By Louis Bedigian

Zynga (ZNGA), the perpetually imperiled social game developer, received a new and unexpected competitor this week when Amazon (AMZN) announced that it is getting into game design.

The company's first title (developed by the online retailer's new game division, Amazon Game Studios) is "Living Classics," a moving object game in which players must reunite a family of foxes "by exploring beautifully illustrated scenes and spotting moving objects." In essence, "Living Classics" appears to be another take on the hidden-object genre.

"Living Classics" features an interesting art style with familiar characters and scenarios, including those from Alice in Wonderland and The Wizard of Oz. The debut trailer posted on the official Amazon Game Studios blog shows a wide array of challenges, including one that appears to be taken from The Sword in the Stone.

This is not the kind of game that will steal the thunder of Activision (ATVI), whose "Call of Duty" franchise still leads the game industry in the United States. It is, however, a fairly unique entry into the world of Facebook (FB) gaming. With recognizable characters and some of the most impressive animations ever seen in social media, "Living Classics" could easily steal the spotlight as the hottest new Facebook game.

At this very moment, investors do not seem to care. Amazon shares are up a marginal amount, and Zynga (which launched a new game this week, ChefVille) is up roughly 4%.

The bigger picture, however, is not as kind to Zynga. In July, the stock lost more than 40 % of its value after Zynga announced quarterly earnings results that were well below expectations.

Since March, Zynga shares have dropped roughly 80%. The company has attempted to stay relevant by signing deals with major corporations, including the Comcast-owned (CMCSA) Universal Studios. Without any major products to excite the masses, however, Zynga has had a difficult time maintaining its position as the social gaming leader.

Last September, Electronic Arts (EA) became the No. 2 player in social gaming, thanks in part to its acquisition of PopCap Games. According to AppData.com, EA has since fallen to fourth place. Microsoft (MSFT) has taken the second-place spot, while Woobox currently comes in at number three.

Earlier this month, EA sued Zynga over copyright infringement. EA claims that Zynga copied its new Facebook game, "The Sims Social," in developing "The Ville."

EA refers to "The Ville" as an "unmistakable copy" of "The Sims Social." Reggie Davis, Zynga's general counsel, responded to the accusations by telling USA Today that it is "unfortunate that EA thought that this was an appropriate response to our game, and clearly demonstrates a lack of understanding of basic copyright principles."

"It's also ironic that EA brings this suit shortly after launching SimCity Social which bears an uncanny resemblance to Zynga's CityVille game," he said.

That would be ironic if "CityVille" had not already been accused of copying the original "SimCity." Still, EA has decided to leave "CityVille" out of this legal battle -- for now, at least.

With lawsuits, new competitors, and a lack of original and compelling game content, Zynga's future is not looking good.

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