Candy Crushed? Here's A Chart To Make You Think Twice About King's Looming IPO

Mar 12 2014, 8:32pm CDT | by

Candy Crushed? Here's A Chart To Make You Think Twice About King's Looming IPO
Photo Credit: Forbes Business

Candy Crush is a maddeningly addictive game on which people are willing to spend a buck or more to lengthen their vividly-colored screen time. But potential investors to King.com’s forthcoming IPO should note it’s also a game that brought in roughly three quarters of King.com’s revenue in the fourth quarter, and that there may be a cost to relying so heavily on a digital golden goose, no matter how hooked its users or how much King values itself to be — a remarkable $7.6 billion .

The chart above shows that Candy Crush has recently been sliding in the ranks of downloaded apps on both Apple’s App Store (above) and Google Play (below). Having been firmly in the top 10 for much of July and all of August 2013, the game eventually dropped into the teens and even 20th position in December 2013, according to app analytics company App Annie.

That slide mirrors a fall in revenue for Candy Crush’s maker, King Digital Entertainment, and shows just how closely correlated the company’s finances are to one game. In the last three months of 2013, King’s sales slipped to $632 million from $648 million in the previous quarter, while net profit also fell to $269 million from $290 million.

King did not wish to comment for this story, but the company has been open about the investment risks in its SEC filing today, noting that “a small number of games currently generate a substantial majority of our revenue,” (though “one game” might have been more accurate). The company said that in the future it expects Candy Crush to represent a smaller percentage of gross bookings from mobile as it expands into other games:

“If the gross bookings of our top games, including Candy Crush Saga are lower than anticipated and we are unable to broaden our portfolio of games or increase gross bookings from those games, we will not be able to maintain or grow our revenue and our financial results could be adversely affected.”

King has been producing casual games for a decade and been profitable since 2005, so potential investors are of course also betting on the company’s clever strategies for sniffing out and promoting the next blockbuster hit that will dominate app rankings.

But history tells us even the most effective strategies which stretch the boundaries of exploitative game mechanics can’t guarantee future blockbusters that replicate what Candy Crush has achieved till now. Just ask Zynga, maker of the blockbuster social game Farmville, whose shares have fallen 40% since its December 2011 IPO. Zynga’s shares debuted at $11 but have been hovering around the $3-5 mark for almost two years.

Rovio, the maker of blockbuster mobile game Angry Birds, has chosen not to go public, though when I visited the company’s Espoo, Finland-based offices in June 2011, management then were tentatively excited about a future IPO. Rovio back then had just seen its annual revenue jump by 300% and it was dominating the top ten charts globally. Since then however, Angry Birds has fallen into the mid-30s in rankings according to App Annie.

“We don’t want to estimate ourselves in bubblelicious figures,” Rovio’s vice president Ville Heijari eloquently said then, adding that Rovio didn’t want to “rush” towards an IPO. That may have been wise in hindsight. Rovio has yet to release a game with the same impact of Angry Birds, though it’s had relative success in milking the game’s brand and characters with merchandising deals.

It’s worth noting that King may manage to counterbalance Candy Crush’s eventual disappearance from our screens with other, addictive games. Its other colorful offering, Farm Heroes, seems to have the most potential. According to the company’s filing it had racked up 20 million daily active users in February, up rapidly from 8 million in December 2013.

But it’s still no Candy Crush, which had 93 million users in December 2013.

Source: Forbes Business

 
 

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