Rovio financials show the digital economy isn’t always a smooth ride

Gaming and entertainment company Rovio has reported its latest financial and the disappointed sighs can be heard from here; with all the promises offered by the digital economy, success is no guarantee even for the pioneers.

This is the challenge Rovio is facing. It was one of the first companies in the app economy to make a name on the global stage. The Angry Birds franchise was a huge success with numerous different launches and even inspiring a movie. Ask anyone who is sat around you today, the likelihood is they have played the game at some point. But following up this success is the tricky part of the equation.

The original Angry Birds hit the heights when the industry was still trying to figure out how to monetize apps. Now the answer is known, the popularity of the game is shrinking, with the team offering few new opportunities to cash in on the bonanza. This might just be another example of where a pioneer in the industry fades away to nothing. Another example is Google. It wasn’t there for the initial excitement of ‘surfing the web’ but it knew how to make money better than anyone else.

Looking at the numbers, total revenues for the year grew to € 297.2 million, an increase of 55%, but this was below analyst expectations. And conservative expectations to add to that. As a result, Rovio share price has dropped 10% (at the time of writing). There are signs of recovery, but the damage has been done. The company is making money, that doesn’t seem to be a problem, but others in the industry are making a lot more.

“During the year the key figures of Games segment showed strong development due to the improved monetization of the top games,” said Kati Levoranta, CEO of Rovio. “However, in the last quarter of the year our new games, Angry Birds Match, Angry Birds Evolution and Battle Bay landed short of our expectations. Competition in the market intensified, which led to a significant increase in the unit costs of user acquisition, especially in the puzzle genre.”

Alongside the slightly negative financial performance, the team also announced it will be closing its London office, while Wilhelm Taht, who heads up game development, will be leaving. The London office has only been open for a year and was supposed to be a driver for new game development.

Rovio might have had its big blockbuster moment a little bit too early. If Angry Birds had been released this week, the team would be rolling in the cash. In-app purchases are going through the roof and there is money to be made. But it won’t be released now. The team need a new title, it needs to be big and it needs to come along quickly.