Although Candy Crush describes itself as the “sweetest game around,” there is no guarantee that Activision’s $5.9 billion (£3.8 billion) takeover of King.com won’t leave both users and investors with a bitter taste.
Activision Blizzard is best-known for its action-centric, big-budget console and PC titles. But these are very different to the role-playing and simpler puzzle web-based and mobile games its London and Stockholm-headquartered acquisition is adept at making.
On top of that, the size of the acquisition outdoes other mega-deals in an industry already susceptible to consolidation.
Other recent mergers include:
- Electronic Arts’ $750m purchase of Popcap – the Plants vs Zombies developer
- Amazon’s $970m payment of the games community Twitch
- Facebook’s $2 billion takeover of Oculus – virtual reality headset maker
- Microsoft’s $2.5 billion purchase of Mojang – the developer of Minecraft
So why the huge figure in the latest deal?
Gaming on tablets and smartphones is experiencing a growth spurt.
Newzoo, a research firm, predicts that 2015 will be the year that revenues from mobile games eclipse those of console titles, even though the latter generally cost more to purchase.
This is partly due to the fact that a lot more people own and game on tablets and handsets, but also because of King.com’s and some others’ success in persuading players to make several “in-app” purchases.
Simply put, instead of attempting to make users cough up a large amount of money to purchase access to all of a game’s content upfront, players are instead given the software for free or charged a low price but then persuaded to pay extra to add abilities, unlock levels, get other booster content and change the appearance of their character.
As many a user has learned, the cost of such virtual goods may seem cheap initially, but eventually add up.
Small sales, big names
Despite Activision Blizzard releasing dozens of titles, it has grappled to make much impact in the mobile sector.
Attempts to build on existing franchises such as Skylanders, Tony Hawk skating games and Call of Duty have had mixed success.
In contrast, King.com’s games Candy Crush Saga as well as its sequel Candy Crush Soda Saga are both inside the top six titles and have been steadily high-earners over the years.
After Candy Crush
King.com reported an admirable $490 million worth of sales and 501 million active players at the end of its most recent quarter.
However, some analysts remained concerned about its prospects.
Piers Harding-Rolls from the IHS Technology consultancy stated that its actual audience has decreased from a peak of 550 million active users. He added that he thinks it would be a challenge on what to do post-Candy Crush, something Activision has to take on.
What might cause specific concern is that approximately 40% of King.com’s revenue in the first six months of 2015 came from one title – the original Candy Crush Saga – and its earnings ability is reducing.