With King Bid, Activision CEO Bobby Kotick Wants to Unleash Crush of Mobile Content

For Activision Blizzard, the future is smartphones.

The game giant’s core rationale for snapping up King Digital Entertainment in a $5.9 billion pact was to dive into the fast-growing mobile game space.

Investors have questioned how much growth is ahead for King, best known for its wildly popular “Candy Crush” series of casual games. But Activision CEO Bobby Kotick believes that King, besides throwing off lots of cash, will serve as an engine for the company to launch new mobile-content franchises down the road.

Kotick, on a call with Wall Street analysts Tuesday, said Activision Blizzard has an intellectual-property portfolio stretching back 35 years that could be adapted for mobile gameplay.

“With mobile, we now have the opportunity… to take a lot of that content we’ve built over 35 years and leverage that against this new opportunity,” he said, but did not provide examples of titles that may be poised for new mobile incarnations. He cited King’s presence in 196 countries and 474 million monthly active users for the third quarter 2015.

The deal plugs the huge app-gap in Activision Blizzard’s lineup, which mostly comprises console-based action games like “Call of Duty” and PC role-playing titles like “World of Warcraft.”

“We think now is the right time to enter mobile gaming in a meaningful way,” Kotick said. “There’s a lot of opportunity to distribute content to that half-a-billion players.” The mobile-gaming sector is “still very fragmented,” he added, and it’s projected to hit $36 billion in revenue this year while continuing to grow.

After an initial drop Tuesday, Activision’s stock soared to all-time highs as the company solidly beat third-quarter 2015 revenue and profit expectations and raised guidance for the full-year 2015.

Still, analysts said King’s biggest days may be behind it. For the first six months of 2015, King reported revenue of $1.06 billion, down 12% from the same period a year earlier, and profit of $283 million, a decline of 3% year over year. King had 340 million monthly unique users for the second quarter of 2015 (down from 350 million a year earlier).

“At first blush, we suspect investor debate on the deal to focus on King’s growth prospects,” UBS Securities’ Eric Sheridan wrote in an investor note. Other questions include whether King’s current financials will affect Activision’s current trading multiple and future buybacks.

Activision Blizzard said it expects the King acquisition to be accretive to 2016 adjusted revenues and earnings by approximately 30% while significantly boosting free cash flow. CFO Dennis Durkin noted those forecasts exclude any potential synergies that the companies may realize.

King, which has 1,600 employees worldwide, will operate as an independent unit under Activision Blizzard, led by King CEO Riccardo Zacconi. That’s how Activision has run the Blizzard Entertainment business, which it acquired in an $18.9 billion deal for Vivendi Games in 2008.

Other top King execs expected to remain with the company include chief creative officer Sebastian Knutsson and COO Stephane Kurgan. Ireland-based King has 12 studios in Europe, Asia and the U.S. Its four key game franchises are “Candy Crush,” “Farm Heroes,” “Pet Rescue” and “Bubble Witch.” On the call with analysts, Zacconi said King plans to launch three new games from existing franchises by end of 2015, with a brand-new title to launch in 2016.

Activision Blizzard expects the acquisition of King to be completed by the spring of 2016, pending approval by King shareholders and regulatory clearances.

For the quarter ended Sept. 30, Activision Blizzard reported revenue of $990 million, compared with $753 million a year earlier, including record sales via digital channels of $629 million. Earnings per diluted share were 17 cents, versus a loss of 3 cents for the third quarter of 2014.

Activision Blizzard raised estimates for full-year 2015 results, pegging revenue of
$4.53 billion (compared with $4.43 billion previously) and EPS of $1.07 (versus $1.06 previously).

Popular on Variety

More Digital

  • Netflix-logo-N-icon

    Netflix Is Testing Human-Curated 'Collections'

    Netflix, a company powered by the strategic use of data, relies on artificial intelligence to suggest new content that its streaming customers are likely to be interested in. Now it’s looking to potentially add a human touch: The company has launched a limited-scale test of “Collections,” a new feature that presents groups of movies and [...]

  • wolves in the walls emmy

    Neil Gaiman VR Experience 'Wolves in the Walls' Wins Primetime Emmy

    “Wolves in the Walls,” the virtual reality (VR) experience based on Neil Gaiman’s children’s book by the same name, has been awarded with a Primetime Emmy for outstanding innovation in interactive media. The experience has been produced by San Francisco-based immersive entertainment startup Fable, which puts a big effort on making the viewer a participating [...]

  • The Void San Francisco

    The Void Teams Up With Sony Pictures for New Location-Based VR Experience

    James Murdoch-backed virtual reality (VR) startup The Void has teamed up with Sony Pictures Virtual reality to produce a new location-based VR experience, according to Curtis Hickman, the startup’s chief creative officer. Hickman revealed the partnership in a conversation with Variety this week, during which he also outlined plans to bring more original IP to [...]

  • US President Donald J. Trump speaks

    Apple Stock Down 4.6% After Trump ‘Orders’ Companies to Leave China

    Apple’s share price was down around 4.6% Friday at the close of the market, to $202.64 per share, after President Trump took to Twitter to “order” U.S. companies to leave China. The slide came amid a market-wide sell-off, with the NASDAQ sliding 3%, and the Dow dropping 623 points. Trump’s edict was a response to [...]

  • Former head of CAA China Peter

    Peter Loehr to Spearhead Asia Expansion of Genies Avatar Venture (EXCLUSIVE)

    Peter Loehr, the former head of CAA in China, and seasoned music executive John Possman have been tapped by digital avatar company Genies to lead its expansion into Asia. The company’s proprietary avatar technology allows users to express ideas, thoughts and feelings in a different way from text, audio and video. Within the app and [...]

  • Tim Connolly - Quibi

    Quibi Head of Partnerships and Advertising Tim Connolly Departs

    Tim Connolly, the former Hulu exec who joined Quibi last year as head of partnerships and advertising, is leaving the mobile TV subscription startup founded by Jeffrey Katzenberg. Connolly’s exit comes eight months ahead of Quibi’s planned April 2020 debut. A Quibi rep declined to comment on his departure, which was first reported by Business [...]

More From Our Brands

Access exclusive content