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Activision Buys Candy Crush Developer For $5.9B (inquisitr.com)
ForgedArtificer writes: Activision Blizzard purchased Candy Crush Saga developer King Interactive Entertainment last night for a cool $5.9 billion USD; about 20% above market value. The move likely leaves them owning five of the top grossing franchises in the industry. "Candy Crush is one of the most lucrative games in the world, earning some $1.33 billion in revenue in 2014 alone according to a King financial statement. The studio, which operates Candy Crush and a number of similar games including Bubble Witch and Farm Heroes, grossed $529 million in the second quarter of 2015."
Branding is like, > 90% of business. Also a HUGE MASSIVE database of analytics and pre-loyal customers.
King's game revenue comes almost entirely through in-game purchases of gold bars, which are effectively treated as the currency for their games. You can use them to purchase an extra few moves if you run out but are close to winning a level (called EGPs), and you can use them to refill your lives if you run out, without having to wait for them to re-fill at the rate of 15-30 minutes per life (depending on the game). The only ads in King games are for other King games (called cross-promos).
King's games are a popular thing to hate lately, but the fact is that a huge amount of ongoing work goes into their titles - most of them see new batches of levels every two weeks, and new gameplay mechanics, boosters, and features every month or two. The games are constantly being improved, and the high bar of quality is why King's games have done well while other dime-a-dozen match-3 games haven't.
The other thing to keep in mind is that you can get every last byte of content out of the games without ever spending a penny. Yes, early on there are collaboration locks, and you need to wait for lives to refill, but at the end of the day you can do it if you're patient. King makes its money because most people aren't.
Activision paid over $1billion more for Candy Crush than Disney paid for the Star Wars franchise.
You are welcome on my lawn.
Personally, I'm of the view that Activision has just paid rather too much money to acquire a developer whose value has already passed its peak. A lot of these mobile developers tend to get big on the basis of one or two apps that "go viral" but then struggle to follow up on initial successes. The mobile gaming market is so over-crowded that producing the next big-hit is a complete crapshoot. Nobody's come up with a formula that works; the Next Big Thing is as likely to be a so-bad-it's-funny Flappy Bird game from some guy in his bedroom as it is to be a carefully crafted and marketed sequel to the Last Big Thing.
That said, I'm not surprised that Activision is looking to diversify. For a long time, it has been dependant upon two big cash cows; World of Warcraft and Call of Duty. Both of those have passed their peak.
World of Warcraft's subscriber numbers have fallen a long way since their peak in the late-Lich King/early Cataclysm era. It's down at around 5 million subscribers now, down from a peak of over 12 million (and Activision/Blizzard have just announced they're going to stop reporting subscriber numbers). 5 million is still a huge user-base for a subscriber-MMO, but they are on a fast downward trend and likely to lose the "world's biggest subscriber MMO" crown soon.
Call of Duty, meanwhile, has also fallen a long way from its sales peak. The peak was achieved in 2011, with 26.5 million sales of Modern Warfare 3. 2012's Black Ops 2 managed an only-slightly-lower 24.4 million, but things went into serious decline after that. 2013's Ghosts sold 16.5 million copies, which Activision blamed at the time on the game coming out during a transition in console generations (the fact that it was a poor game even by Call of Duty standards probably didn't help either). It never reported final numbers for 2014's Advanced Warfare, but did indicate that after 3 months on sale, numbers were "27% lower than Ghosts at a similar point in time", which would indicate that it probably eventually landed somewhere in the 12-13 million sales range.
Now, don't get me wrong, both World of Warcraft and Call of Duty are still spectacularly successful franchises (breaking over 10 million sales is something most AAA developers can only dream of, let along over 20 million). But they are far and away the most important jewels in Activision's crown and if they are in decline, that gives the company a problem.
On that basis, it's not surprising to see them take a punt on something like King (even though I think this was the wrong punt to take).