King Digital Entertainment, or King.com, was formed in 2003 by Melvyn Morris, Riccardo Zacconi, and Toby Rowland. Melvyn is one of the largest Angel Investors for the firm. The company develops games strictly for mobile and has 200+ games available. In 2016, Activision Blizzard bought out the company. However, it continues to operate as a separate unit. According to BusinessInsider.com, in 2013, King was estimated to bring in between $1 million and $3 million per day and carried a value of $5 billion for its IPO. It is difficult to know what kinds of revenue numbers the company has generated now that it is part of a bigger company.
Before this acquisition, the company generated $2.26 billion in 2014 with a decrease in 2015 of just shy of $2 billion. According to ThinkGaming.com, Candy Crush Saga earns the company over $450,000 per day.
If you have been using Facebook for any length of time, you likely have played or have been invited to play some games developed by King, particularly Candy Crush Saga, which is one of its most popular. Although the craze has died down you will still find people who are playing on Facebook.
How the Company Started
In 2003, Melvyn Morris sold a dating website called uDate.com, for $150 Million. He used part of the proceeds to form King along with two people he worked with at uDate.com. One of those people, Riccardo Zacconi, has been CEO since the company’s inception.
The other, Tony Rowland, has sold out his shares early on and left the firm. Several other key people were brought on board. Morris was an Angel Investor but also served as Chairman of the Board up until 2014.
The company was able to raise $43 Million in venture capital in 2005 from Apax Partners and Index Ventures.
There was a dispute with another gamer who wrote a similar game two years earlier. This developer claimed that King stole much of the concepts and assets of the game. King wanted to pursue legal action against this developer due to using the name Candy which King tried to enforce trademark violations. The developer dropped the suit.
King had financial difficulties in 2008 as Facebook started gaining traction and was stealing much of the web traffic the company relied on. It sought a capital infusion. This was the $43 Million previously mentioned. The company was able to generate profits after this infusion and has done so every year since.
Critics felt the results of the company’s IPO was disappointing. This is largely due to the waning in popularity of Candy Crush Saga. However, as noted below, the company is not focused on creating blockbuster hits.
Why it Works
The company was an early adopter of portal games. These are games that exist on portal-type websites. These portals like Excite, Yahoo, etc., would allow users to play games right from the portal. However, in the days before King.com, users were often charged for the games.
King set up a business model where games would be free. As more users jumped on, they would make money with add-ons (in-app purchases) and other enhancements. When King started using Facebook as a portal, subscription numbers exploded.
The demographics of gaming is largely boys and young men. Candy Crush Saga is played mostly by women. This is a major motivation behind Activision Blizzard purchasing the company, to add women into the mix.
If you ask many insiders, a big reason for the success has to do with the company’s CEO, Riccardo Zacconi. He sticks by his vision and doesn’t get swayed by external forces.
It’s hard not to notice games when they are prominently displayed on portal websites. With a site like Facebook, where members can invite their friends to play these games, this makes it even easier for new members to get involved.
The company also recognizes that the original method of revenue generation, i.e., portal sites such as Yahoo, etc., are no longer viable. They shifted focus to social media and more importantly, mobile. Mobile games allow users to play no matter where they are. This has broad appeal.
King takes advantage of its inherent addictive aspect of its games to make money from them. When a player gets hooked, they will stop at practically nothing to get to the next level. If you present them with a way to do that quickly (and at a cost) many will take that option. The key is to make those options attractive enough to justify the cost of purchase.
Although King.com has many titles, this section deals with one of its more popular games, i.e., Candy Crush Saga.
In PCMag.com, Candy Crush Saga gets a three-out-of-five star rating. This is something they rate as good. The editors like the huge number of puzzles available but are not keen on the repetitiveness of the game. They also specified that levels are either too hard or too easy.
On the Google Play store, the positive reviews were much higher than negative reviews and five-star ratings heavily outweighed all other ratings combined. Many negative reviews had to do with technical problems, such as game crashes and lost assets, more than the gameplay itself.
Lessons Learned By The Business
- The company is not looking to build another mega seller like Candy Crush Saga. Instead, it’s looking to build a large portfolio of steady sellers. This way the income remains constant. A company should not depend on blockbusters to carry them indefinitely.
- Your company culture should back failure as being part of the process. This is because failure allows you to learn. Many companies become upset when their employees fail. This is a mistake. People have the highest chance of creating something new after they fail and learn from those failures.
- Attract the best people. Companies are successful because of the people they hire. Managers who try to do everything themselves without relying on the talented people they hire will frustrate those people, and the manager will be overwhelmed. A company will have a difficult time moving forward in this type of environment.
- Don’t always follow what analysts say about your industry. Have your own vision and listen to what analysts may say but keep your vision intact. Companies that blindly follow analysts’ predictions will tend to see-saw instead of executing their vision. The key is to think long-term.
- It’s easy to keep people who work for you happy during good times. It’s when bad times hit that you will run into trouble with this. The best advice is to be upfront. If people leave because of your honesty, so be it. It means they were not committed to the company. Also, remember the people that stuck by the company in both good and bad times.
How Other Businesses Can Learn From This
Try to keep focused on what is good for the company. This means everything is open for discussion. If people aren’t right for certain jobs, it needs to be discussed. Otherwise, the company will suffer in the long run.
It doesn’t necessarily mean getting rid of those people. It just means finding the best mix to make your company a success. Open discussions are necessary to make this a reality.