Candy is dandy, but an IPO could rot King's teeth out

By Cale Guthrie Weissman , written on February 18, 2014

From The News Desk

King Digital Entertainment, maker of the mammoth hit Candy Crush, has filed for an initial public offering, a move that been hinted at for months. Let’s play our own game: How much a fiasco will this IPO be? Submit your predictions in the comments below. The winner gets nothing.

Those who claim that games are nothing but mind candy are right in this case. If so, people really crave sweets. King generated $1.88 billion of revenue last year, most of it from a single game. As Re/code's Peter Kafka explained, that was after a loss of $1.3 million the previous year.

A revenue jump like that would normally be celebrated. But in this case it's also a problem. The insane boost is undoubtedly due to Candy Crush. Yes, it's addictive. Yes, half a billion people have downloaded it on both Facebook and mobile. But games aren't sticky, and people lose interest. We are even starting to see evidence of this, with King’s declining fourth quarter revenue, which went from $621 million to $602 million.

Take this graph made by Benedict Evans from a few months ago. It looks at four wildly successful games and their peaks and imminent wanes. The games were Tetris, Farmville, Angry Birds, and Candy Crush. All are "addictive games" and all suffered massive usership dips. Candy Crush appears to be on the same trajectory. So what happens to King when this ultimately -- inevitably -- happens?

Well, this single-product company could find itself stuck in a Zynga quandary, with unhappy shareholders, failing products, and nothing to do but pivot. That hasn't turned out too well Zynga. Even though its stocks has seen moderate gains over the last few months, its price is only a fraction of its peak $15.91 in March of 2012.

King will have to hope it can create another blockbuster game -- or, better yet, crack the formula for making addictive games. That's not likely, though, which makes its IPO a true head scratcher.

[illustration by Brad Jonas for Pando]