Activision Blizzard, which markets blockbuster console and games such as “Call of Duty,” “World of Warcraft” and a thousand or so other titles, is paying $5.9 billion in cash to acquire King Digital Entertainment, the maker of “Candy Crush Saga,” the free-to-play mobile game that nonetheless enticed players to spend more than a billion dollars on in-app purchases last year.
“With the buyout, Activision is able to address one of its chief areas of weakness: mobile,” writes Chris Morris for Fortune. “The company’s franchises — which also include ‘Destiny,' 'Guitar Hero’ and ‘Skylanders’ — are strong. But Activision has been late to the mobile revolution and slow to embrace mobile gaming as the category has increased in size.”
“The deal gives the combined group more than 500 million monthly active users across almost 200 countries and is expected to boost Activision's adjusted earnings by about 30% next year, write Tim Bradshaw and Matthew Garrahan for Financial Times.
“Other than YouTube or Facebook there isn’t a worldwide network that has a bigger number of audience members,” Robert (Bobby) Kotick, Activision’s CEO tells them. “A big part of the opportunity is to explore the intellectual property that exists at Activision Blizzard and see if it makes sense in that network.”
King’s management — CEO Riccardo Zacconi, Chief Creative Officer Sebastian Knutsson and COO Stephane Kurgan — will stay in place and run the company as an independent operating unit, according to a statement announcing the deal.
“Activision Blizzard has a strong integration track record, and implementing the acquisition as structured will minimize disruption and integration risk while maintaining the spirit of creative independence,” it says.
“They built an incredible business,” Kotick tellsUSA Today’s Mike Snider and Brett Molina. “When we think about people who create compelling content and satisfy large audiences, they’ve been brilliant at it. We thought it would make a great opportunity for us to enter a new market.”
And King’s Zacconi tells the Wall Street Journal’s Sarah E. Needleman that “the deal acquisition represents an opportunity to extend its user base beyond its stronghold of women and casual gamers.”
A huge share of that business was, and remains, one franchise. “‘Candy Crush Saga,’ which was first launched on Facebook and smartphones in 2012, caught the public imagination and still makes up about a third of the company's revenue,” reports the BBC. “Even though the company has produced more than 200 games, including the popular ‘Bubble Witch’ and ‘Farm Heroes,’ it has yet to replicate the success it found with ‘Candy Crush.’”
Writing two years ago in ESPN’s now-defunct and lamented Grantland, Tevis Thompson said “Candy Crush Saga” “succeeded at free-to-play in a way that will be studied for years, that penetrated the wider culture and came to stand in for all of addictive, time-wasting mobile gaming in 2013.”
Although “97.7% of people playing King’s games are playing for free, the 2.3% that pay are spending an average of $23.42 a month within the games,” according to a Guardian analysis of its 2014 results last February that tallied “Candy Crush Saga”’s yearly sales at $1.3 billion. But, writes Stuart Dredge, “In terms of gross bookings, ‘Candy Crush Saga’ peaked some time ago” — which, in videogame time, translates to third quarter of 2013. “It’s been downhill ever since” but it “remains one of the most lucrative mobile games in the world.”
Indeed, “the declining performance of ‘Candy Crush’ and other King titles did not deter Activision from a deal, according to executives from both companies. Activision saw value in King’s network of players, which when combined with its own would yield an audience of more than 500 million unique users each month — bigger than Twitter’s base,” write Michael J. de la Merced and Nick Wingfield for the New York Times.
“The expanse of King’s audience, stretching across the globe and including emerging markets that traditionally haven’t spent money on expensive videogame consoles and PCs, also proved attractive.”
Activision is based in Santa Monica, Calif. King, whose Q3 earnings call will be webcast tomorrow at 4:30 EST, has corporate headquarters in Dublin, game studios in Stockholm, Malmö, London, Barcelona, Berlin, Singapore, and Seattle, and offices in San Francisco, Malta, Seoul, Tokyo, Shanghai and Bucharest. And, if you’ve ever seen someone engrossed in playing “Candy Crush,” it also exists in another world entirely.