Did Activision Pay Too Much For King?

We were slow on the keyboard with this one, but in case you haven’t heard this news yet from any of the 10,000 other news outlets that already reported it, Activision — the company that publishes things like Call of Duty and Destiny — brought out their giant checkbook and bought Irish casual phone game maker King, to the record-breaking tune of 5.9 billion US dollars. It’s enough cash to make a dozen Call of Duties at once, but the question is, did they overpay?
At casual glance it wouldn’t appear so. Nearly six billion dollars is a lot of cash, but right now King makes some of the most popular phone games in the world, with Candy Crush Saga alone raking in $1.9 billion last year. If those numbers keep up, Activision should make back the money it spent in no time. But that’s the question….IF they hold up.
Casual phone gaming is a new market, so we don’t know everything about it yet, but from what’s been observed so far, its audience is a lot more fickle than the hardcore audience (which will buy anything with a strong brand attached to it). Brands tend to flame out quickly among casuals — just ask Zynga, who was in King’s position just a few years ago with their “Ville” titles. Right now the company is bleeding money and going through CFOs and CEOs like tissue paper. They also cut 350 jobs last May. The Farmville brand was once worth as much as the Candy Crush brand is now. So was Angry Birds once, and though a movie is on the way, those rotund avians don’t attract the attention they once did.
King is worth big bucks now, but the whales it depends on could move on to the next shiny shallow thing soon, especially if King continues to rely on their established properties again and again. That decision is up to Activision now.