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San Francisco — Size matters to Bobby Kotick, whose US video games group Activision Blizzard is paying $5,9 billion to acquire the European leader in mobile gaming, King Digital.

When Call of Duty — perhaps Activision’s best-known franchise — achieved launch-day sales records in successive years, Mr Kotick hailed the feat as the biggest entertainment launch in history, comparable with blockbuster movies.

The price he has paid for the maker of Candy Crush Saga, one of the most popular games of all time, is also one of the biggest sums paid for any entertainment franchise in recent years. Walt Disney’s two transformative acquisitions of comic-character juggernaut Marvel and Lucasfilm were cheaper at $4bn each.

But like Hollywood, the games industry is grappling with a shift from the big screen to the small. And here, Mr Kotick is not too big to admit that Activision has fallen short.

“We really haven’t had success in mobile, nor have we made investments in it,” he says.

There are some small exceptions: Hearthstone, a mobile spin-off of Blizzard’s multi-player online game World of Warcraft, has seen some success since its launch in April. But while Activision has tried to bring Call of Duty and Guitar Hero to smartphones and tablets, nothing else has really caught on.

“One of the things we really respect about (King’s) business is it’s a different business,” Mr Kotick said.

That runs from the way games are designed and players are attracted in the overcrowded app stores to the way they make money. Unlike the upfront spending on a console title or subscription for World of Warcraft, the top-grossing mobile games are free to download, with a small but dedicated portion of players then choosing to buy in-game upgrades.

“We could have continued to invest in exploring this as an opportunity,” Mr Kotick says. “But as much as we might have done so, I don’t think we could have ever caught up to the experience and capability that Riccardo (Zacconi, King chief executive) and his team have.”

Activision has traditionally profited from console titles and online games, which are paid for upfront or through subscriptions. The top-grossing mobile games are free to download, and then a small but dedicated proportion of players chooses to buy in-game upgrades.

“One of the things we really respect about (King’s) business is it’s a different business,” Mr Kotick says.

The deal also creates another huge number. Combined, the two companies have a 500m-strong network of active users. That scale, Mr Kotick boasts, is topped only by Facebook and Google.

Yet some analysts were puzzled by Activision’s move. Candy Crush remains a dominant force in mobile gaming but it hit its peak two years ago. Mr Zacconi said in Monday’s announcement that King had 474 million monthly active users in the third quarter of 2015, a 5 per cent decline from the previous quarter. That continued a slow downward trend.

“The challenge with mobile games is turning one major hit into a sustainable stable of games,” says Dan Cryan, digital media analyst at research group IHS. “That’s been the problem for (Angry Birds maker) Rovio and is arguably the major challenge facing King.”

Activision’s hope is that it can lure gamers with new twists on Candy Crush and King’s other formats, this time featuring its own brands and franchises, which date back to the earliest computer games on the early Atari, Commodore and Nintendo consoles.

“We bring 35 years of intellectual property creation,” Mr Kotick says. “We have more IP that will be available to Riccardo than any other source.”

Yet some analysts believe that today’s Activision games have more in common with the fantasy worlds of Machine Zone’s Game of War and Supercell’s Clash of Clans — so-called “mid-core” games that attract a smaller yet more dedicated audience than the casual gamers attracted to Candy Crush’s sugary treats. But Mr Zacconi, a former “entrepreneur in residence” at Benchmark, the Silicon Valley venture capital firm, insists that is more important than thematic affinity.

In the US, shareholders have been burnt by two initial public offerings — Zynga in 2011 and King Digital Entertainment in 2014. Zynga’s stock is 80 per cent below its peak. It was hurt by the shift of activity from desktop games on Facebook (FarmVille was Zynga’s big hit on Facebook) to mobile. King, down 39 percent from its high last year, is also struggling to move on from its huge hit, Candy Crush Saga.

“We have one of the largest networks and in my old Benchmark times, I learnt that it’s better to have access to a really wide audience and from there segment the audience and work out the different opportunities, than having a business that is very large in terms of revenues with a very narrow audience,” he says.

If there is one Activision number that is not quite as big as it seems, it may be the price it paid for King.

Michael Pachter, games analyst at Wedbush Securities, said that excluding King’s $900 million in cash, Activision is paying about seven times operating cash flow. That is “not very expensive” given it will add 60-75 cents a share to annual earnings. Furthermore, it is partly paid for using Activision’s offshore cash pile, thus avoiding paying tax that would have been incurred by repatriating it to the US.

At $18 per share, the offer is also a 20 percent discount to King’s $22,50 initial public offering price a year and a half ago.

Who is profiting from the deal?

The sale of King Digital will be a landmark return on investment for Apax, the private equity firm that is its biggest shareholder with a 45 percent stake, write Joseph Cotterill and Robert Cookson.

Apax will sell down all of its holding as part of the deal, generating $2,5 billion — a return for its investors of over 90 times the money it originally invested in the company a decade ago, according to people familiar with the matter.

This return, which includes €400m of previous proceeds from King Digital but does not count fees paid to Apax by the investors, would make the company one of the firm’s most successful investments ever.

The average multiple on investments sold by Apax since January 2014, a fertile period for buyout groups to sell off investments as equity markets peaked, has been 3,8 times.

The 29 million euro investment in King Digital in 2005 was one of Apax’s last venture capital-style deals before the firm switched to focus on leveraged buyouts of bigger and older companies.

Investors who bought shares in King following its initial public offering last year, in which Apax sold 2 percent of its stake, have fared rather less well than the private equity group. The stock had fallen 30 percent since the listing before the deal with Activision was announced.

Mr Zacconi and King’s co-founders Melvyn Morris and Sebastian Knutsson own a combined 26,7 percent of the company worth $1,6 billion at the acquisition price.

Melvyn Morris has 11,3 percent, Riccardo Zacconi has 9,9 percent and Sebastian Knutsson has 5,5 percent, representing stakes worth about $666 million, $584 million and $324 million, respectively.

Apax declined to comment.

“I compliment Activision for being introspective enough to realise they can’t do it on their own,” Mr Pachter says of the effort to use King as a way to move from console to mobile. “I complement King for realising they are not a great standalone business. So together they have a chance.”