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Candy Crush, That Game Everyone Is Playing on Their Cellphone, Sells for a Cool $5.9 Billion

World of Warcraft maker Activision will buy Candy Crush maker King Digital Entertainment, in one of the most expensive purchases in the history of the video game industry.

by Reuters and VICE News
Nov 3 2015, 5:30pm

Photo par Matt Campbell/EPA

Video game maker Activision Blizzard announced it will pay $5.9 billion for King Digital Entertainment, the creator of the Candy Crush Saga — making the exploding candy game manufacturer the most expensive ever acquisition in the mobile-gaming market.

In fact, the deal would be one of the biggest in the entire video game industry in recent years, more than twice the size of Microsoft's $2.5 billion purchase of Minecraft maker Mojang last year.

Activision, which owns popular game franchises such as World of Warcraft, Call of Duty, and Diablo, said the deal gives the company more than 500 million monthly active users across the world. The deal is projected to add to Activision's estimated 2016 adjusted revenue and earnings by about 30 percent.

The Candy Crush maker already brings in nearly $2 billion in annual revenue, and over half a billion dollars of profit — all from mobile games.

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Activision Chief Executive Bobby Kotick told Reuters that buying King will help broaden the reach of its games and expand into new demographics, since 60 percent of King's players are female, and no gaming consoles or hardware — besides a phone —are needed to play.

"You have such broad reach. This is a fantastic opportunity for us to create compelling content for new demographics," Kotick said.

But the long-term viability of the Candy Crush business-model is not a sure thing.

"[The] model relies on producing a steady stream of new games in an attempt to find another mega-hit like the confectionery-based puzzle," Reuters analyst Neil Unmack said. "But mobile gamers are fickle... the history of the video gaming industry is littered with one-hit wonders."

The Finnish company Rovio, for example, originally raked in hundreds of millions after it released the game Angry Birds in 2009. But the game failed to replicate its success with future games, seeing its profits drop 73 percent in 2014 alone. The company was eventually forced to lay off more than a hundred staff members to cover the drop in player interest.

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And there are some small signs that Candy Crush could suffer the same fate. Consumer spending on Candy Crush fell 13 percent year-over-year in the second quarter of this year.

But, the massive sale is a sign that investors are confident that King Digital will continue to deliver. Activision will be drawing on $3.6 billion in offshore cash, and borrowing the rest from Bank of America Merrill Lynch and Goldman Sachs Bank to raise whole $5.9 billion.

The deal, expected to be completed by spring 2016, is still subject to approval by King's shareholders and the Irish High Court, and clearances by antitrust authorities.