Activision's $6 Billion Candy Crush Gamble

[Pyrian]

And if they maintained profits on Candy Crush they wouldn't recoup their expenses in a "Long" time as you put it, they would recoup it in, 3 to 4 years if they are conservative with some of their costs, or any one of their titles hits it out of the park.

Actually, if Candy Crush is pulling in a million dollars a day, it will take over 15 years to recoup their investment...

Gah. Shamus' link is highly misleading. King made over $2 billion in revenue in 2014 on a ~33% margin. (source [http://www.reuters.com/finance/stocks/financialHighlights?symbol=KING.N]) If they stabilize (highly unlikely but you gotta put your baseline somewhere) Activision will recoup its investment in 9 years. Which would be a very good deal - if it goes down like that.

I think that a horrid crash is a very plausible outcome (they're already losing revenue), and I'm sure Activision is hoping to synergize and get some across the board gains instead. But as valuations go, this is much more reasonable than the purchases of Mojang or Oculus. That's speculation. This... All they need to do is not screw up. (They will probably screw up.)

 

[The Rogue Wolf]

Okay, here's my theory: One of Activision's financial guys was on the phone with Bobby Kotick, panicking because the money press that is World of Warcraft is starting to dry up; Bobby, annoyed and trying to get to his five-day weekend, just yelled "Buy a drink and freaking calm down!". But he was on the elevator and losing his signal, so all that got through was "Buy... King...!"

...yeah, I got nothin'.

 

[008Zulu_v1legacy]

This is a considerable gamble. If it pays off, it will pay off big. If it doesn't, I'm not sure Activision could survive the hit.

 

[fenrizz]

Bobby Kotick has been CEO of Activision since he was 28 that's nearly 25 years. I think Activision can be said to be run by someone who knows games.

Indeed.
Just look at were Activison was when he aquired his 25% stake (for $400.000!) in 1990, and look at them now.
It stands to reason that Bobby Kotick is a pretty competent CEO.

 

[Coruptin]

It might not pay back in the long run but they get to report additional revenue on their financial reports.

 

[Darkness665]

Well put, Shamus. I worked in corporate America and it was an educational experience. Often one company would buy a smaller one, to gain access to that pool of talent only to shutter the whole mess a few years later (5 was the longest). The one fact that was true for most is there was never any noticeable uptick for the business as a whole. Occasionally one would buy one big enough to grant a change in revenue, income and intangibles but it always came with some caveat, usually mentioned as some sort of financial gymnastics in the annual report.

While Bobby the Krazy was theoretically a gamer he has preferred to sue others, unless they are employees - then he prefers stiffing them. It will be interesting to watch. Although I have no urge to rejoin the corporate world there is one thing I miss. The office pool, there must be a significant one that is betting on how long before they shed the company.

 

[Darkness665]

I'm sorry but you are wrong. Its valve want to make steamos and its VR a thing it's going to have to invest far more than it's doing. --- snip ---

Wow, you really went off the rails there. Valve is making SteamOS just what it wants it to be with exactly the amount of investment they are comfortable with. There has been no billions invested thus wall street isn't clamoring for billions in returns and profits. Gabe wanted an alternative to W8, and now W10. He got it. There is no need to get all Tim Cook with the supply chain as they are not trying to pull billions in returns. ActiVision has to get billions in returns, cause they spent billions to get there. Good news, they have billions to work with.

 

[9tailedflame]

Ugh, it's so ugly. It's a terrible company buying the rights to a game that's just another one of the same game that's existed forever. The match games have been around so long, and candy crush is at best slightly different.

I hope it all collapses underneath the weight of all that suck.

 

[Blackbird71]

And if they maintained profits on Candy Crush they wouldn't recoup their expenses in a "Long" time as you put it, they would recoup it in, 3 to 4 years if they are conservative with some of their costs, or any one of their titles hits it out of the park.

Actually, if Candy Crush is pulling in a million dollars a day, it will take over 15 years to recoup their investment...

Gah. Shamus' link is highly misleading. King made over $2 billion in revenue in 2014 on a ~33% margin. (source [http://www.reuters.com/finance/stocks/financialHighlights?symbol=KING.N]) If they stabilize (highly unlikely but you gotta put your baseline somewhere) Activision will recoup its investment in 9 years. Which would be a very good deal - if it goes down like that.

I think that a horrid crash is a very plausible outcome (they're already losing revenue), and I'm sure Activision is hoping to synergize and get some across the board gains instead. But as valuations go, this is much more reasonable than the purchases of Mojang or Oculus. That's speculation. This... All they need to do is not screw up. (They will probably screw up.)

It should be pointed out that "revenue" is not "profit," and that "profit" is what will be needed to recoup the cost of purchase.

 

[Pyrian]

It should be pointed out that "revenue" is not "profit," and that "profit" is what will be needed to recoup the cost of purchase.

That's why I said nine years and not three.

EDIT: BWAHAHAHAHAHA! Stephen Colbert's Candy Crush movie clip:

https://www.youtube.com/watch?v=N7eICNV1d_4