Activision Blizzard (ATVI) is Reiterated by Mizuho to Buy, Raises Price Target …

4 Nov 2015 | Author: | No comments yet »

‘Call of Duty’ maker buys ‘Candy Crush’ company for $5.9B.

NEW YORK — How much are women gamers worth? Last night, Activision Blizzard announced in a press release that they have bought King for $5.9 billion, an acquisition that has created the biggest games powerhouse in the Western world, second only to Tencent on a global scale.In a surprise move, Activision Blizzard on Tuesday shelled out $5 billion to buy King Digital, the maker of the ubiquitous Candy Crush Saga and Candy Crush Soda mobile franchises. “The combination increases Activision’s scope and scale, but more importantly gives the company another top-quality [intellectual property] creator,” the Cowan analysts wrote.

Today, if we add H1 revenues of Activision Blizzard and King together, this would give the new mega-company $3.4 billion in half-year revenues, jumping over Microsoft ($2.7 billion), Sony ($2.4 billion) and EA ($2.4 billion) to take second place behind Tencent ($4.2 billion). “People who think the $5.9 billion valuation is too high are wrong,” comments Newzoo CEO Peter Warman, “One key value element is a complementary pipeline in terms of games in development. And that customer base is one reason the acquisition “makes a ton of sense” said Mr Mark Pincus, who founded the social gaming pioneer Zynga. “There’s no question women like competition,” said Mr Pincus, whose company’s titles include Farmville and Words With Friends. “They just don’t like blood and guts and gore.The game industry has had that wrong.” Women have represented almost half of the gamers in the US for the past few years, according to the research firm NewZoo BV. And it’s bound to add new players to Activision’s ranks, such as women, who haven’t been especially interested in the company’s violent games up to now. And while “Candy Crush” is notoriously addictive, it has waned in popularity for some time, and it’s unclear when or if King Digital’s next hit mobile game will come.

An even larger share of female customers end up spending money on the games, which are free to start but earn their keep through in-game purchases, according to Mr Riccardo Zacconi, King’s chief executive officer. “If you then look at the paying side, it’s much more accentuated toward a female audience,” he said on a conference call yesterday (Nov 3). “And this is where one of the big opportunities here is.” The combined company will be the second-largest game-maker in the world, behind China’s Tencent Holdings Ltd.It will bring together Activision titles that are played on computers or consoles with those made mostly for mobile devices from King, including Pet Rescue and Bubble Witch. Having King’s experience in running and monetizing mobile games as a service will be a priceless asset to a company that is still on the learning curve when it comes to mobile.” What is most appealing about the acquisition is how complementary the companies are. It’s becoming increasingly important for video game companies to make their products accessible in both console and mobile formats, making Activision’s move an expensive but necessary one, said David Lord, CEO of JumpStart, a Torrance, California, company focused on educational mobile games for kids. “This gives them access to the mobile market at a time when the console market has had a tremendous year,” Lord said, “but we’re not sure where it’s going to go.” And it’s not just console games that are moving over to mobile devices; mobile games are being played on consoles, too.

Some critics have lambasted publishers for games that include overly sexualised female characters or that write sexist behaviour into the play, or omit women altogether. Activision said it sees tremendous potential in the mobile gaming market, predicting it will generate more than $36 billion in revenue by the end of 2015 and grow more than 50 percent by 2019. Last week, the organisers of next year’s South by Southwest Interactive conference in Austin cancelled two panels, one featuring Ms Wu, that would focus on such harassment and on women in gaming, because of threats of violence.

But while people might not mind spending $60 for the latest “Call of Duty” game, many balk at the idea of handing over a few dollars on a game for their smartphone, making it tough to make money off such products. “It’s always harder to monetize on mobile, but on the same token you have many more people in mobile,” Lord said. The organisers did an about-face after a public outcry and announced that there would be a full-day summit to discuss the issue. “You are seeing more women in video games, but it’s coming slowly,”said Ms Bonnie Ruberg, a postdoctoral scholar at the University of Southern California who studies gender and sexuality in video games. Ubisoft Entertainment SA’s Assassin’s Creed, created in 2007, this year included a female main character for the first time, and Electronic Arts put female football players into its popular Fifa game, including stars Alex Morgan and Christine Sinclair on the cover. None of King’s other games have been able to replicate the success of “Candy Crush.” King’s adjusted profit fell 18 percent to $155 million in the second quarter.

While those kinds of games don’t traditionally appeal to women, Activision CEO Robert Kotick told CNBC on Tuesday that about 60 percent of King’s audience is female. The boards of both companies have approved the deal, but King shareholders must still vote on it, and regulators in Ireland, where King is based, must also sign off.

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