The company’s revenue has dropped nine per cent and its operating profit fell 73 per cent. There has also been a decline in the business licensing the Angry Birds brand on merchandise.
Essentially, the game has been overtaken by rivals Candy Crush and Clash of Clans, with former CEO Mikael Hed admitting that Rovio built a team on assumptions of “faster growth than have materialised”.
As Rovio’s franchise begins to falter, the question of whether it is a one-hit wonder rears up again.
In his 2014 article for American Express, Mark Henricks explained that in order to increase its reach, Rovio partnered with the likes of Star Wars in the hopes of sparking renewed interest. This is no surprise given that Rovio has yet to recreate the initial success of Angry Birds.
“But all these activities are tied to Angry Birds, and the Finnish phenom hasn’t been able to come up with a similar hit even after five years of trying,” Henricks explained. “That’s especially a problem now that the gaming world is moving away from the freemium business model that helped Rovio prosper. As a result, the company’s profits are plunging, dropping by more than half last year as it flirts with being the business world’s next one-hit wonder.”
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In an attempt to bat away their rivals away with a stick, Rovio have placed hopes on a 3D animated movie that is set to premier in 2016.
“The movie will help us get the licensing business back to growth,” said CEO Pekka Rantala. “Pretty soon we will be able to publish new major partnership deals.
We envision ourselves as an entertainment company with mobile games at its heart. We get tons of mail from our fans from all parts of the world. Many of them write their ideas about what we should be building, what kind of new levels our games should have—and we actually do take those ideas into account. When Angry Birds turned five years old in December, we launched 30 new levels in our game and all of them were based on drawings coming from our fans.”
Rantala explained that this kind if fan base is what gave Angry Birds a brand awareness rating of 91 per cent.
“Some years ago Rovio was approached by many studios who wanted to buy the rights to make a movie,” he said. “I am really proud that the company made a very bold decision not to sell the rights but instead to make the movie by themselves.
“It’s a huge investment for a company of our size. Some people might think we are crazy, but we are very excited, and we are very confident that this is the right move because when we decided to make it we decided to make it right.
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“For the first time, our characters are going to have lips, wings, and will also speak,” added Rantala. He even compared the up-coming movie to Pixar hits. “It’s exactly the same level. And people who’ve seen [parts of]it have been very excited. It’s a very, very funny movie. It’s a family movie but at the same time I can guarantee that young adults who go and check out the movie will love it.”
“The business peaked very much during 2013. And now it’s normalised and the movie will create the next boost for the business.”
The move might just work. Among the many commentators to have questioned Rovio’s strategy, Sotirios Paroutis, associate professor of strategic management and tech sector for Warwick Business School, suggested: “Developing an entertainment company on the back of a successful cross-platform gaming app might sound too optimistic – but staying still, and relying only on gaming, is too risky an option for Rovio.
“Past attempts to bring video games into the movie theatres have not been successful, but Rovio might still be able to develop a winning movie formula particularly for younger audiences and Asian markets with its Angry Birds cartoon-based characters. In its efforts to become an entertainment company, Rovio is taking a risky route to arrive at a less risky business model.
“If Rovio is to become a successful entertainment firm it needs to slingshot its brands into new, unchartered territories.”