “We wanted to create content that could fit the new model of digital distribution.”

At PlayFirst, Welch built a reputation for pioneering the casual game market — quick, easily playable, often Web-based titles such as Diner Dash, which sold more than 500 million copies in its various forms over the years. PlayFirst was founded in 2003 and it was one of the first modern game companies to attract venture-capital funding.

Welch said it was already evident that Zynga was becoming a leader in social games on Facebook and Ngmoco (now owned by Japan’s DeNA) was a leader in iPhone games. So they decided to sell their company to News Corp. in November and battle the competition as the game-publishing arm of the media giant.

Making Fun has just 14 employees, but is now recruiting game developers, particularly at next week’s Game Developers Conference in San Francisco.

“News Corp. is patient,” said Welch. “It wants to get into games, but not by spending a massive amount of money very quickly. It is willing to grow organically and start slow. On the other hand, News Corp. doesn’t make investments so that it can create slow-growing businesses.”

Welch said the company already has three projects under way. Making Fun will work closely with small teams of developers. When it finds a really good development studio and builds a solid relationship with it, the company will consider an acquisition.

While News Corp. owns the struggling MySpace social network, Welch said Making Fun will target its games at Facebook, mainly because with 600 million-plus users, Facebook is the powerhouse of the social networking business. If any deals with MySpace or News Corp.’s IGN game-media business make sense, Making Fun will pursue them, Welch said. Making Fun will set its own direction and is mostly investing in original games now, not licensed properties. Welch said he is excited about the future of games ahead, as he believes that Zynga has only won the first round of social gaming, but the market still has huge growth and opportunities ahead.

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“Our goal is not to out-Zynga Zynga,” he said. “We’ve done games like Diner Dash that have gotten hundreds of millions of people. We are looking at the next games that could get those kinds of audiences.

One of the interesting twists is that Sean Ryan was the News Corp. executive who negotiated the purchase of Making Fun. But Ryan recently left to become the head of game-developer relations at Facebook. Ryan will now work with Welch to signal what is coming ahead for the platform related to games. That’s important, Welch said, because Facebook games take six months to build now, not six weeks, so developers need to know the changes coming to the platform.

Welch said the company’s first games will launch in the summer.