When a CEO like Rovio's Mikael Hed announces layoffs of a maximum of 130 people” you know something's up. Stating that the company had anticipated faster growth than it was able to realise, the firm is forced to reduce its headcount. But if one of the most successful mobile firms starts to cut back, you have to ask if we're not looking at a larger industry trend. Is Rovio the canary in the coal mine?
Angry Birds is still going strong, but its 200m active players is 24 per cent down on its 2012 peak. Despite this, Rovio's revenues have slightly increased year-over-year, from $192m in 2012 to $197m in 2013. We've seen similar trends before with Zynga, where revenues initially stay at the same level as its user base declines, because the non-payers are the first to move on.
Over the past two years, the mobile market has also seen the emergence of several big new companies, such as Supercell, which managed to generate $892m in 2013 with a total staff of 132, compared to Rovio's $197m and 800 staff. Once the undisputed king of mobile games, Rovio no longer can claim this position.
But Rovio wasn't born yesterday. It spent its early years developing games for the likes of EA and Bandai Namco. Once Angry Birds reached the success its did, Hed realised that replicating its success was nearly impossible and, instead, Rovio should focus on building a business around its hit title. At its peak, Rovio would receive between 60 and 80 proposals to collaborate in some way. But the market has shifted.
Mobile gaming is big. It's grown into a $21bn-a-year industry. And a failure to capitalise on the free-to-play mobile market, where players spend an average of $23.94 every month is costly (United States, August 2014). And it is here that Rovio has been unable to replicate its earlier success. Subsequent F2P Angry Birds games have done well, but none have come close to Clash of Clans or Candy Crush Saga.
To build a brand to the size of Mickey Mouse or Star Wars, two franchises that Rovio likes to invoke when outlining its vision, one needs a strong narrative economy. But in laying out the core values of its design, such as the need for wordless gameplay, Rovio has limited its ability to tell a narrative. Stories are what provides depth to characters, allows players to establish a connection to their avatars and the rules of their universe.
Because of its broad appeal, mobile gaming caters to a wide audience. Taking a wide approach, makes sense. But after an initial phase in which people surprise themselves by figuring out that They're gamers now!”, this same group will also start demanding more challenging and more sophisticated content. The same happened to social games, and the same is now happening in mobile.
"To build a brand to the size of Mickey Mouse or
Star Wars, two franchises that Rovio likes to
invoke when outlining its vision, one needs a
strong narrative economy. But in laying out the
core values of its design, such as the need for
wordless gameplay, Rovio has limited its ability
to tell a narrative. Stories are what provides depth
to characters, allows players to establish a
connection to their avatars and the rules of
If Rovio is indeed facing a decline, the silver lining may very well be that we have entered the next stage in the evolution of mobile gaming. Consumer expectations have shifted, marketing has become more challenging and development costs continue to increase – all of which results in a radically different mobile landscape. It means that mobile gaming is not a fad, as some initially suspected. It provides proof of the idea that mobile is a maturing games market, allowing big brands and innovative publishers to make long-term investments.
Many soon-to-be former Rovio employees will re-emerge. There's a tremendous amount of belief in the ability of Finnish developers. These recent changes amount to a revised strategy as Rovio enters the next stage in its existence. It's changed before and will again in the future. Let's see if they can navigate their brand through what comes next.