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On Wednesday, King updated its prospectus, filed with the Securities and Exchange Commission, to reveal that it plans to price its shares at between $21 and $24 a piece. At the high end of that range, King is slapping a $7.6 billion value on a company that makes 180 titles but only one that really matters.
Candy Crush is King's one-hit wonder. This one game, played by hundreds of millions of people each month, accounts for 78 percent of the company's total gross bookings. Candy Crush is an even bigger factor on mobile, where King made a lion's share -- $1.32 billion of $1.88 billion -- of its money last year.
he question is whether Candy Crush is a one-hit wonder with staying power. Recent history in the social games space would suggest otherwise, and it's impossible to predict whether Candy Crush's sweet spot on mobile can be forever delicious. That's because 12-year-old King barely has a year-and-a-half of experience profiting from mobile games.
By comparison, a look at Zynga's most recent financial statement -- and stock price -- argues against those ready to bank on the continued success of one big-name title. Farmville-maker Zynga reported $873 million in revenue for 2013, which is 32 percent less than it made in the previous year.
The difference between Zynga and King is a pretty big one: mobile. When Zynga went public at the end of 2011, it had been buoyed by the success of Farmville, a Web-based social game. But that genre has taken a backseat to games on mobile devices in recent years, and Zynga has yet to navigate this chasm or make real money on mobile.
King and Candy Crush, meanwhile, are now almost entirely mobile in nature. Take it from the company. "From their launch until February 28, 2014, our mobile games have been installed more than 600 million times. These mobile games were the primary driver for the acceleration in our revenue growth during the fourth quarter of 2012 and 2013," King said in its prospectus.
I say now because King's business was an entirely different one prior to 2011. Then, the company made its revenue from players who paid tournament fees to participate in multiplayer skill games on its Web site. Today, these skill tournaments account for just 1 percent of revenue. What changed? Candy Crush, which debuted in late 2012, as a Facebook app and smartphone game.
"Candy Crush has really taken off on the mobile side, and that's really where it has established itself from very early on," Marcos Sanchez, vice president of global corporate communications at AppAnnie, told BG, "which is unlike migrating from a different platform to mobile."
King, said Sanchez, has done a remarkable job of understanding what it means to develop and sustain a mobile game -- Candy Crush, if turned into a franchise, could be enough to keep the company in the black, he said.
Sanchez likens Candy Crush's franchise potential to Angry Birds, which is made by Finnish company Rovio. Rovio, while seemingly in no rush to go public, has turned its one-hit wonder into a gaming franchise that includes a number of crossover titles (Angry Birds Star Wars, for one), a feature film, and a bevy of consumer goods.
King seems to be on that page. "We believe Candy Crush Saga, our top title to date, is one of the largest interactive entertainment franchises of all time," the company said in its prospectus.
But red flags persist, the most alarming being that King saw 1 million fewer people in the fourth quarter of 2013 pay for upgrades than in the previous quarter. The company reported 12 million monthly unique payers in December, which means just 4 percent of its 324 monthly active users are willing to spend to level up. Candy Crush and King's other games are also largely dependent on distribution through app stores, and the various social-sharing and recruiting features proffered by Facebook.
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