Tuesday, February 18, 2014

King Digital, in IPO Filing, Crushes It on Revenue - Full WSJ Article

Disclosure; Long $ZNGA

King Digital, in IPO Filing, Crushes It on Revenue,
Profit -- WSJ Blog
Feb 18 at 08:40

By John Edwards,

      By Sven Grundberg and Niclas Rolander
      Anglo-Swedish game developer King Digital Entertainment, the maker of
"Candy Crush Saga," lifted the curtain on its financials in a filing for a U.S.
listing on Tuesday, showing who's really the monarch of the mobile-games
industry--at least when it comes to revenue.
      In its filing with the U.S. Securities and Exchange Commission Tuesday,
the game developer said it saw a more than tenfold revenue increase in 2013, as
sales skyrocketed to $1.88 billion from $164 million in 2012.
      By comparison, Zynga, maker of "FarmVille," had revenue last year of $873
million, while Finland's Supercell, maker of "Clash of Clans," reported revenue
of $892 million.

      Admittedly, King, founded in 2002, has been around longer than both Zynga
and Supercell. Also, with a total staff of 665 employees, it runs a considerably
larger operation, compared with Supercell and its 138 employees. Zynga, however,
still employs some 2,000 people despite heavy downsizing in recent years.
      King said its net profit last year was $568 million, up from $7.8
million in 2012, largely on the back of its vastly popular and profitable
"Candy Crush Saga" game, which was launched on Facebook in April 2012 and was
ported to Apple's and Google's respective mobile platforms later that year.
      Zynga, meanwhile, lost money over the course of last year. Because
Supercell isn't publicly traded, many of its financial details remain under
wraps, including net income. However, the Finnish company last week said
earnings that exclude interest, taxes, depreciation and amortization were $464
million in 2013, up from $101 million in 2012.
      Along with Supercell's "Clash of Clans" and "Hay Day," King's "Candy
Crush" has been leading the top-grossing charts for iOS and Android for more
than a year, and has been one of the most frequently downloaded free apps via
the iPhone and Google Play. "Candy Crush"--a colorful and addictive puzzle game
that reaps revenue from in-game power-ups--is being played by 93 million people
every day, and is played more than a billion times every day, King said in its
      King said its mobile games have been installed 500 million times in total,
from the launch of its first mobile game, "Bubble Witch Saga," which it released
for mobiles in the summer of 2012.
      As with other stars of the mobile-gaming industry, the big challenge now
facing King is following up the success of its current hits. In 2013, it almost
quadrupled its R&D spending, pushing to diversify its games portfolio and
diminish reliance on the immensely popular "Candy Crush Saga."
      But the company admitted that it faces intense competition and low
barriers to entry in the digital-gaming industry, where programmers with very
limited resources can score massive hits. That was evidenced in the recent craze
sparked by Vietnamese developer Dong Nguyen, who has said it took two or three
days to develop his chart-topping "Flappy Bird" game.
      In the fourth quarter of 2013, "Candy Crush Saga" accounted for 78% of
King's total gross bookings, and its top three games accounted for 95% of total
gross bookings in the quarter.
      The company plans to diversify its game portfolio and said it expects that
" Candy Crush Saga" will represent a smaller percentage of gross bookings going
      More at The Wall Street Journal's MoneyBeat blog, http://blogs.wsj.com/
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