IHS: Activision-King deal provides short-term boost, less beneficial in the long run

Market analyst IHS Technology has questioned the long-term benefits of Activision Blizzard’s acquisition of Candy Crush firm King.

The Call of Duty, Warcraft and Destiny publisher announced its plans to purchase the mobile giant for $5.9 billion earlier today.

IHS director and head of gamesPiers Harding-Rollssuggested that the move was an effort to ‘acquire rather than build’ new IP, adding that it will potentially help deflect shareholders’ concerns in the future.

With the increased competition to the Skylanders franchise from Disney, Nintendo and Lego, and the declining sales of its annual release of Call of Duty, the acquisition will aim to mitigate any shareholder anxiety related to both short term revenue growth and its profitability targets,” he said.

Indeed, King, although seeing its revenue decline in the last two quarters, is still highly profitable, which will significantly boost Activision’s overall margins and will give Activision immediate access to a new $1bn-plus franchise.”

Harding-Rolls compared the King purchase to that of Blizzard; while Blizzard opened the doors to online and Asian audiences for Activision, King will similarly expand its reach to mobile and female fans.

King has a handful of what are termed ‘mid-core’ titles in its content pipeline,” he said.

In the mobile space these are games that are targeted at enthusiast gamers that play for longer and monetise more strongly but are generally enjoyed by smaller audiences. These align more strongly with Activision’s current portfolio of content and may help bridge the gap between both companies’ audiences.”

Harding-Rollscontinued by saying that the core trial for the newly united companies will be maintaining King’s falling Candy Crush player base, but suggested that Activision could bring King’s experience in cash-gaming apps to brands such as Hearthstone.

While IP branding is important in finding traction in mobile and tablet markets, even with a strong set of franchises success in the mobile segment of the games market is highly unpredictable,” he concluded.

With King’s audience stagnating as Candy Crush Saga declines, maintaining the scale of the business will be the key challenge during the next six to 12 months.”