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On November 2, Activision Blizzard (home of World of Warcraft and Call of Duty) announced that it was buying (home of Candy Crush Saga) for $5.9bn, bringing together one of the largest publishers of Triple A games with the current champion of casual gaming. While financial analysts can argue about the staggering amount paid (King may have 474 million monthly active users in 3Q15, but its revenues are only around $400–500m a quarter – and both its user numbers and revenues are in active decline this year), there is no doubt that this combination of a stable traditional publisher with a new-generation casual developer (with all the highs and lows that implies) could offer a template for future games publishers. If – and it’s a big if – the synergy of the brands and the meeting of two still fairly distinct gaming cultures can be shown to work.

On the positive side:

  • King gets a “safe pair of hands” as its new owner. Activision has stable earnings, reliable money-generating franchises (Call of Duty, World of Warcraft), has typically been better at delivering games to a deadline, and is broadly respected by the financial markets. This means that King (unlike say Rovio or Zynga) is no longer at the mercy of quarterly Wall Street calls and institutional investors still hazy on what success should look like.

  • Activision gets a massive boost in mobile and casual. Activision, like all of the major traditional game publishers, has dabbled in non-traditional games in the past (a Downton Abbey game anyone?), but it’s never had the success that firms like King has seen.

  • An enviable roster of game properties. As Bethesda demonstrated with Fallout Shelter – a fairly traditional casual game based on its highly anticipated RPG Fallout 4 – given the right trapping and branding, even “traditional” gamers will embrace a few casual games. In World of Warcraft, Call of Duty, and Skylanders, Activision has some of the most recognizable IP out there. Conversely, while King’s IP may seem all cartoony, non-threatening, and childish, it’s exactly those qualities that have drawn in so many female players.

On the negative side:

  • Does King justify what amounts to one of the biggest entertainment acquisitions? King has good revenue and decent margins and the offer price is only around 20% higher per share than recent trading activity. But is King really worth more than Lucasfilm or Marvel (Disney’s for just $4.1bn and $4.2bn, respectively), or even AOL (Verizon Communications picked this up for $4.4bn this year). Bluntly, the firm is still a one-franchise (Candy Crush), one-channel (non-traditional gaming) pony whose highest usage/revenue days may be behind it.

  • Can a non-traditional gaming firm go the distance? OK, so now some of the stock market pressure is off King at least it should avoid the kind of fate awaiting Zynga or Rovio, but Activision will need to see consistent returns on its investment. It is worth stating here (again) that, while we’ve seen a number of small firms rise to incredible heights of user engagement, daily revenues, and global reach in the non-traditional space (you could add in firms like GREE or Supercell here), none have yet shown an ability to repeat this success after one or two breakthrough hits.

  • Can two very different markets and cultures work together? As we’ve written before (in our October 2014 report Keeping Up With the Kardashians: How Gaming Companies Engage the Mobile and Social Consumer), the pace of development and release of casual games (not to mention their speedy follow-ups) is fast and relentless – and a game can be deemed a failure and canned in less time than it takes a traditional developer to mock up some environment graphics. In a worst-case scenario, Activision tries to bring its normal pipeline management and planning to the more laissez-faire world of casual game development – or “death by meeting” as we tend to call it!

What does this mean for the games industry?

This acquisition instantly makes Activision Blizzard one of the largest mobile gaming companies in the world. With casual gaming largely played by women, Activision Blizzard has been able to change its audience demographics significantly, bringing in millions of consumers who would not consider themselves gamers. This will be a boon to Activision Blizzard if it can keep those players within the Activision Blizzard fold, perhaps by introducing them to other mobile games such as Hearthstone which is perhaps not as overtly macho as other Activision Blizzard titles. Of course, the still largely independently managed Blizzard would need to go along with this “casualization.”

Activision Blizzard is now better able to compete with EA, which out of all the traditional publishers has embraced mobile the most. EA has around 165 million monthly active players and in the 2015 financial year, generated $524m in revenue from mobile games. Incidentally, this acquisition also makes EA’s 2011 purchase of PopCap for $600m (plus performance bonuses) look like an absolute bargain! While Activision Blizzard now surpasses this, the instability in the mobile gaming market is likely to remove any inherent advantage.

Casual gaming companies will also have to be wary of King in the future. Not only will Activision Blizzard be able to use its widely known brand names, but also its significant marketing budgets. With marketing increasingly important in the race to attract players, this may prove to be decisive in King’s future.


Further reading

Videogame Revenue Forecast Report: 2015–20, ME0002-000588 (July 2015)

Videogame Revenue Forecasts to 2020, ME0002-000589 (July 2015)

Keeping Up With the Kardashians: How Gaming Companies Engage the Mobile and Social Consumer, ME0002-000546 (October 2014)

The Future of Video Gaming, ME0002-000527 (July 2014)


Paul Jackson, Practice Lead, Media and Entertainment

Charlotte Palfrey, Research Analyst, Digital Media

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