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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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