×

Like mobile hits before it, including Angry Birds, Candy Crush maker King released actual goodies last fall.

Can The King Of Candy Keep Its Throne?

To do so, King Digital Entertainment, the Dublin-based publisher behind the massive mobile gaming hit Candy Crush Saga, must learn to do it again. And again.

They miss subway stops.

They throw fits in grocery stores when denied the hypnotic, lullaby music. They use their sleeping fiancée's thumbprint to unlock her iPhone and get at the game--well, they do if they are pop star Adam Levine, who confessed to doing just that on Ellen DeGeneres’ talk show last month.

They are the more than 500 million moms, dads, kids, and commuters who’ve downloaded Candy Crush Saga on their mobile device and brought the smash hit’s Dublin-based publisher to the brink of the most anticipated game-industry IPO since--right, since “that other company,” as King Digital Entertainment’s Tommy Palm, the co-creator of Candy Crush, referred to Zynga in our recent conversation.

And indeed it is the specter of Zynga’s post-IPO blues that haunts King’s public offering dreams now. Because just as Zynga rode the massive success of a single game--FarmVille, if you’ll recall--all the way to Nasdaq, so now King must contend with the frightening possibility of being a one-hit wonder.

Palm would like the similarities to end here: In the four months following its offering, Zynga watched its stock price plunge right along with the popularity of its 'Ville line of games, nose-diving from $12 a share to $3. (The price has rallied of late, and was trading at over $5 a share earlier this week.) The company cofounded by Mark Pincus, who stepped down as CEO last July, says it will cut about 15% of its workforce this year, or 314 jobs.

Palm is well aware of such pain. When I ask him about the Zynga jinx, he’s quick to point to his company’s ability to generate new ideas.

“We have more than 150 games on our website, and eight games on Facebook,” Palm, wearing a tailored gray suit and a chocolate-brown tie speckled with pink, green, and blue polka dots reminiscent of the highly coveted "color bomb" power-up in Candy Crush, tells me. “So we've found a good recipe for us to try out new things and keep on innovating.”

Candy Crush co-creator Tommy Palm reveals his strategy for winning the game.

In a couple of cases, that innovating has resonated with consumers: King’s game Papa Pear Saga was among the 10 most popular apps in Apple’s store in December. Last month’s Farm Heroes Saga cracked the top 10 list when the highest-grossing apps were tallied in the United States and the United Kingdom.

Still, the company generates 78% of its revenue from a single, sweet source. And while Candy Crush counts 93 million daily users, that’s about three times as many as the next four most popular King titles combined.

"The biggest fear of course is that King is another Zynga," Tero Kuittinen, an analyst with mobile-diagnostics company Alekstra, told the Wall Street Journal.

“Gamers are kind of like sheep,” says Lindsey Port, founder of the online gaming ad company GLO Gaming. “And right now, Candy Crush is the big one.”

How long can that last? If you consider some of the eye-popping numbers it’s hard to believe it will ever end: According to app analytics firm Think Gaming, Candy Crush generates nearly $790,000 in revenue a day via iOS in-app boosts--an extra turn for 99 cents, or a $1.99 lollipop that smashes candy to bits. All that sugar sure adds up: King reported profit of $567.6 million last year, compared with $7.8 million in 2012. Revenue, meanwhile, climbed to $1.88 billion from $164.4 million.

Also working in King’s favor is the fact that it’s aiming for an offering of $500 million--that’s half of what Zynga went for. And the company has not tried to mislead potential investors about where they will stand. "King has essentially said very clearly that things have slowed [with its hit game],” Arvind Bhatia, an analyst at Sterne Agee Group, told the Journal. “If investors are going into this knowing that, and seek an adjusted price for that, the stock can work.”

Looking beyond Candy Crush, questions remain about whether or not King can be the first sustainable hit maker in an industry that has yet to produce its own Activision, or Pixar, or Disney. “Once you start talking going public, there’s a different set of expectations,” says Jesse Divnich, an analyst at the video game industry research firm EEDAR. “Investors want to see a growth plan. How are you going to grow the top and bottom line?”

If the company can be as clever with innovating new games as it is with unburdening addicted players of their cash, then a very sturdy growth plan might yet emerge.

Like other freemium titles, Candy Crush employs a number of slick psychological techniques to squeeze purchases from its players. When you share your score from the game to Facebook, for example, King is tapping into our innate need for social comparison, says Dan Ariely, a professor of psychology and behavioral economics at Duke University and author of Predictably Irrational: The Hidden Forces That Shape Our Decisions.

"There’s also this sense of improvement," Ariely says. "You see your progress and feel like you’re getting better and better."

And then, when you’ve depleted the standard five lives King provides and the sad-faced-heart character tells you to wait 25 minutes for the next round? King is merely interrupting a psychological process called hedonic adaptation--the diminishing pleasure one receives after repeating something they enjoy. A recent Harvard study done with chocolate found that this slide toward disenchantment could be broken by forcing participants to take timed breaks from eating the candy.

But perhaps the most effective weapon in King’s arsenal is an industry technique called "fun pain," a term reportedly coined by Zynga’s Roger Dickey, which essentially places the player in such an uncomfortable position in the game that he will happily cough up a dollar for an extra five moves to relieve this pain. And this, in the end, could be King’s killer app.

"It's the best technique they have, this sense of reward removal," says Ramin Shokrizade, an influential free-to-play blogger and game economist at MMO developer Wargaming.net. "They give you all this stuff, and right at the end [threaten] to take it away. 'Look at how man points you scored, but you didn’t get the last jelly. You have to spend if you want to keep going.'"

Research suggests this idea is an equal-opportunity money suck. According to a recent as-yet-unpublished EEDAR study provided to Fast Company, 22% of parents who play mobile games admitted that their children made transactions without their permission. Shokrizade points out that these in-the-moment, stress-related decisions are handled in the brain’s prefrontal cortex, which isn’t fully developed until the age of 25. That might explain the 14-year-old Candy Crush addict in Singapore who spent $4,300 on his dad’s phone last year--and some of that $32.5 million in refunds Apple was forced by the FTC to pay consumers who didn’t know they were being billed for in-app charges.

Some industry watchers, however, don’t see this psychologically driven gravy train lasting forever.

“I have concerns that the free-to-pay appeal will wane, as certain techniques that limit gameplay wear on consumers,” says the NDP Group’s Liam Callahan.

It’s concerns such as this--along with the unpredictable nature of invention, and the many unanswerable questions on follow-up hits--that would keep worrying types awake at night. But so far at least, Palm doesn’t appear to be sweating it.

"I started making mobile games 14 years ago," he says, sanguine as ever. "A long time before it was a good idea to make mobile games."

Will it still be a good idea 14 years from now? To find out, follow the money--and the sheep.

[Photo by Will Styer]

Add New Comment

3 Comments