Having established itself as a big player on PCs and video game consoles, Activision’s deal to acquire King for $5.9 billion immediately boosts its stature on mobile devices, a market the longtime video game publisher has struggled to capture.
During an interview with USA TODAY following Activision’s announcement, CEO Bobby Kotick admitted the publisher hasn’t been as active in the fast-growing mobile gaming space. “There is a huge fan base, and we weren’t really creating a lot of content for that enormous fan base,” says Kotick.
Activision attempted a handful of endeavors to attract smartphone and tablet users, including a version of its popular Zombies mode created for the lucrative Call of Duty franchise. Console versions of the toys-to-life game Skylanders were also launched on mobile devices, complete with controllers aimed at mimicking the core experience. And its rebooted Guitar Hero Live game can be purchased and played on iPads, iPhones and iPod Touch devices.
With its deal to acquire King, Activision Blizzard snags a video game publisher known for making mobile blockbusters, much like Activision has done on consoles with Call of Duty and PCs with World of Warcraft.
The mobile game market is increasingly lucrative, with revenues having more than tripled from $1.47 billion in 2011 in the U.S. to more than $5 billion in 2014, according to SNL Kagan. Global spending on mobile games will total $32 billion this year, forecasts IHS Technology.
And Candy Crush Saga, the puzzle game that fueled King’s rise, remains a crown jewel in that market. According to iTunes most popular charts, Candy Crush Saga is the fourth highest-grossing app. From July to September, Candy Crush Saga and Candy Crush Soda Saga ranked among the top five grossing games in both the iOS App and Google Play stores, according to data tracking firm App Annie.
The deal “enables Activision to tap enormous scale of the mobile games market and overnight seize a significant double-digit share of mobile games,” says IHS games analyst Piers Harding-Rolls. “King has annual revenues of $2.2 billion of which approximately 80% are from mobile games.”
Adding King’s mobile revenues should also help ease shareholder worries over about slowing momentum for core franchises including Skylanders.
“Activision is facing increased competition to the Skylanders franchise from Disney, Nintendo and Lego, and is experiencing declining sales of its annual release of Call of Duty,” Harding-Rolls said.
As for King, the mobile publisher seeks to maintain its unique player base of 340 million as interest in Candy Crush Saga wanes. The company is planning to launch games identified as “mid-core,” which attract an enthusiast gamer audience more willing to play longer and spend money.
“The mobile games market is highly unpredictable, even with a strong set of franchises success and strong IP brands,” says Harding-Rolls. “With King’s audience stagnating as Candy Crush Saga declines, maintaining the scale of the business will be the key challenge for the next 6-12 months.”
Activision is betting that the combined companies can do just that. Not everyone agrees.
At the IMD/Cisco Center for Digital Business Transformation in Lusanne, Switzerland, director Michael Wade thinks King is an “unrealistically high” overvalued unicorn. Sure, Activision’s current games skew to males and Candy Crush to females. “To me this sounds very expensive,” he said. “Activision must be trying to diversify its customer base. But at what price?”
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