One of the biggest names in traditional video games is making its boldest step yet into the fast-growing world of mobile gaming with the multibillion-dollar acquisition of a onetime darling.
At a price tag of $18 a share, King will sell at a discount to the $22.50 a share that it fetched during its initial public offering last year. When the game developer went public, it was greeted with considerable enthusiasm largely on the strength of Candy Crush, where players match three or more matching candies.
King’s hook was in the title’s so-called freemium model, where the game was largely free to play, but additional content or virtual goodies cost real money.
But during the run-up to King’s stock sale, however, the company faced questions about whether it could duplicate the success of its biggest hit, one responsible for a roughly 7,000 percent jump in annual profit.
So far, Candy Crush has remained a steady performer, ranking third in the Apple app store’s top-grossing games three years after its release. But the company has said that the juggernaut has slowed down, and other games are not as popular — not even Candy Crush Soda, a related title released last year.
That lack of success in conjuring a new hit has weighed down King’s profit, which fell 28 percent in its second fiscal quarter from the same time a year ago, to $119 million.
Shares in the company have fallen 30 percent below their offer price, closing on Monday at $15.54 each. (They rose 4 percent on the day, though the reason is unclear.)
Yet the declining performance of Candy Crush and other King titles did not deter Activision from a deal, according to executives from both companies. Activision saw value in King’s network of players, which when combined with its own would yield an audience of more than 500 million unique users each month — bigger than Twitter’s base.
The expanse of King’s audience, stretching across the globe and including emerging markets that traditionally haven’t spent money on expensive video game consoles and PCs, also proved attractive.
And Activision is also betting that it can figure out new ways of breathing new life into the Candy Crush franchise, much as the company has done for its own titles like Call of Duty, these people added.
Robert Kotick, Activision’s chief executive, acknowledged that the deal was at a premium to where King has been trading. But he added that he believed in the long-term potential of his latest acquisition.
“They have a great franchise focus, as well as the ability to create and invent new franchises,” he said in a telephone interview.
And Riccardo Zacconi, King’s chief executive, added that his team would now have new opportunities by joining with Activision and its stable of games.
“We suddenly have access to the best I.P. portfolio I could ever have thought of,” he said, referring to intellectual property.
Monday’s deal is a departure for Activision, which has taken a cautious approaching to investing in mobile games even as rivals scrambled to sink money into the market.
Activision’s best-known game franchises — Call of Duty, World of Warcraft, Skylanders and Destiny — are played on consoles and PCs, and in most cases they are sold for $30 to $60 each. It earned $835 million last year on top of $4.4 billion in sales.
“Mobile gaming is the largest and fastest-growing opportunity for interactive entertainment and we will have one of the world’s most successful mobile game companies and its talented teams providing great content to new customers, in new geographies throughout the world,” Mr. Kotick said in a statement.
Mobile games have grown to encompass more and more of the overall video game market. In 2015, such games are expected to generate about $14.49 billion in revenue out of about $75.41 billion in total revenue for the global games market, according to estimates by PricewaterhouseCoopers.
While mobile games have become one of the most popular categories of apps for smartphones and tablets, hits in the business can be ephemeral and the most successful publishers usually make money by charging players small fees for virtual goods and digital currency, rather than one big fee for a game.
Once-hot mobile games companies like Rovio, the maker of Angry Birds, and Zynga have struggled to adapt to shifts in taste and technology.
But there have also been some huge mobile game franchises that are still going strong. In one of the biggest acquisitions in the sector, Microsoft last year bought the Swedish developer of Minecraft for $2.5 billion, a game that is also popular on consoles and PCs.
One of Activision’s biggest rivals, Electronic Arts, spent hundreds of millions of dollars on rocky acquisitions of mobile game makers like Jamdat Mobile and PopCap Games before finally hitting its stride in the business.
Activision and Mr. Kotick have taken a slower approach to the mobile gaming sector, which they have viewed as significantly different from their core business. Still, over the past year, Activision’s Blizzard business came up with a huge homegrown mobile hit in Hearthstone, a digital card game.
Mr. Kotick first came to know Mr. Zacconi about three years ago when executives from King came to visit Activision’s headquarters, the two men said.
The two companies stayed in touch, with Activision keeping an eye on Apax Partners, the investment firm that owns about 45 percent of King. At some point, the bigger video game maker wagered, Apax would want to sell its stake, creating a potential opportunity for a big deal.
In April, Activision approached Apax and asked what it intended to do with its stake in King according to a person briefed on the matter. That eventually led to merger discussions with the mobile-game maker, with Activision eventually signing up King’s senior executives to long-term employment contracts as part of the deal.Separately, Activision reported $127 million in profit for its quarter that ended on Sept. 30, swinging from a $23 million loss the same time a year ago. Its net revenue for the period was $990 million, up 31 percent.
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