Why Activision spent $5.9 Billion on the creator of Candy Crush

Yesterday, news broke that Activision bought King Digital Entertainment, creator of Candy Crush Saga, for $5.9 billion.

Activision has the cash. They merged with Blizzard and the merged company owns World of Warcraft and all associated properties, as well as the Call of Duty franchise.

Why would they be interested in King Digital? Short answer, mobile.

Activision’s franchises—which also include Destiny, Guitar Hero, and Skylanders—are strong. But Activision has been late to the mobile revolution and slow to embrace mobile gaming as the category has increased in size. (Mobile games, in the 12 months ending Sept. 2015, accounted for 19% of the total dollar spend on video game software, according to The NPD Group.) Rather than investing its own resources, the publisher has partnered with mobile-centric companies (including Tencent) to bring select franchises to mobile in emerging territories. In January, for instance, the two companies launched Call of Duty Online in China.

Aside from Skylanders, most of Activision’s major franchises don’t have a mobile presence in the U.S. One exception: Blizzard’s Hearthstone, a PC and mobile game that has attracted more than 25 million players. Hearthstone’s success may have been a key catalyst for Activision’s pursuit of King. Blizzard’s games appeal to a wide audience, but it’s nowhere close to the size of the Candy Crush player base. King’s games boasted 474 million monthly active users in the third quarter of 2015.

Question is, will this move help transition their existing franchises into mobile, or will they simply own a mobile franchise that supplements their existing holdings?

One side note: When King went public last year, they were valued at US$7 billion. That’s a drop of more than $1B in value in about 18 months.