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14
2015 DIGITAL REVENUES
($ millions of dollars)
20%
GROWTH
46% of Total Revenues
57% of Total Revenues
$2,198
$2,628
2014 2015
2016 DIVIDEND
(Shares)
UP 13 %
$0.23
$0.26
2015 2016
Our greatest challenge now is prioritizing the unusually attractive opportunities
we have ahead and finding the right people to pursue them. Since we joined the
company, we don’t remember a time with more exciting prospects. Ever.
Interactive entertainment can be played on a variety of devices. Our company has
always been agnostic with respect to which devices we support. We first consider
whether we can put our best creative foot forward on a device. This means we can
make the very best games for the target new platform. Over the last 20 years, we
have done this largely for personal computers, video game consoles and dedicated
handheld devices.
Over the last five years, mobile phones emerged as great devices for playing
games. Because of their lower cost of entry, mobile phones—unlike PCs or game
consoles—are much less expensive, easier to use, portable and available in every
country in the world. The market for mobile games is more diverse than PCs or
consoles; the mobile market is eight times the size it was five years ago and is
projected to grow 64% over the next five years.
Despite the size of the opportunity, we approached the mobile market with caution
over the last few years. The type of games that are successful on mobile phones,
and the way you make and market these games, is different from games on PCs
and consoles. We didn’t really know how to do this well. To take advantage of this
opportunity, we decided to acquire a company with the skills and capabilities to
make mobile games. We needed to find one that met our stringent criteria for how
we allocate capital through an acquisition. As we have outlined many times before
in these annual reports, we employ five principles to evaluate an acquisition or an
investment. They are:
Great management with a long-term orientation
A proven history of profitable operations
Proven franchises or a proprietary technology (preferably both)
Accretive to our operating model
Non-dilutive (preferably accretive) for our shareholders
We wanted a company as committed to product excellence as we are. We wanted
a great management team that has the right balance of creativity and commercial
sensibility and operates with the same integrity that is the hallmark of our culture.
We waited for the “fat pitch,” as Warren Buffett likes to refer to investment oppor-
tunities that only come with patience.
With King we hit the ball out of the park. When we first met the management team
of King a few years ago, we were impressed. We watched as they operated their
business since that first meeting, and we were even more impressed. It was hard
not to be.