LONDON – All is not well in the land of Angry Birds.
On Monday, Rovio, the Finnish gaming company behind the once-popular franchise, announced a more than 50 percent drop in its 2013 net profit, to $37 million, compared with the previous year.
The fall comes as Rovio tries to respond to changes in the gaming world, where the likes of King Digital Entertainment, maker of Candy Crush, and Supercell, the Finnish company behind the Clash of Clans franchise, have found success with so-called freemium games. Those companies allow consumers to play their games for free, but charge for in-game purchases, unlike Rovio, which has traditionally charged users to download its games.
Late last year, Rovio launched its first effort at a freemium game, and has diversified its efforts in recent years into movies, animation and theme parks to reduce its reliance on online gaming. The company’s business of licensing the Angry Birds brand for consumer products like candy dispensers and lunch boxes now generates almost 50 percent of Rovio’s yearly revenue, according to the company’s annual financial report.
Rovio’s chief financial officer, Herkko Soininen, called 2013 “a foundation-building year.”
“We invested in new business areas, such as animation and video distribution, ventured into new business models in games, and consolidated our strong market position in consumer products licensing,” he said in a statement.
The efforts to alter the company’s business model, however, have yet to take root.
Rovio’s revenues last year fell slightly, to $216 million, compared with 2012. In contrast, Supercell, which sold an 51 percent stake to the Japanese telecom company Softbank for $1.5 billion last year, reported a ninefold increase in its revenue over the same period, to $892 million.
Rovio’s earnings fell 52 percent, to $37 million last year, compared with $77 million in 2012.
While Rovio pushes into the world of freemium games, many industry analysts are questioning whether the business model can remain profitable for the world’s largest gaming companies.
Zynga, for example, has struggled ever since its multibillion dollar initial public offering in 2011, as investor worry that the company is overly dependent on a small number of games.
And the share price of King, which was valued at more than $7 billion when it listed on the New York Stock Exchange last month, also has lost 18 percent of its value, as analysts caution that the gaming company still generates almost 80 percent of its revenue from its core Candy Crush franchise.