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With New Products, Rovio Seeks to Maintain Explosive Growth

Posted on Tuesday, Jun 5th 2012

Researchers estimate the worldwide mobile games market to be worth $2.7 billion in annual revenues this year. The market is projected to grow to $7.5 billion by 2015.  Asia is the biggest market for mobile games and is expected to account for $3.2 billion of the global market by 2015.

Angry Birds is known to be among the most popular mobile games. Earlier last month, their developer, Rovio, reported the one billionth download of the game. News reports suggest that they may now be looking at an IPO on the New York or Hong Kong stock exchanges by next year. Recently, Rovio disclosed their financial results to the public. Here is a quick look at their progress so far.

Rovio’s Financials
Rovio recorded annual revenues of €75.4 million (~$106.3 million), with earnings before tax of €48 million (~$67.6 million). A year ago, they reported revenues of $10 million. The Consumer Products business segment, which accounts for both merchandising and licensing revenues, contributed nearly 30% of their revenues last year. Analysts estimate Rovio to be worth $8 billion-$9 billion.

Angry Birds’ Expansion
Last quarter, Rovio launched Angry Birds Space, a new theme for the game. Within 35 days of its launch in March, the game had reported more than 50 million downloads, making it the fastest-growing mobile game ever. Rovio followed this with the April 2012 launch of an interactive version of Angry Birds, Angry Birds Share and Play. The Share and Play feature lets users share and embed a level onto a blog, Facebook timeline, or webpage, so that they can play it instantly on that page. In addition, for Facebook, they also launched Angry Birds Friends, a tournament-based game. Angry Birds Friends lets users play with friends in weekly tournaments and comes with four exclusive levels and virtual rewards. Their Facebook fan page has also been a big hit, and they recently announced the achievement of 20 million “likes.”

Head to Head with Mickey Mouse?
It is not just games where Rovio aims to grow. As of earlier this quarter, they have their own theme park: Angry Birds Land opened at Finland’s Särkänniemi Adventure Park with 12 rides, and it will have themed food and characters. The park was designed with the help of Rovio’s design team.

Rovio has managed to move beyond being just a game developer to begin to carve a name for itself in the entertainment industry. Their plush toys and t-shirts are earning them significant revenues as they clocked sales of more than one million plush toys and t-shirts a month. Marketing chief Peter Vesterbacka says the goal is “to exceed the number of Mickey Mouse toys that Disney sells.” They are also moving beyond Angry Birds and launching a non-Angry Birds–themed game later this year. With more than 200 million monthly active users, Rovio is also working hard to narrow the gap with its competitor Zynga, which boasts of a user base of more than 240 million.

As GigaOM’s Bobbie Johnson points out in his analysis of Rovio’s strategy, right now Rovio is more interested in competing with Disney in terms of the bottom line than as a pop culture force. But, Johnson argues, Rovio may benefit in the long run by studying how Walt Disney built his company far beyond Mickey.

For now, Rovio is earning a hefty EBT of close to 64%. Compare that with competitor Zynga, which reported a net loss of 26%. Rovio may have nailed the ability to earning big margins. But whether the company can transition to a sustainable entertainment empire from their current business model will be the big question they will need to answer.

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