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Candy, Crushed

In the iPhone era, a hit game is an enormous moneymaker. But it's not a public company.

King / Candy Crush Saga
Peter Kafka covers media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.

What would you do if you found a gold mine?

Would you keep it to yourself and sell as much gold as you could dig out, for as long as you could?

Or would you sell it to investors, and promise to make even more money for them?

King Digital, the people who brought you Candy Crush, chose the second path. It didn’t work out, so now they’re selling the company again.

Here’s all you need to know about what happened to King: It went public back in March 2014, at $22.50 a share, and fell immediately, down to $18.08. It’s selling today to video game heavyweight Activision for $18 a share.

Here’s what that looks like in chart form, via Google Finance:

And here’s the (slightly) longer version:

  • In the iPhone/Android era, a megahit game is something close to a perpetual money machine. Once you find one, it will keep making money for you for a very long time, because a small percentage of its players will pay you for power-ups and other virtual goods.
  • That money machine will decline over time, as other games capture people’s imaginations/credit card accounts, but it’s going to keep making money. In the last three months of 2013, Candy Crush generated an astonishing $493 million for King. In the last three months ending in June of this year, Candy Crush generated $206 million for King. Still astonishing. But smaller.
  • The thing about creating a megahit game in the iPhone/Android era is that there’s no flywheel effect: A megahit gives you resources to market other games, which is nice. But no one has been able to prove that making one megahit lets you make other megahits. Ask Rovio, the people behind Angry Birds.
  • King couldn’t create another Candy Crush, either. King’s gross bookings — its preferred analog for revenue — peaked in the third quarter of 2013, when they hit $648 million. Last quarter, they were down to $530 million.
  • That’s still an amazing amount of money to make from a very small percentage of people: 340 million play King’s games, and only 7.6 million of them — 2.2 percent — pay King anything when they play. This quarter, that translated to $119 million in profits. (Not EBITDA, or any other made-up accounting convention: $119 million in real money.)
  • But that’s a shrinking number, and that’s no good for a public company. At its peak, King had more than 13 million paying customers. Game over. Time to sell.

Your turn, Activision.

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