Will Candy Crush deal leave Activision with a bitter taste?

The big-budget, action-centric PC and console titles that Californian buyer Activision Blizzard is best known for are quite different to the more simple puzzle and role-playing mobile and web-based games its Stockholm and London-headquartered acquisition is skilled at making.

Furthermore, the size of the acquisition dwarfs other mega-deals in an industry already prone to consolidation.

For comparison's sake, other recent mergers include:

Microsoft's $2.5bn purchase of Minecraft's developer Mojang

Facebook's $2bn takeover of virtual reality headset-maker Oculus

Amazon's $970m acquisition of the games community Twitch

Electronic Arts' $750m payment for Plants v Zombies developer PopCap

So, what's behind the huge sum involved in the latest deal?

Mobile gaming

Gaming on smartphones and tablets is enjoying a growth spurt.

Research firm Newzoo predicts that 2015 will be the year that mobile games revenues overtake those of console titles, despite the fact the latter typically cost much more to purchase.

This is in part down to the fact many more people own and game on handsets and tablets, but also because of the success King.com and some others have had at convincing players to make multiple "in-app" purchases.

In other words, rather than trying to make players shell out a large sum to buy access to all of a game's content upfront, consumers are instead charged a low price or given the software for free but then convinced to pay extra to unlock levels, add abilities, change the appearance of their character and get other booster content.

As many a player - and parent - has learned to their cost, the prices of such virtual goods may seem cheap, but can soon add up.

Big names, small sales

Activision Blizzard has struggled to make much impact in the mobile sector despite it releasing dozens of titles.

Efforts to build on existing franchises including Call of Duty, Skylanders and Tony Hawk skating games have had mixed success.

It can only really claim hit status for Hearthstone - a World of Warcraft spin-off - and even that ranks outside the top 25 grossing titles on both the iOS and Android platforms at present.

By contrast, King.com's puzzle game Candy Crush Saga and its sequel Candy Crush Soda Saga both appear inside the top six titles and have been consistently high-earners over the years.

Post-Candy Crush

At the end of its most recent quarter, King.com reported an impressive $490m worth of sales and 501 million active players.

Even so, some analysts still have concerns about its prospects.

"Its actual audience has declined [from a peak of 550 million active users]," said Piers Harding-Rolls from the IHS Technology consultancy.

"King would say that the audience it shed were less committed players who didn't monetise as well, and that it's hanging onto people who play more than one of its games and tend to spend more on average.

"So, it says it is holding onto its best customers.

"But I still think it has a challenge about what to do post-Candy Crush, which Activision will now have to take on."

This latter point could prove crucial.

The firm has developed more than 200 titles since it was founded 12 years ago. But none of them have come close to repeating the two Candy Crush titles' success.

King.com might like to boast that a recent launch - AlphaBetty Saga - shot to number one in both the iOS and Android game download charts when it first went on sale.

But the sad truth is that it no longer appears in either platform's top 100.

Other mobile developers - including Angry Birds' Rovio and Clash of Clans' Supercell - have also found it harder to create new franchises than to carry on milking their best-known brand.

The risk is that over time this leads to ever-decreasing returns.

One statistic that might cause particular concern is that about 40% of King.com's revenue for the first six months of 2015 came from a single title - the original Candy Crush Saga - and its earnings power is diminishing.

(BBC)