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Candy Crush IPO Could Go Bazinga! (But It's Probably Another Zynga)

Stocks in this article: EA NTDOY SNE TTWO ZNGA CRM ATVI

For the industry, the history of one-hit wonders is nasty, brutish and long.

Look at the charts. Electronic Arts (EA), Nintendo, Sony (SNE), Take-Two Interactive (TTWO) -- all train wrecks since 2004 (in Nintendo's case, since 2007, the peak of the excitement over the Wii's new capabilites). And that's before we even begin to talk about Zynga (ZNGA). Two years ago, Zynga was where King is now -- fast growing, profitable, its handful of top games the King of the Facebook Economy, just as King is now the putative Monarch of Mobile Commerce.

Then the buzz faded and Zynga did, too. Its stock, which peaked around $15, is now around $5, its market cap down to $4.5 billion, its paying-user base down to 1.3 million from 3.4 million when it went public in 2011. Not chicken feed, but a losing bet on its $10 a share IPO.

"King's most recent quarter saw sequential drops in revenue, Ebitda and a 7% decline in average monthly unique payers,'' Renaissance Capital analyst Will Preston told me in an email. "King is also way more dependent on a single game (Candy Crush was 78% of revenue in the most recent quarter, while Zynga's top game accounted for only 27% of revenue at IPO).''

It's a hit-driven business. In King we have an 11-year old company with no really big hits until last year that is making the argument it has a "platform'' -- one of the most overused words in tech, by the way -- that will not only pound out hits consistently, but will pound out lasting hits consistently.

That's actually the argument King chief creative officer Sebastian Knutsson makes in the company's video roadshow: The secret sauce of King is its designers' ability to pick from among its 180 games and pick the ones engineers can "Saga-fy" to make them compulsively playable on social networks, presumably for years.

"We take the best games ...and we put them into what we call the Saga envelope,'' Knutsson said. "We reconceive games from a two-minute skill game into a multi-year franchise that can work on social platforms.''

Really, Mr. Knutsson? How would you know given that this never happened in a material way before last year?

If anything, the evidence in King's prospectus points the other way.

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