Activision Blizzard to buy Candy Crush Saga maker King Digital for $5.9 Billion

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With a B.

Civilization is over.


I’m starting to think that money is non-linear… it’s really hard to make, say, $100 moving dirt all day with a shovel which has an obvious deliverable for the labour cost.

Sell a software company and you can get for $5,900,000,000 with intangibles, promises, and hope as deliverables.

Either that or the system is rigged. Naw, couldn’t be…


I have never played it, but from what I have seen it just looks like a Bejeweled clone?
Is there more to it?

Billions, Zillions, and even BaZillions sold…


Don’t underestimate potential. Paying someone $100 to shovel dirt for a day gets you one relocated pile of dirt and nothing more. It’s not going to sprout a giant beanstalk for you to climb towards riches.

Buying a company is more like buying an automated dirt-moving machine. You still have it when the day is done, and can move more dirt tomorrow without having to pay anyone another $100. You can use its capabilities to build something, or go into the dirt-moving business without having to get all sweaty, or maybe the machine’s resale value goes up for whatever reason and you sell it for a profit.

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King is making $900 million a year. It is a bold bet, but similar to Marvel it could pay off huge.

It survived Groupon’s $12 billion IPO ‘value’?

What I find utterly baffling about this aquisition, at a premium price, is that while King has ‘Candy Crush Saga’, they don’t appear to have any special insight into how to replicate their success; and if you want people who can succeed at mobile once; Zynga, Rovio, and probably others are available down at the flea market.

I understand why Activision wants in on the microtransaction money train; but what I don’t understand is the strategy of buying the company that has already had its hit(and thus is extremely expensive) unless you think that they(unlike the scattered corpses of the optimists who believe this before them) have actually cracked the secret of repeatable mobile success; rather than a surprise hit followed by a series of progressively less successful reskins and derivatives.

With King, they have the assurance that the company knows something about mobile games; and can at least assume whatever marrow is left to be sucked out of their existing successes; but they also take on the relatively high risk that they are buying in at about the highest price the company will ever command. For almost $6 billion, just imagine how many assorted lean-and-hungry mobile developers with adequate technical chops but no hit yet you could bet on. Sure, lots of them would probably die without a wimper; and you’d be out the money unless the staff were worth aquiring; but given the peanuts you are paying for each one; you don’t need most of them to succeed.

That’s what seems weird: King is guaranteed to produce some ongoing profit(though their quarterly earnings growth numbers have frequently been negative since their IPO; they remain profitable at the present time); but the markets factored that into its valuation, so Activision isn’t getting anything ‘for free’ there.

As a talent-acquisition strategy, King is remarkably expensive compared to just poaching its good people or buying up your choice of companies with respectable portfolios but no lucky hits: they could easily put together a team capable of pimping out the games that people actually like in debased mobile form for markedly less than 5.9 billion; probably substantially under 1 billion. (Diablo might actually make a pretty good mobile game; phones and tablets are up to the challenge now, it it was all left-clicking on stuff anyway; and only their sense of shame prevents them from releasing “Zergling Squish Ballad”)

As a bet on ‘mobile’ it seems extraordinarily conservative, risk-averse; and thus unlikely to produce more than a tepid payoff: King has already won the lottery, and their price reflects that, so there isn’t much room for notable improvement and a lot of potential for withering and decline. You’d think that a diversified portfolio of dozens of cheaper mobile outfits would have been a more interesting purchase if they just wanted in to the industry; and a much cheaper focused talent recruitment would have been much more logical if they wanted people suitable to bring their existing franchises to mobile.

It’s probably not the dumbest thing that has been tried; by a long shot; but the ‘meh’ is strong with this one.


Trouble is, unless the rational market hypothesis has utterly fled the room; King’s assets and reasonably likely future earning should be factored into its market value; so Activision is already paying for those; and, while I can’t rule out some sort of clever scheme, this graph of net income(from Wolfram Alpha, ‘King Digital Entertainment Net Income Per Year’) would make me a little nervous. That’s not ‘plummeting’; but ‘mobile’ isn’t a business where AAA blockbusters with multi-year development and hype cycles are the order of the day; so it looks like King’s pipeline is…perhaps not so hot…and their ability to monetize existing users is doing the same thing that Zynga did.

Unless Activision has some sort of elegant synergy in mind; I find it hard to escape the conclusion that they, in a misplaced attempt at risk aversion or lulled by prestige, managed to buy in close to King’s peak value and are going to try assorted flavors of firing peons and shuffling deck chairs; but will find that making that graph stop trending down fast enough to earn back what they paid(once time value of money and cost of risk are factored in) will be a challenge that, if they knew how to accomplish, they wouldn’t have needed to buy King in the first place; because they’d already understand the secret of mobile gaming.


Yeah, it could be a Vanity Acquisition, or even a Desperation Acquisition. But considering the market for mobile games went from what $20 billion to $35 billion over the last fourish years (arstechnica has the real numbers) and consoles/AAA are flatlining, they had to do something big.


Oh, and there is around a 12% overlap in unique customers between the two. Which means 88% of Kings customers don’t play Activision games.


I’m definitely not surprised that Activision wants in on ‘Mobile’, nor do I think that that is illogical; it’s just their choice of entry strategies that I find curious(already belabored above, so no point in repeating). It certainly is Big and Decisive and Splashy; but I’m not sure that those are going to be virtues in this case.


They usually aren’t. I suspect their board didthe equivalent of running around like a headless chicken.

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So is this the second or the third bubble we’re looking at?

King is grotesque behemoth, that Activision sees value of it at this price makes me want to puke candy gems. They’ll get their money back and more.

This better not be true. First of all, a free game where you pay for flashy extras is Path of Exile - it’s actually free, you can play and enjoy it for no money, and the extras are silly hats and stash space. Candy Crush is designed around making some levels require huge numbers of plays to get through so that people will become frustrated and pay for bonuses to beat them. I understand the majority of people who have won Candy Crush never paid for it, which is a testament to the mentality of actual hardcore gamers, but a few people have paid a lot.

I know a lot of people who like Candy Crush and would have paid a few dollars for it. With like 700+ levels I think people would have paid $10 or $15 even. But they don’t want a large number of people to pay them $5 or $10, they want a small number of people to pay them $1000 or $5000. It’s a whale hunting operation.

I don’t want to play a game that I get for free on the back of other people with gambling-addiction-like problems.

I’m hoping this business model works the same way that negative campaign ads “work.” Sometimes they work but if you just keep using them people get sick of them and they stop working. People adapt. Let’s adapt and get rid of this nonsense.


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