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King execs struggle to explain why the  Candy Crush  maker is flagging
King execs struggle to explain why the Candy Crush maker is flagging
August 12, 2014 | By Christian Nutt

King is taking a beating on the stock market thanks to the softness in Candy Crush Saga's bookings. The game just isn't monetizing as strongly as it used to, and more troublingly for investors, that isn't being offset by newer titles.

Shareholders are spooked, and in today's King investor call the company tried to assuage their fears. Those assurances clearly aren't helping King's stock (it's still down over 20 percent since the results were announced). That may be because the company's executive team didn't really offer any answers.

Chief financial officer Hope Cochran said that the company couldn't really explain why Candy Crush was soft in May and June; she simply pointed out that -- according to App Annie at least -- it was a general seasonal trend for mobile games across all publishers.

"We are tempering our expectations for full-year 2014," Cochran said.

"A drop in monetization across the board"

While "we have demonstrated our ability to consistently produce high quality games," said CEO Riccardo Zacconi, "we are are not happy with the lower than expected gross booking run rates we have been experiencing since the latter part of Q2."

"That's what we've seen in all of our titles: a step-down change in monetization across the latter part" of the quarter, Cochran said.

("Bookings" refers to in-game revenue from purchases by players.)

Chief operating officer Stephane Kurgan said that King has seen "a drop in monetization across the board" and "that's impacted pretty much all the games." Farm Heroes Saga, which launched on mobile in January, was supposed to be its rising star, and it has a large number of daily active users.

The problem: They aren't monetizing like King expected, Kurgan said, and he isn't sure why not. He worries that the game was too optimized by the time that it launched on mobile, thanks to the long lag between its Facebook launch and its appearance on mobile. In other words, users may be fleeing because there's not much work the company can do to appeal to them: "we realized as we added features to the game, the game was already optimized... We've been surprised by the fact that retention did not improve."

Kurgan also thinks that Glu's world-beating Kim Kardashian: Hollywood might be stealing its thunder. 2048 also may not monetize strongly, but it still eats up time users might spend on King's games.

The company isn't forecasting as strongly as it hoped for bookings later in the year: "I'm being cautious in that regard, because I can't prove it's seasonality," Cochran said.

That comment leaves everyone with a big question mark as to what's really driving the downturn in King's fortunes.

Hope for improvement?

As far as potential uptick for the back half of 2014, Kurgan talked up its "Saga 1.5" project, in which the company intends to add new content and an entirely new monetization mechanic (as yet unrevealed) to its Saga franchise games -- "new features and new opportunities for our players to convert and spend," he said.

Meanwhile, Cochran pointed to the upcoming launches of Candy Crush Soda Saga and revenue from Tencent's launch of Candy Crush Saga on WeChat in China as positive developments for the latter half of the year.

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Ron Dippold
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I don't think they can explain why it's falling off because they don't have any real idea why it took off in the first place.

It's obviously a hugely polished and deviously designed match 3 variant, and they were well positioned to capitalize on it and have it pester all your friends, but you could say that about Pet Rescue and Papa Pear as well. Why that and not those? Why Flappy Bird? Why can't Rovio rekindle the lightning in a bottle of Angry Birds? It seems to be mostly right time, right place, right game, and nobody really wants to admit just how important that is - and they especially don't want to admit to investors just how little control they have over it.

Shea Rutsatz
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I agree. No one could really figure out exactly why CCS was so huge over anything else, including King. Solid and polished, but so are so many others.

Michael Joseph
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They hit a nostalgic sweet spot.

Granted, exploiting nostalgia is easier said than done, but I think if we're talking about what separates CCSaga from other match3s, it's that and if you're looking to make your own variant of a popular time waster, try turning it into a time machine with rose colored windows.

We must be in some kind of golden age of nostalgia. But this could indicate that people are are hungry for new stories about a hopeful future. Aren't we all a bit sick of all the dystopian worlds? Giving people something to look forward to is a good alternative to luring them into the past.

James Coote
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@Michael - My thoughts exactly.

As well, eventually someone will come up with a game that allows people to play in small, casual-sized chunks, but also lets them go much deeper and get far more involved if they so choose. It could be story/narrative is a major element in that.

James Margaris
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It's very similar to the dotcom era where businesses would succeed almost at random. Often times the people behind the business erroneously believed the success was due to superior skill and strategy, but in practice were never able to replicate success because the original success was based mostly on luck. In fact often times they succeeded in spite of what they did and learned flawed lessons that hindered future success.

James Coote
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It's equally dangerous to put success down to luck, as then you're flat out refusing to learn and understand. In fact King are recognising that whilst they are trying to learn the lessons, they're also aware it's better to draw a blank sometimes than take away the wrong lessons.

Jay N
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I agree, I think this is very much the case for both King, and Rovio and Zynga, and even Blizzard with WoW - right place at the right time can make shooting stars out of any game, and it's damned near impossible to figure out what combination of factors created the condition to begin with, and thus equally difficult to reproduce the effect.

King should have diversified its IP-portfolio immediately when CCS took off. Their current batch of games are all gnawing at the same bone as that game, and probably won't ever reach its heights.

Thibault Coupart
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agree :) especially in the world of casual gaming !

Zach Grant
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Anyone who bought stock in King based on one successful mobile game deserves to lose all their money.

Robert Carter
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I would add an exception to that: Those who knew the stock would rise on wings of "Big name company offers stock" before plummeting. Similar to FB going public, many people knew to buy for the first few hours and then sell for a profit.

Colin Schmied
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Live by the casuals, die by the casuals.

Nooh Ha
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Anyone that has worked in companies that have targeted this predominantly female oriented "mass" market knows that a single title's success can be huge but is always transitory and usually with a far more compressed parabola compared to core games. These games rarely have depth to them (not a criticism) and this casual demographic is hugely fickle (also not a criticism). The fact that King, with its long history in casual gaming, does not appear to understand this is pretty amusing.

Chris Mills
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Interesting comment. Why do you think "female oriented" is the best descriptor for "casual demographic"? As far as I know game developers don't have any well researched numbers on these demographics. I hear people toss this out, but it's usually just a stereotype inspired comment.

So why do you believe this?

Nooh Ha
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Actually the demographics for King, BFG, Zynga, Playdom, Pogo and many other leading casual games devs/pubs are pretty well known. Most have presented on these subjects giving their userbase details at trade events (casual connect, gdc etc) or released them as part of company filings. There have been a load of surveys which provide demographics (look at PopCap's surveys from a few years back) supporting this assertion. It is also quite trivial to get specific Facebook game demographics too which again reinforce the "female oriented" demographic notion.

Robert Green
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"2048 also may not monetize strongly, but it still eats up time users might spend on King's games." - important point right there, which is even more applicable to Flappy Bird. Your games need good monetisation to make your business successful, but your competitors games don't need any monetisation to take your customers away.

Having said that, the phrasing also suggests that people need a reason NOT to be spending time on King's games, which is a pretty strange way to look at it.

Mikhail Mukin
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Monetization of any game (Candy Crush, Clash of Clans, Angry Birds, League of Legends, WoW, Crysis, EVE Online, whatever) will drop and at some point those games will not even exist (in tops anyway). It was an amazing run for Candy Crush (enjoyed probably 60 levels of it till it was "enough is enough"). But people move on.

By now most people who wanted to play it played it. There is nothing anybody can do to keep making mountains of money on it in very long term. Some new features, promotions or other tricks might keep the curve for a while. But it is a game, not toilet paper - that people have to keep buying...

There is an exemption to the rule... Chess and Go are played for centuries. But they are not monetized and have way more complicated/diverse strategy then any video game. More importantly, they became "cultural things".

John Trauger
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I'd agree and go a step further.

Candy Crush Saga's monitization model was flawed. From everything I've read on Gamasutra (I haven't played CCS and don't plan to) it was "Give players headaches then sell them the aspirin."

I'm not sure if King had any retention model in effect. Tactics like creating levels that *required* the player buy stuff to beat the level seem to me to be rather anti-retention. This is what King is seeing.

Mikhail Mukin
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I think their monetization was pretty well done. Many times I would be left with only one cell to finish the level - and I could buy a power up to finish it. And when I would give up and stop playing for a few days - there would be something nice when I come back to give me an incentive.

When I thought it got boring and same (somewhere around level 30-40 - don't remember!) the game noticeably changed... Instead of "rare" combos I would suddenly be able to get a lot of combos (even in a chain) - and I felt like by level 40+ I'm almost playing a different, "super power" version of the game, with many things collapsing left and right. I would not be surprised if the gameplay changes again beyond level 60 - just do not have time to check.

I was thinking maybe they actually do some analyses of the board so that new gems are coming in a way that "promotes" situations when you are "almost finished, just one little step left!".

Anyway, I think the game was well designed, hope the devs earned a ton of money and can just retire to a nice house on the beach, that I wish us all :)

If you want to try a bit different game - there is "Crazy Kitchen" from Zindagi - it uses different matching algorithm (can match long chains in different directions). (disclaimer - I did not work on this game but worked at Zindagi).

Jane Castle
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Queue the inevitable layoffs as they try to raise the stock price......

Alan Barton
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I do think in many ways boredom is really the lifeblood of our industry. Its why every game has its time and players inevitably move on to something new. Its also why success is so difficult to replicate, because companies can't keep throwing the same kinds of experiences at players and expecting them to be as successful as previous titles just like them.

Players want something new. In many ways it very good news for us all (well other than for King at the moment). The key is to offer players something new.

Angry Birds, Candy Crush, Clash of Clans, ... my game!?! ;) ... I can but dream :) ... if only, but then we all do share that same dream! :)

Doru Apreotesei
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My comment on twitter:

"You'd think that @King_Games financial woes would make people drop their silver-bullet-thinking about F2P. Nah. Now it's all about Kim."

Not much to add to that. We really are a fad-driven industry to a large extent, and casuals are more fickle and fad-y than most demographics. Trying to emulate your way to success with that crowd, well, it's uncertain at best.

Raf Keustermans
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Financial woes? Yes, growth is slowing down and they missed Wall Street's expectations, but they're still doing $2 billion in annual revenue and $7-800 million in annual profit. Bit harsh to call that 'financial woes', not?
Their 'failing' Candy Crush game is still pulling in over $3 million per DAY in revenue... Sure, it's no longer the $4-5M/day it was 6-9 months ago, but that's still not too terrible. I struggle to think of many non F2P games that generate these kind of revenues...

Doru Apreotesei
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Yes, "financial woes" is harsh, but requires fewer characters than "disappointing earnings" or the like. Twitter etc.

I agree, in absolute terms, I'd love to fail like King is failing.

Paul Weber
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Unfortunately, for many investors, if you aren't making more money than you have in the are indeed failing...

Michael Meier
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I think what Paul just said is the heart of the problem of the game industry and basically our global economic system in general. Constant improvement in overall company revenue is expected, and when the expectations aren't met, investment money is pulled and people are laid off regardless of how much money the company made in the past. The investors can make huge profits off of short term gains, then move onto the next investment or retire right away, so they really have no incentive to ensure long term improvement or even long term stability. Companies are too beholden to the shareholders and rarely save up for a rainy day to protect their workers. This is what happens when you place too much power (money) in the hands of a few.

Paolo Gambardella
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I think they have a lot of cards to play. Some example:
1) Become a publisher
2) Try new platforms
They have been smart in the past, I don't think it will be difficult to be like that in the future.

Mike Jenkins
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I'd like to think the bad press they received while threatening Stoic over "The Banner Saga" played a role in this, even if only in the form of karma.

Kyle Waring
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New monetization methods can really only mean a few things. Subscription based payments & access, or advertising in some form or another... but will it convert? Curious to see what kind of testing they are doing, Candy Crush Soda Saga is available for ppl in Canada and Sweden I believe, it's a soft launch roll out.

Alex Nichiporchik
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I just hate how everyone jumped on the bandwagon behind King. Now the company itself is going down, and all of the companies backed up by VC funds to replicate the success will suffer. Layoffs, shutdowns, overall bad for the industry :(

John Maurer
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This entire article is misleading. King isn't "going down", there redundant IP's may be stifling a bit but they're far from a financial meltdown. They didn't meet market expectations, which pisses of investors. I think the real mistake is that they converted to a C-Corp at all. LLC would have worked, and they wouldn't have been as susceptible to the whims of investors.

Chris Hendricks
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For clarity, is it losing money, or is it just not gaining money as fast as it was?

Mitchell Fujino
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@Chris: "revenues also missed analyst estimates: $593.5 million versus expectations of $606 million".

Closer to the latter, but it's actually neither. They're just not making as much money as they told people they would make.

Dave Hoskins
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Predicting future trends of what kids will be talking about and plotting charts in the million dollar ranges must be a tough job!
But I suspect they just use past values, draw it with some 'exciting' increases, and go off to play golf for the rest of the month.

Pascal Clarysse
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when you're booking half a billion per quarter, your business is affected by macro-economic factors, such as many big European countries paying annual taxes in June, for one, and the World Cup eating away leisure time in the same month, and then, well, it's sunnier outdoors. Taxes payment season and summer affect all big corporations every year, and CCS has a lot of its players in Europe. So! What really puzzles me here is not the slight decrease in revenue, it's how on earth can their CFO be unsure whether it's seasonality and fail to reassure investors, especially after AppAnnie confirmed the trend for mobile at large? I mean, his job would have been to forecast this, so that the target wasn't missed and there was no panic. Lack of experience with big numbers at the growing digital startup, maybe? Once you go IPO, you have to grow up about a few things, financial forecasts and investors communication being chief among them.