The World’s Greatest: Why Activision Needs to Acquire Glu and Ember Entertainment

Context:

Huge pent-up demand exists for Blizzard IP based mobile games (e.g., Warcraft, Starcraft, and Diablo). We see strong market evidence of this demand in the countless number and success of infringing mobile games that operate without formal licensing with Activision Blizzard.

Especially for fantasy gamers, the ultimate IP in mobile gaming is from Blizzard’s Warcraft universe. Overall, this IP is likely second or third only to Nintendo and Shueisha/Shogakukan (who own most of the Japanese anime IP) as underutilized IP assets for mobile games.

Activision Blizzard could easily become the largest mobile gaming company in the world by applying Blizzards old strategy of perfecting proven game models with high polish and launching new mobile games leveraging the company’s elite roster of IP.

Hearthstone is a great initial success but what does it need to do to get to the next level?

Strategy:

To get to the next level Activision Blizzard should:

  1. Scale its mobile product line
  2. Acquire the right kind of talent
  3. Build a mobile game network to cross-promo against ridiculously high user acquisition costs

Although internal organic growth of new mobile teams is possible, why take the risk?

  1. No guarantee of being able to build good teams internally
  2. The company would lose time while waiting for internal teams to build – this is time that new entrants could enter the market, user acquisition costs could continue to rise, and the timing is ripe for new games to compete with the aging giants in the mid to hard core space like Clash of Clans and Game of War

So who should Activision acquire?

To me there are only a few viable candidates and the best of these may be Glu Mobile and Ember Entertainment.

The one other company to consider is Com2Us the developers of the game Summoners War which may quite possibly be the best designed mobile game ever created. However, Glu/Ember from a high level outsider’s view seems to be a closer fit culturally and with ready to go product fit for IP.

Why Glu and Ember?

  • You need network effects from a portfolio of mobile game products to more effectively market games. UA has moved from advertising single games to monetizing networks across an entire portfolio via cross-promotion. Both Glu and Ember can add meaningfully here.
  • Glu:
    • Has deep experience building mid/hard core games with high production value
    • Experience working with high profile licensed IP
    • Good cost structure with globally distributed teams
  • Ember Entertainment:
    • Has developed a Top 100-150 grossing game (Empire Z) in a proven category (march battle similar to Game of War) that could get supercharged by a newer version leveraging Warcraft IP
    • Brings key mobile experience in monetizing hard core users

Glu + Ember + Activision Blizzard IP:

Let’s imagine a scenario where we take the game engines of Glu + Ember and apply Activision/Blizzard IP:

Mobile Game CategoryGame EngineIP UsedGrossing Potential
March BattleEmpire ZWarcraftTop 10
Active Skill Battle
(e.g., DOTA Legends / Heroes Charge)
Heroes of Destiny (some mod required)WarcraftTop 10
ARPGEternity WarriorsDiablo
Starcraft
Top 20
SniperDeer Hunter
Frontline Commando
Call of Duty
Destiny
Starcraft
Top 30

Right off the bat we could have 3-4 easy wins that could all be developed on existing engines. Hence, unlike Hearthstone which took 6 years to release, these wins could conceivably all launch in less than 1 year.

A comparison of the companies market capitalization:

CompanyMarket Capitalization
Activision Blizzard (NASDAQ: ATVI)$18.6B
Glu Mobile (NASDAQ: GLUU)$0.5B
Ember Entertainment (Private)Private

These acquisitions likely wouldn’t be easy: there are certainly some changes and areas of weakness to shore up to make this vision a reality. Glu has some particular weaknesses as does Ember.

However, I see great potential for these acquisitions to lead to the creation of the world’s biggest mobile gaming company. Activision could with < $1B in acquisitions cost potentially generate 3-5 Top 10 grossing hits over time. Hence, an acquisition that may be able to create as much as $5B-$10B+ in future market capitalization.

Conclusion:

The combination I describe could result in essentially the world’s greatest mobile gaming company to date.

Activision Blizzard… what are you waiting for?

8 Comments

  • Andy

    Posted August 28, 2015 9:02 am

    This is so wrong. Blizzard cares for their Brands and their players and I think that they are far away from using their IP’s for some mobile games that have mediocre gameplay at its best. The damage that the brand Blizzard would take by using their name for such underdeveloped products would be much greater than any money numbers could ever tell. This article shows how little understanding typicall mobile games / f2p designers have when it comes to the craft of real companies that try to build real games like Blizzard does.

  • jokim1

    Posted August 28, 2015 10:57 pm

    Hey Andy, I think your concern is totally right but I disagree with your conclusion. Glu’s games are some of the most highly polished on the market. Some of those games are a step or two away from being really great. Look at Hero’s of Destiny and the potential it had if they only had more time to really develop the core battle and eliminate some of the weird micro bits in that game. Also look at Deer Hunter/Frontline Commando 2. FC2 was ripped by Tencent and with a bit of added mid/late game innovation has been #1 top grossing in China.

    I believe that the pressures that Glu puts on its team to rush/get to market could be mitigated by Blizzard’s culture and people to get the product right.

    In today’s market, it’s so hard to get good people and good teams together. The market if you’ve been recruiting in this industry you’d realize is super super tough. This deal has some risk but overall the upside is wayyy higher. The bigger concern I have for Blizzard is that Hearthstone took so long and is based on a very light monetization model which works for that game… BUT if you are trying to enter other mobile game categories the understanding of advanced monetization and retention mechanics required for success in those other categories I don’t believe Blizzard has in house and they should acquire.

    As for this remark: “This article shows how little understanding typicall mobile games / f2p designers have when it comes to the craft of real companies that try to build real games like Blizzard does.” <- This to me indicates you just really don't like F2P or consider them "real companies". Well in fact, mobile gaming today is a huge industry not only driving billions in revenue but significant amounts of real user/player time. I think you should just realize you may not be the target market for the "typicall" mobile game, but there is certainly a big market that's not you playing, paying, and enjoying those games. I'm glad you love Blizzard games, I do too, but I as I mentioned there is a huge ALREADY PROVEN market for F2P games that use Blizzard IP that players really enjoy and pay significant amounts of money for. Just look at Heroes Charge as an example.

  • Andy

    Posted August 30, 2015 2:25 pm

    Okay, first: Ember Entertainment wouldn’t be a good aquisition because of their “copying” from Game of War. They even copied almost the whole balancing. In the last few weeks they changed as much as they could as they got suied by machine zone. Do you really think it would be a good idea to make a partnership with a company like that if you’re Blizzard? A company that added so much innovation to already existing genres and is highly focused on delivering fresh and epic experiences? I don’t think so. It would be a shame for Blizzard and the guys that work there to be in the same pool as a company like Ember.

    Second: Glu Entertainment… All the games you mentioned are polished in terms of reward strategy and maybe even visuals. But they lack something that is the most important for Blizzard: Good gameplay. Blizzard has the words “Gameplay first” set in bronze on their campus floor because it is so important to them. Want some proof?

    http://pcmedia.ign.com/pc/image/article/999/999661/blizzard-studio-tour-20090630001224259-001.jpg

    The gameplay from the normal mobile game does not even come close to a game like Hearthstone. Blizzard strives for epic experiences with awesome gameplay. The reason why Hearthstone took so long and is so soft monetized is that Blizzard really cares about their gameplay. Every Glu game iyou mentioned is highly content and progression driven. Your stats do matter more than your skill, something that Blizzard would never accept in their games because things like this kill interesting decisions and thereby gameplay. There are no interesting decisions when the answer lays in the time you have already invested or the money you are willing to spend.

    The number #1 player in Hearthstone never payed a cent. This is no “accident” or flaw in their game. This is purpose. They focus so much more on delivering a great game that motivates with its gameplay than on keeping the player motivated through reward structures and that’s why all the Glu games you mentioned wouldn’t have any value for them. I don’t say that the Game Designers at Glu don’t know how to deliver good gameplay. Maybe they do but their games don’t proof that.

    So to make it short: Blizzard cares too much for good gameplay that neither Ember nor Glu could bring any value into the studio.

    And of course this is just my oppionion. I do not work at Blizzard, Glu or Ember.

    • Joseph Kim

      Posted August 30, 2015 4:51 pm

      LOL. You definitely make some good arguments and thanks for taking time to keep me honest on this post.

      As I mentioned before what you’re talking about is my main concern as well HOWEVER the difference we have is 2 parts:
      #1. I think the concern we both share is actually surmountable and
      #2. We don’t agree on the fundamental perception you have on F2P mobile game experiences as not having “good gameplay”

      Let me talk a bit about both parts.

      #1. I feel that the combination of the game companies above can potentially create a huge synergy. Well taken that Ember didn’t innovate significantly on Empire Z, but neither did MZ when they first launched Game of War. Further, if you look at Blizzard’s strategy overall it’s to take existing games and to “+1” innovate through polish, production value, and “refining” rather than creating new kinds of gameplay. The experience of the companies I mention having already entered a lot of strategic game areas and having operated and learned from their time is super valuable. They have lived in those games and understand it well. Especially with a game like Game of War, I believe in particular is difficult to add good innovation because of the complexity associated with that game.

      When I say Blizzard should acquire those companies the strategy is definitely not to just hand over IP and tell them to “GO!”. It’s to take what’s good about Blizzard and it’s focus on gameplay as you mention and to infuse that into the talent (engineering, mobile knowledge, and design+operating experience in strategic categories) of those companies.

      As I stated in my post: “These acquisitions likely wouldn’t be easy: there are certainly some changes and areas of weakness to shore up to make this vision a reality. Glu has some particular weaknesses as does Ember.” For me, Blizzard just doesn’t currently have what I think they will need to create “great gameplay experiences” in the key proven strategic mobile gameplay areas I think they could really kick ass in.

      I think you’ll also see that Ember just may have some innovation up its sleeve although not widely publicly disclosed yet.

      For Glu, I really think they did a great job with some of their games as I mentioned. Yes, they are a step or two away but that’s where we differ in opinion that I think they could get there.

      #2. I think that what you don’t realize is that gaming experiences on different platforms with different monetization models than you are personally comfortable with can be viable, and to those who play those games considered “great”. The friends I have who have played Game of War and feel more emotion from that game than from any other game on any other platform to me indicates a gameplay experience which they would consider unique and “great.” If you look at the session times, # of sessions, and lifetime play of players for some mobile games like Candy Crush, Clash of Clans, or Game of War it would be extremely difficult to argue that those players are not experiencing something they are completely engrossed in.

      There’s a mobile game I recently played for almost 10 hours straight which definitely reminds me of my old PC and console playing days – and to me I would consider this a really great experience.

      The other consideration you miss is the demographics and psychographics of players in different situations or life stages. As a specific example, I’m an old guy with kids and a busy work schedule. I had to stop playing League of Legends a few years ago because of my life situation and the inability to regularly devote 3+ dedicated hours per day. So for me a great game is one I can play in small increments, keeps me engaged, and that’s a fun experience. Again, just bc it’s different and not what you’re used to doesn’t mean it’s less _valuable_ to the players who play it.

      The way to make these kinds of games with the same care that Blizzard takes with it’s games and the expertise required is everything the acquisition I mentioned is all about.

      As a lifetime fan of Blizzard I believe and hope they can bridge the mobile gameplay gap and as I posted, can’t think of a better or more scalable method than I described.

  • Andy

    Posted August 30, 2015 2:35 pm

    PS: Also the guys at Blizzard always emphasize in interviews that they want to make games that they would love to play too. I highly doubt that there are many guys at Blizzard that enjoy games like Heroes Charge. It just doesn’t make sence to say “Gameplay first” as a company value and then delivering games like Empire Z or Kim Kardashian: Hollywood.

    And of cource the f2p market is proven and has a lot of potential but the consumers do not care about video games. They are looking for distraction, some rewards, a good feeling. They may chat with other players from their clans but they do not seek for challenges in terms of gameplay. And challenge and gameplay are highly entangled.

  • Joseph Kim

    Posted August 30, 2015 5:06 pm

    I personally loved Heroes Charge (well at least the original non-cloned version of the game DOTA Legends). I certainly played it 100x more than Diablo 3 (one of my biggest Blizzard disappointments as a diehard fan since it was a grindy piece of crap – I heard they improved it since it first launched but haven’t played it since).

    I’m not sure but you may be conflating “great gameplay” with games that are skill based. Certainly, it’s more difficult to build skill based mobile games but again where we differ is that I don’t discount mobile/F2P as great gameplay bc I’m encouraged by a lot of games that are as good or superior to PC/console games.

    Further to be honest can’t speak for others but for me: “They are looking for distraction, some rewards, a good feeling.” <- that perfectly describes me when I played some of my favorite games of all time like League of Legends, Warcraft 3, or DQ/FF games. Isn't that what we're all looking for when we play games in general?

  • Andy

    Posted August 30, 2015 6:08 pm

    Okay, I think we go into a pretty subjective conversation from here and well, I guess in design you’ll go this way pretty often but let me explain the differences in my oppinion.

    Take a look at a game like Hearthstone

    At Hearthstone it really matters who is executing how in terms of gameplay. You need the right card combinations and you need to play the cards the right way, you have to react on your opponent and you basicly have some kind of coinversation between you and your enemy. This is where the fun comes from the gameplay itself. Video games as a medium are special because they are interactive. For me this is the attribute that makes them unique. So we keep in mind: interactive experience. And the ability to satisfy the unqiue attribute of being interactive is somehow related that it matters how a game is played.

    Now lets take a look at Heroes Charge which I played for about 2 month for research.

    At this game you have almost no real decisions. Everything is streamlined and I think that if you take a look at the players you will see that players who spend the same amount of time will be probably almost at the same level (If they didn’t pay). It’s more like a well hidden slotmashine. You have to say which heroes you take into the dungeon and then you have to use their skills at the right time. The use of the skill is the only time where the individual skill comes into play because there will be probably situations where it is better to wait until you use a skill or you don’t. But even this decisions becomes redudnant as soon as your level is high enough. Sooner or later you will find yourself in the position that you can’t beat a level and you’ll have to grind dungeons that you’ve already beaten. Now comes the worse and probably most common mechanic known from typical f2p games: You have to grind the shit of the content you already know. There is almost no real decision. What do you want by grinding? Is it XP or a specific item? That’s the only choice. As soon as you have made this choice you have to repeat the same task over and over again. And the game designers know that that’s a problem and a good point where players want to overcome this task (it’s not a challenge ist es mindless task). You can’t tell me that this is great game design. Maybe it is good free2play monteziation design and probably they do a good job by providing timer based reward and effiecent variety but it is not good gameplay design. Players will be motivated to perfom this task because they want the reward but the task itself is dull and mindless. It’s the same with gambling. You don’t play Slot Mashines (a genre that i also very successfull on the mobile market what a suprise) because you like to press the button. You’re just motivated because you’re brain tells you that the next bix reward is only a few actions away… probably… Heroes Charge is a nice looking slightly more strategic slot mashine in my oppionion. Nothing more and nothing less.

    No good game design. It is a good product because it makes money, but not a good game (in my oppionion).

    When you grind in Hearthstone, grinding is fun because the games you play are fun. They always have some kind of challenge as you always have to strategyze what move you’ll make. And this is in my so much more important to Blizzard and I think that this is probably the least that Ember or Glu could help them to improve in their own games.

    And you’re right, Diablo 3 had the same problem and they try to fix it and they did a good job with RoS. It got a lot better from that point of view.

    I don’t want to judge Glu and Ember for making these kinds of game, I just don’t like them as games. I think they know how to deliver successfull f2p mobile game products but there is no great game design what so ever.

    I hope you can understand my point of view. But as I already said it is a subjective matter. I don’t want to judge what people enjoy. But I want do judge games based on their game design and not their commercial success.+

    And to be honest I think it is much “cooler” to motivate people through gameplay than through reward structures and other systems.Both is not easy but I think if Blizzard is able to motivate players through gameplay thay are also able to motive them thorugh reward structures as this is a lot easier.

    PS: I think that Candy Crush Saga could be a great game to be honest if it wasn’t balanced so hard. But the hard balance makes it a better f2p game and a more successful product. But at least you have some kind of decision making but as I mentioned it is balanced the way that you need a lot of tries because at some levels you need luck to overcome them. Which makes sence if you monetize new trys or more turns. But it makes the game worse because individual decisions become less important as soon as needed luck becomes more important to overcome a challenge.

    • Joseph Kim

      Posted August 31, 2015 9:13 pm

      So I think I get what you’re saying: you believe a lot of mobile/F2P experiences are inherently grindy and not “fun” experiences but instead rely on compulsion loops to get people to keep playing. I’ll agree that some games are like that… Machine Zone adopted it’s name from the term used to describe a state of addictive flow (from the book Addiction by Design).

      Having said that, I’ll just say 2 things:
      #1. It’s not all that bad. Game of War is actually extremely interactive, games like Deer Hunter are more similar to PC/Console types of fun experiences as the core gameplay experience, and you also mention that match3/candy crush for you is pretty fun. I’ve defn recently been seeing a number of games that are fun at a core gameplay level.
      #2. I personally don’t look down so much at a slot machine based compulsion mechanic… if that’s the kind of game that those users want to play. To some degree candy crush or other games like Hearthstone is just a skill based compulsion loop.

      Andy where are you based? If in SF or if you come by the area let me know and I’ll buy you a coffee or lunch (you can contact me via the link in my header at the top)… this discussion is definitely getting pretty long but I really appreciate your thoughtfulness and feedback!

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