Activision's Crush on Mobile Gaming On November 2 2015,...

Activision's Crush on Mobile Gaming

On November 2 2015, Activision-Blizzard announced it would purchase mobile gaming giant, King Entertainment for $5.9billion. The all cash deal was expected to close in March 2016. Activision-Blizzard was formed in 2008 as a merger of Activision and the interactive entertainment division of Vivendi(Blizzard). Activision-Blizzard was best known for its Call of Duty, World of Warcraft, Skylanders, Starcraft, and Destiny games franchises. In 2014, the company reported revenues of about $4.4 billion and was the number 3 video game(software) company in the world behind Tencent, and Microsoft.

King Entertainment PLC was founded in 2003 as a social games company. The company, headquartered in Ireland, was primarily known for its best-selling mobile game, Candy Crush Saga. The company's revenues came in at about $2.6B in 2014, with Candy Crush Saga generating nearly 50% of revenues despite about 98% of Candy Crush players being non-players on the "free to play" service. King was the largest mobile gaming company in 2014 with an estimated 10% global market share.

At the time of acquisition announcement, mobile gaming companies largely had been unable to repeat their successes as a "formula" for developing a popular mobile game had proven to elusive. Meaning, most mobile games were "one hit wonders." Wacky games like Flappy-Bird and Plants vs. Zombies appeared to have chances to succeed as good as apps associated with established game franchises. Despite its success in PC and online gaming, Activision-Blizzard had little success in cracking the mobile gaming market. Activision's revenues from mobile games and accessories had fallen from $629 million in 2012 to $418 million in 2015. Given the large number of failures and crowded mobile marketplace, investors worried that Activision-Blizzard would be making a nearly $6 billion mistake in purchasing King Entertainment. Moreover, the business models of Activision-Blizzard and King Entertainment were fundamentally different-and some observers noted, perhaps fundamentally incompatible.

Questions:

1. Main challenge/problem facing the company
2. Analysis of current corporate-level strategy being followed - is it the best one? Why or why not?
3. Recommendations for adjustments to corporate-level strategy.
4. Analysis of impact of recommended change on company.