King’s Projected IPO

According to market researcher Newszoo, the worldwide gaming industry is projected to be worth $86.1 billion by the year 2016, growing at an annual rate of 6.7% over the period 2012 through 2016. Growth within the industry will be driven by the increased use of mobile devices, including smartphones and tablets. The researcher estimates the tablet gaming industry to grow at an annual rate of 48% through the four-year period. The smartphone gaming market is projected to grow 19% annually during this period to $13.9 billion in 2016. During the current year, the smartphone and tablet game revenues are projected to grow 35% over the year to $12.3 billion.

King’s Financials
London-based King.com was founded in 2003 to create arcade-based games for players on the Web. At the time of its creation, Yahoo was a portal of choice, and King’s co-founders Riccardo Zacconi, Thomas Hartwig and Lars Markgren, wanted to design games that could be played on Yahoo. Today, King.com claims to be one of the leading skill-based gaming site in the world with an established mobile platform. They have a portfolio of more than 150 online skill based games, but are best known for their game, Candy Crush Saga. Candy Crush Saga is among the top 10 games on Facebook and has helped King become one of the leading players in the industry, with more than 45 million monthly average users playing the game on Facebook. App Data’s reports show that King has more than 25 million average daily users playing their games on Facebook.

Unlike other social game offerings, King does not rely on advertising revenues. Earlier this month, it announced plans to end all advertising on its games to ensure that the players enjoy an uninterrupted entertainment experience. Instead of the ads, King plans to earn revenues through virtual currency transactions. For instance, on Candy Crush Saga, players can purchase lives, advantages and additional levels for a nominal charge. King is confident that the quality of its games will help convert free players into paying player status as well.

King’s detailed financials are not known, but the company is expected to generate revenues of more than $524 million this year. It has managed to control their expenses and have been profitable since 2005.

King has remained venture funded with investments from Apax Partners and Index Ventures. The company had received funding of $43 million from these two investors in 2005. Now King is preparing for an IPO in the US markets. Earlier this month, it hired J.P. Morgan Chase & Co., Credit Suisse Group AG, and Bank of America Corp. to handle the IPO.

The last gaming company IPO, for Zynga, did not fare too well. Analysts are worried that King may go the same way. But some believe that King has better prospects than Zynga. Unlike Zynga, King first established its presence on the mobile platforms before pushing itself on Facebook and iOS. King uses their website King.com, which has a user base of hard-core gamers to test its games. Only the games that are successful on King.com are sent to other platforms, including Facebook and the iOS.

In summary, King will not have as frothy an IPO. However, it will also likely not have a dramatic meltdown.