Buying the future of video games, and of gaming profits, is in mobile

Taken from economist.com 's article
A crush on mobile
A big merger shows where the money is heading in the industry

Nov 7th 2015

COMPARE “Candy Crush Saga” with the “Star Wars” franchise and it comes as a shock that the casual game’s creator, King Digital Entertainment, would sell for almost 50% more than the $4 billion that Disney paid for Lucasfilm in 2012. But in paying $5.9 billion in cash and stock for King on November 3rd Activision Blizzard, a giant in video games for computers and
specialist gaming consoles, is doing more than buying another industry leader. Its purchase is an acknowledgment that the future of video games, and of gaming profits, is in mobile, where games are usually given away, and where their creators make money by selling extra features to the most enthusiastic players.

Mobile games have been by far the fastest-growing part of the market in recent years, and have broader international appeal because of the penetration of smartphones. By Activision’s reckoning, worldwide revenues from mobile games will almost catch up with those from PC and console games by 2019, reaching $55 billion (up from an estimated $36 billion this year). PC and console games’ sales are projected to reach $57 billion by then.

With “Candy Crush Saga” in its arsenal, Activision will have one of the most successful mobile games yet seen, access to an active monthly user base of nearly half a billion people and dozens of new foreign markets where smartphones, not consoles, are the game platforms of choice. Those users might enjoy mobile versions of some of Activision’s hits, like the “Guitar Hero” series. The combined company will become the world’s second-biggest in terms of video-gaming revenues, with close to $7 billion a year, placing it behind only Tencent, a Chinese gaming and social-media conglomerate.

Activision has flailed about in mobile gaming (even if it has had a recent hit with “Hearthstone”, a digital card game). Though King’s shares have weakened since it gave a profit warning in May this year, there are worries that Activision may be paying richly for its big move into mobile.

James Gwertzman, the boss of Playfab, a provider of back-office technology for game developers, says it is not clear if Activision and King can add that much value to each other’s gaming platforms, in the way that Disney can exploit the “Star Wars” characters and stories across its various businesses.

There is also no guarantee that King can establish another runaway success like “Candy Crush Saga”—although it has created a moderately successful sequel in “Candy Crush Soda”—or that the flagship “Saga” game will remain a hit. The faddish mobile game of the moment, like, say Zynga’s “FarmVille”, can give way seemingly overnight to new franchise hits—in its case, to “Candy Crush Saga” itself.