US based gaming company Activision Blizzard is set to part with $5.9 billion to acquire mobile gaming giant King Digital Entertainment, developer of the globally popular Candy Crush Saga series. The deal gives Activision access to a combined network of 500 million monthly active users across 200 countries, and is predicted to boost their revenue by 30% next year. Here, Mintel’s expert analysts look at how the deal could play out in UK and US markets… Fergal McGivney, Travel and Technology Analyst When Activision gets access to King’s UK users there could be an issue of addressing the juxtaposition between the companies’ different user bases, which would be split into “hardcore” gamers and “casual” gamers. Activision Blizzard is perhaps most well-known for publishing the popular Call of Duty series, a game most favored among Millennial men (ie hardcore gamers), while according to Mintel’s Mobile Phone and Tablet Apps UK 2015 report, mobile games (ie casual gamers) tend to be more popular with women. What’s more, some 59% of UK women use a mobile gaming app compared to 51% of UK men. King’s most popular game, the Candy Crush series which launched in 2012, accounts for around a third of the company’s revenues. However, consumer spending on King‘s games fell by 13% year on year in Q2 2015 according to the Financial Times. This could be due to the fact that Candy Crush is free to download but generates the bulk of its revenue from in-app purchases (IAP). Mintel research reveals that just 6% of mobile users generate over 60% of IAP revenue. This leaves the IAP open to sharp dips in revenue if consumers lose interest, which appears to be happening with the Candy Crush series. However, it should be interesting to see how Activision combines the console gaming model with the mobile gaming model. Its games such as Call of Duty retail for around £40, while most mobile app revenue is generated through the freemium model (ie free apps with IAPs). Data from App Annie show how freemium apps dominate revenue share in the Google Play store and the iOS App Store, accounting for over 90% of income (excluding in-app advertising). However, one thing that may make Activision’s transition into the mobile gaming market run smoothly is that it secured King’s chief executive Riccardo Zacconi, chief creative officer Sebastian Knutsson, and its chief operating officer Stephane Kurgan for the next five years. Activision Blizzard announced this month that it acquire King Digital Entertainment, makers for the widely popular mobile game Candy Crush Saga, in a $5.9 billion deal. While Activision Blizzard’s repertoire of games (Call of Duty, World of Warcraft) have targeted hardcore gamers, Candy Crush is perhaps one of the biggest icons of casual mobile gaming. Bryant Harland, Technology and Media Analyst The acquisition may seem like a strange combination, especially given how volatile the mobile gaming market can be in contrast to the consistently strong performance of long-standing PC and console titles. For example, Rovio’s Angry Birds was ranked one of the most profitable video games in history in 2011. Yet the company’s profits fell quickly, declining 50% between 2012 and 2013. However, mobile games offer considerable reach for brands that find success in the market. According to Mintel, 39% of US internet users aged 18+ play video games on a smartphone, and 29% play on a tablet. Activision is also not alone in its efforts to transition its powerful brand name into new environments; Nintendo, which has historically been against the idea of bringing its games to mobile, has announced plans to release its first mobile game in early 2016. Blizzard has had some success transitioning one of its PC titles into a mobile environment. Hearthstone, the company’s digital collectible card game, was released for tablets in 2014 and for smartphones in 2015. This suggests there is real opportunity in leveraging the strength of the company’s brand to venture into the mobile market, attracting a new audience while maintaining the attention of its already strong base of fans. Stacy Glasgow, Consumer Trends Consultant From a broad perspective, Activision’s expansion to a wider stretch of the gaming category is a smart move. As explored in the Mintel Trend Extend My Brand, consumers today feel comfortable sticking with companies they know and trust for the exploration of new territories. According to Mintel’s Back to School Shopping US 2015 report, for example, some 40% of US back to school shoppers rank familiarity with products or brands as an important source of information. Wise companies, in turn, are learning to leverage that existing equity to branch out – as Activision has done, in this case, by growing from console gaming to mobile gaming. The trend is also coming to fruition elsewhere in the technology world, with Google harnessing its own enduring consumer faith to launch a wireless service, Project Fi. While currently available only through invitation, the Project Fi test has thus far rolled out to positive industry reviews that sing the praises of the service’s fast speeds, fair pricing and enhanced user experience. The enlarged Activision fan base can likewise see positive reviews – as long as it’s careful to maintain quality and reputation across all areas. A concentration on both factors is crucial in order to avoid undermining consumer confidence, but if the company can manage to build on existing trust in both console- and mobile-based gaming, it will likely find success and further growth on top of gaming’s already explosive popularity. Fergal is a Technology & Travel Analyst at Mintel, having previously worked for a market research company focusing on a diverse range of industries including travel, technology and media. Bryant Harland is a Technology and Media Analyst at Mintel. He brings almost a decade of experience working in the tech arena, most recently as a Senior Technology Writer with Brafton News. Stacy Glasgow is a Consumer Trends Consultant at Mintel. Stacy joined Mintel in 2013 bringing with her an exciting blend of CPG, agency and marketing experience. Her time is spent traveling the US engaging clients across global CPG, Beauty and Financial Services in meaningful discussions around the consumer trends that will propel their businesses forward. You might also be interested in: Skill-based games hit the casino floor Thought Bubble: Amazon Go launches in the US, but does it hold potential worldwide? Thought Bubble: Digital Fitness What does Google’s Project Fi mean for cellular services?