What is Activision really buying in its recent $5.9 billion acquisition of Candy Crush maker King Digital? Profit. Last year the company produced $575 million in net income.
Assuming profits stayed that high, it would take Activision 12 years to recoup the purchase price. But King’s profits have been trending downward in recent quarters, as Candy Crush loses steam (though as we recently wrote, it’s still firmly in the top 5 grossing games, after two years).
One gaming executive close to Activision’s Bobby Kotick said the CEO would likely cut down costs at King, which could perhaps slow that slide in profit. Then there’s the chance that King churns out another megahit. But absent that, it could be some time before we see whether or not this deal will pay off.