There are changes coming to Candy Town. Activision Blizzard, owners of video franchises Skylanders and World of Warcraft, among others, announced its purchase this week of King Digital Entertainment for $5.9 billion.
Until now, Activision was not a big fan of interactive for mobile. Activision CEO Bobby Kotick noted in 2010, “The place where you have the opportunities for growth is within the communities of franchises we control. We don’t view the App Store as a really big opportunity for dedicated games.”
Times and trends change. In a press release detailing the current acquisition, Mr. Kotick states, “The combined revenues and profits solidify our position as the largest, most profitable standalone company in interactive entertainment. With a combined global network of more than half a billion monthly active users, our potential to reach audiences around the world on the device of their choosing enables us to deliver great games to even bigger audiences than ever before.”
The press statement also details, or seeks to explain, the reasoning behind this costly acquisition: bigger, better, and mobile.
When the dust settles…$5.9 billion?
In acquiring Candy Town and friends, Activision Blizzard now owns a big slice of the mobile gaming pie. Despite their loyalty, console and PC gamers do not have the mass of global mobile players, and this acquisition neatly diversifies and bolsters the position of Activision Blizzard.
The candy-matching game Candy Crush Saga is clearly the biggest asset of King Digital Entertainment, responsible for just under half of its revenue. Candy Crush Saga remains the fourth highest grossing offering in the Apple App store, while Candy Crush Soda stands at number six.
Despite this performance, the game is slowly losing ground. In August of this year, King Digital posted a decrease in net profit of almost 30 percent, and laid the blame for declining performance on Candy Crush.
King Digital reported, “The sequential decrease in MUUs [monthly unique users] was reflected in both Web and mobile, but at a greater rate of decline on Web, which we believe is due to a continuing decline in overall Facebook desktop users.”
Despite the decline and King Digital’s inability to create the same magic with games released since Candy Crush, Activision Blizzard has experience sustaining games like Skylander, and may be able to work successfully with the Candy Crush franchise.
By adding to its intellectual property, Activision Blizzard acquires a database of the approximate 7.6 million monthly active users (MAUs) of Candy Crush, who spend more every month than gamers who use World of Warcraft. Plus, although World of Warcraft MAUs are up, it lost more than one million subscribers in the second quarter of this year alone.
Activision Blizzard now has a top-notch creative team in place for mobile, boosts its user reach, solidifies its interactive gaming prowess across platforms, and acquired an aging IP. Despite this, it is not clear this purchase creates $5.9 billion worth of synergy.
For King Digital Entertainment, this is a sweet deal. We will see whether it was a needed boost—or bubble—for Activision Blizzard.