Shawn Fanning negotiating to sell social gaming company Rupture for $30M

Shawn Fanning, who gained fame after launching early music file sharing company Napster, is in advanced stages of talks to sell his most recent social gaming start-up, Rupture, for $30 million.

The buyer would be Electronic Arts, but unlike first reported by Techcrunch, the deal hasn’t gone through. I reached someone very close to the deal but who requested anonymity, who said “nothing has been signed, but it’s getting close.”

“Is it likely to go through?,” the source continued. “Yes.”

Finally, it looks like Fanning will hit paydirt. Napster went bankrupt after facing insurmountable legal challenges, and Fanning’s second music start-up SnoCap didn’t do very well either, and was reportedly sold for very little to imeem.

We reported on Fanning’s Rupture a year and a half ago, when it first emerged with a goal to bring social networking to popular online multiplayer games like World of Warcraft. It has stayed in a private testing mode since then, having delayed its launch, so Electronic Arts is obviously buying the company for its technology and potential. The area of online social gaming is promising because millions of gamers have formed communities with each other through playing, but their interactions have been limited by the confines of proprietary software.

With social networking and online gaming all the rage (with $1 billion in subscription sales alone), it’s no surprise that Electronic Arts, the giant game maker, which has been struggling to find itself in recent years, would be interested. EA is working on a variety of online games. The company’s Mythic division has been at work on “Warhammer Online” for four years and it expects to launch the fantasy-role playing game in the fall. Spore, another single-player game with online elements, will launch in September. But it isn’t immediately obvious whether those games could use the Rupture technology. Sometimes the technology behind a game on a major title is written in stone years before its launch.

Fanning and co-founder Jon Baudanza will both join Electronic Arts under the planned agreement.

Rupture raised about $3 million last year from Ron Conway’s Baseline Ventures, Joi Ito and Reid Hoffman among others. (Dean Takahashi contributed to this post).