Angry Birds & Rovio | CryMor
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Imagine a dollar. A single one dollar bill. I’m going to ask you to invest that dollar,
but you get a choice. I know choices can be paralyzing, so I’ll
help guide you. I’ve managed to compile three different
choices, and it’s entirely up to you–whichever one you choose, that’s what we’ll go with. For Option A, I’ve got a company that is
hot off one of the biggest surprise product launches in gaming history. They’ve literally changed the entire industry,
holding multiple positions in the top-sellers lists, and they’ve completely knocked their
multi-billion-dollar competitor’s 200 million dollar product out of the running. In fact, we’re starting to think that competitor
will be gone in a few years–maybe even bought out by Option A some day. Now, it’s got a bit of a bubble risk, that’s
true, but it’s gonna be hot hot hot. Everyone knows it, all the big companies are
paying attention, this is your chance to get in at the forefront of a market that could
be worth hundreds of billions–maybe even trillions–in just ten years. Imagine if you’d invested that $1 in Apple,
or Amazon, or even Bitcoin! Now, for Option B, this is a bit of insider
information, okay? I’ve got a line that a well-established
company is making an offer in the capital-B billions of dollars range for these guys. They’ve got some real expertise in the same
emerging market, but without that kind of hype-fanatic thing going on, so there’s
way less risk. No bubble here. These guys are going to be buying the expertise–they
know that this team can get them into a position to potentially take their older, more established
IPs into this wild west and make a killing. Yeah, okay, the profits won’t be insane,
but they’ll be super respectable. Okay, now Option C is a bit boring in comparison. They’ve been around for a while, they’ve
got a great brand, but they’re a little one note. They can only make one thing, but that thing
is pretty popular. This is easily the safest bet, but it’s
also gonna be the least profitable. You’ll probably only see a few cents of
profit, but again–it’s safe. That’s just kind of how it works. So, where do you want to invest? While perhaps you’ve heard of Rovio, you’ve
definitely played their game: Angry Birds. They’ve released over 40 different versions,
spin-offs, limited releases, and promotional versions all over the world. In fact, there are so many versions and so
many downloads that it’s more likely that you’ve played an Angry Birds game than that
you’ve eaten at a Taco Bell, or visited a Bank of America, or flown on Delta. It was a massive success that completely changed
the way mobile gaming was viewed. And as you might have imagined from the introduction,
the way it was viewed changed a bit over time, but it was always considered to be a safe
bet for investors. So, why is it that today, Rovio is basically
a corporate nobody, a brand with little influence, and a stock that is semi-perpetually considered
to be something you should never touch. What happened to change it from the glowing
vanguard of the future and turn it into a warning for other companies? And, of course, how much money would you have
made if you’d invested that $1? Rovio is a story about time. Specifically, Timing. Founded by three students of the Helsinki
University of Technology, they got their start by selling their student project after winning
a competition sponsored by Nokia and Hewlett-Packard. At first, Rovio made work-for-hire java ports
and contracted themselves out for weird java games, flash games, games for the N-Gage,
and that’s about it. They also worked on a few projects for themselves,
and when the Apple App Store opened up, they were quick to create a game called Totomi,
a $4.99 puzzle game that was considered to be pretty good specifically because it wasn’t
another java port to iOS. And while it sold poorly, so poorly that it
lost Rovio money, it did teach them how to make a game specifically for touch-screen
devices. A lot of people tend to forget the days when
not every phone was a touchscreen, but when the original iPhone came out people were still
using their Motorola RAZRs, and talking about how no one would use an iPhone because it
had a touchscreen. In fact, the App Store itself wasn’t taken
particularly seriously–why would anyone pay for an app? And while there are millions of apps on there
today, and millions more on Android, and the Amazon app store, and side loading, and so
much more–well, the day the App store was announced, there were only 500 apps. This was very much untested waters, no one
knew how to make these products, the top games were weird, and most AAA game companies went
into it thinking they could continue to just produce bad ports of java games for a quick
buck, or to tie-in and promote a movie, or as a way to increase profits on a brand by
releasing a tie-in to their own larger AAA releases. The few companies who went all in and tried
to produce mobile games that didn’t suck, well those guys were making games for consoles
and PC and using that kind of mentality to make games for a touchscreen. Rovio, though, they’d make a few games already. Not hugely successful, in fact kind of the
opposite, but nonetheless they’d already had experience with the common pitfalls. And they didn’t have huge amounts of bureaucracy,
there wasn’t multiple levels of management to get involved, they could just make something. And if it didn’t sell well, that was fine,
they could use that in a portfolio to get a work-for-hire project as experienced iOS
developers–something that was, again, very rare. And so it was that 18 months after the release
of the App Store, and having released a couple not bad games onto the platform, Rovio released
Angry Birds. And it was an instant and verifiable “Meh.” It didn’t really light up the world, it
sort of just existed. In the first few days it went from 8th to
3rd to 30th on the ranking, and sort of bounced around. Rovio played with the pricing, moving it up
and down, and as high as $1.99 before settling at $0.99. But a little over two months later, they would
release a new version, and add almost double the levels, and suddenly people were talking
about this fun little game again. They added leaderboards. They added in more complicated levels. And then, a month after that, they released
another huge update, including secrets and new birds and even more levels. Then, they sold a million apps, hit #1 in
the world, and just kind of stayed there for a few years. Angry Birds took #1 free spot with their Lite
version. Lite meaning free but not full featured. It would include a few levels from the game,
as a kind of demo to get you to pay $0.99 for the full game. Remember, there wasn’t advertising in games
yet, this was all new, so the only way to make money was to actually sell the game. And they absolutely did that, hitting one
million in April, five million by May, and twelve million by October. Within a year, they were porting their own
game, showing up on webOS, Android, Sony PSP, Mac, Windows. And when they came up with a huge new themed
version of the game for Halloween, they were able to successfully turn that into a stand-alone
release called Angry Birds Seasons–also a top selling app. The next year, they’d do a very very successful
tie-in with the Hollywood animated movie Rio–making Angry Birds Rio, and they’d introduce these
things called In App Purchases, allowing players to buy a once-an-hour Mighty Eagle to clear
especially hard levels–for a small price. They were so successful they had a super bowl
commercial–a mobile app with a superbowl commercial, who would ever have suspected
that! Yes, Angry Birds was incredibly successful. It was #1 in the App Store for over 250 days,
which for reference Lil Nas X’s Old Town Road is the longest running #1 song in the
world at a comparatively short 133 days. Once Rio was released, they held the #1 spot,
the #3, and the #4 spots on the top lists, meaning Rovio represented 3 of the top 5 games
for the year of 2011 on iOS, and when they released Angry Birds Space they would hold
4 of the Top 10 on both iOS and Android. Angry Birds LITE would knock Zynga’s 200
million dollar Draw Something from #1 pretty handily, and completely smash Doodle Jump’s
30 day #1 record. It was the #1 most downloaded, and the paid
version would beat out Zynga’s Farmville as well. So for a game that obviously overtook the
world, how is it that today it’s just kind of there, with a newest release that isn’t
even in the Top 1000. Timing is probably the biggest one. Angry Birds is commonly considered to be the
first “mobile first” game, focused exclusively on providing a good touchscreen experience
for mobile phone users, without any expectations of converting these users into movie viewers
or trying to sell them a PC version of the game. After it came out, it taught everyone else
how to be Mobile First, and therefore it started having competitors. Angry Bird lost casual players to Candy Crush. It lost competitive players to Clash of Clans. Pokemon GO took a huge amount of players looking
for an addictive, familiar experience. The hyper casual players jumped ship to Helix
Jump, and the hardcore gamers left for experiences like Fortnite and PUBG Mobile. Rovio’s success set the scene, but companies
such as Supercell, Small Giant Games, Next Games, and Fingersoft took the starring roles
and upstaged Angry Birds as soon as they were able to. Additionally, Rovio perhaps produced too many
games and they were too expensive and also not expensive enough. Unlike basically every one of their competitors,
Angry Birds was a premium product that required an upfront cost, did not include many microtransactions,
and additionally had next to no advertising. And while that sounds ethical and moral and
basically a great thing, the fact is that free-to-play with in-app purchases, reward
video ads, incentivized app installations, these are the tools that have catapulted mobile
games into profitability and allowed a company like Supercell to release no less than four
billion dollar franchises netting them well into the 10 plus billion dollar profit range. Angry Birds wouldn’t receive any free-to-play
monetization until 2015 with Angry Birds 2, and that game would go on to become their
biggest and most profitable game ever, with over 330 million dollars in sales. The irony of this, of course, being that they
held multiple positions on the most downloaded free game leaderboards for years with their
LITE version, and in fact Angry Birds is the most downloaded franchise of apps of all time,
meaning there’s no reason they couldn’t have become more profitable, more influential,
more more more. As an example of how badly they misread and
misunderstood mobile gaming and monetization thereof, Rovio was completely shocked when
they removed ads from Angry Birds Transformers for any customer who had made a paid purchase,
only to find that those customers were rioting about the loss of the advertising’s in-game
rewards. These players wanted to watch ads for progress,
but Rovio didn’t understand that, and removed the ads. Rovio’s tried to diversify into other games,
like Dream Blast, but they’ve never caught the lightning again, instead only managing
to cannibalize their other games to direct traffic and users to the new ones. It’s incredibly telling that for the past
several years Rovio has managed to produce almost identical amounts of revenue, but they
keep making less profit because they have to keep spending so much money to get new
users. User Acquisition is an expensive part of any
mobile game, any media really. It’s marketing, advertising, getting people
to actually try your game. And these are not small costs, by any means
whatsoever. In fact, in many ways, it’s surprising how
these games make any money at all. In 2018, Rovio was commissioning research
that showed the average cost of a single install was 3 dollars 90 cents in North America, 6
dollars 90 if you wanted them to register an account, and 105 dollars 50 cents for them
to make a single in app purchase. They make about a dollar seventy per user,
so that tells you how infrequently someone is willing to pay for an in-app purchase,
and also how much they rely on you searching “Angry Birds” in the App Store and installing
it on your own rather than them having to advertise to you. This is the so called WHALE problem in mobile
gaming, and a fun number for you to understand is the Top 10% of mobile gamers generate 90%
of the revenue, the top 1% generates 58% of the revenue. For most games, the average Whale represents
70 dollars 30 cents every 90 days. But Angry Birds cost $0.99, and removed ads
once you paid. They were inflexible, and frankly too ethical
to be at the same levels of profitability as some of the less moral companies willing
to simply be obnoxiously expensive, addictive, and manipulative. This is just one part of the problem, though,
and barely half of it at that. Rovio also grew really fast, they were the
equivalent of a YouTuber waking up overnight to 100 million subscribers. They needed to scale quickly, they needed
to continue producing products, but they had no idea how far to scale–what’s appropriate? Are you going to be a long-lasting super power
in the industry, or were you just a flash in the pan? And does a mobile game need as many developers
and staff as, say, Activision or Bethesda? Should you be working on ten games at once,
or just one really really big game? Do you license your product to make merchandise,
or do you produce that merchandise yourself? These are things you usually get to slowly
work your way into–Okay, I’ve just hit 100,000 subscribers, now I can do some merchandise
and make some body pillows for $10 without fear of them sitting unloved in a warehouse. Okay, we’re at 500,000, now I can introduce
my new live tour. Hey, 2 million, great, now I can introduce
my paid webshow. Et cetera. When you suddenly have 100 million, overnight,
with no gradual lead-up…well, do you need all of that? Will people buy it? How much should it cost? There’s no time for experimentation, you
just have to wing it. That’s a bird pun, I think it’s even the
first one in the script, so like..pretty good job me! Rovio grew way too fast, and their revenue
never really matched. They didn’t embrace mobile gaming monetization,
and they tried to be a traditional game studio, hiring hundreds of employees to work on individual
premium titles–something the industry itself was quickly moving away from in favor of those
free-to-play strategies. In 2014, they started restructuring and quite
frankly still haven’t stopped. They laid off 110 employees, and changed their
CEO. They closed an entire studio in 2014 as well. In 2015, they laid off another 260 employees,
and changed their CEO again. In 2017, they would lay off another 35 employees,
and even sell one of their divisions. They didn’t change CEOs, but they did change
Chairman, so I think that still counts. In 2018, they shut down another studio. It’s a long several years of removing the
bloat they’d introduced during the first years of insane profitability primarily thanks
to their First to Market timing. And of course, we have to talk about animation. Rovio purchased an entire animation company,
Kombo, in order to produce Angry Birds television shows, and cartoons. And eventually, the Angry Birds movies. Yes, two of them, if you don’t remember. They were the first mobile game to have a
Hollywood movie–in fact, other than if you consider Pokemon a mobile game, they might
be the only mobile game movie ever from Hollywood. And they produced entirely in-house, through
their own animation company headed up by their former CEO. But, that division that they sold in 2017? That was the animation division–sold to Sony. And this is the part where I don’t surprise
you at all when I say that Rovio thought they could be Disney. They felt that Angry Birds was their Mickey
Mouse, and they were going to storm the world with merchandising, television, movies, and
yes even a theme park. They were going to be a touchstone for all
pop culture, and produced spin offs for Star Wars, Transformers, Rio. They would infiltrate all genres of game,
with Angry Birds RPG, and Angry Birds Pinball, and Angry Birds Racing, even a Match 3 variation. They would use this animation division to
move Rovio out of “just a game company,” and into “an entertainment mega property.” And, of course, they hoped to move out of
Angry Birds, and into other similarly popular new properties. This was their ambition, their goal when they
woke up to those 100 million subscribers. They would take the world by storm. This didn’t happen, or we wouldn’t be
talking about them like this. We’d be talking about how Rovio purchased
Marvel, or about the AT&Rovio service plans. But we’re not. For this former mega company, how much do
you think they made in 2019? Or 2018, even? In 2010, they made 6.5 million euros. In 2011? 75.6 million euros. 2012 was 152.2 million euros. 2013, 173.5 million euros. They had a billion downloads by 2012, and
30 million players a day. 150 million players every month. That would put Angry Birds as the #2 highest
number of players concurrently on the record, just behind PUBG and just ahead of Pokemon
GO. Their TV shows have amassed over 10 billion
views on Netflix and YouTube. They’ve sold over 1.8 billion products in
over 100 countries. The Angry Birds movie series has officially
crossed over 500 million dollars in box office sales, even though the sequel didn’t do
even half as well as the first one. So how much do you think they made? In quarter 4 of 2019, Rovio made 200 …. Thousand
euros in profit. They made over 71.6 million dollars in revenue
in quarter 4, and only 200 thousand euros in profit. That’s just 0.3% profit. If you gave them a dollar TODAY, they would
have given you one dollar back. You’d have to give them 10 dollars to see
3 cents on the return. But, this isn’t the investment I mentioned
earlier, no no, we’ll get to that very soon. Rovio’s profits are down 97% this year. They were down 57.5% last year. And they’ve been down some % basically every
single year since 2013, primarily thanks to their Disney like ambitions. For example, the primary cause of their biggest
losses this year? They’ve been putting money into a new project
called Hatch Gaming, which–and stop me if you’ve heard of fifteen different services
exactly like it–aims to be “the Netflix of gaming,” allowing you to pay them a monthly
fee to stream games directly to your devices without any downloads or special software. Sure sounds identical to about thirty different
startups, Google Stadia, Nvidia GeForce Now, Playstation Now, Xbox Game Pass, and I won’t
go on because I will forget something important and people will yell at me in the comments
for literally years about it. But, they want to be Disney, so they need
a theme park, and a streaming platform, and an animation studio, and movies and netflix
deals, and youtube channels, and lots and lots and lots of merchandise. They couldn’t show you an ad or allow you
to buy a bunch of microtransactions, but they’re completely fine inundating you with plushies. It is not surprisingly, therefore, that Rovio
admits over half of their staff was not working on any sort of game at all, just other entertainment
or merchandising properties, licensing out the Angry Birds name and design for a 6% return
on the license. Following that, it’s also not surprising
that Angry Birds was #6 on the Apple App Store in 2013, and has never been on the leaderboard
since. They stopped making games that people cared
about, they stopped making profitable games, they stopped caring about making games, and
they tried to become Disney. And they failed. Rovio was completely unable to diversify. They are a reasonably competent company with
a single strong property that they were able to exploit but never replicate. They wanted to be Disney 2.0, but instead
they simply became The Angry Birds Company–ironically the one thing they seemed to have tried so
hard to get away from, but which has been their only successful creation. So let’s talk about that investment. Which option did you choose? A? B? C? If you chose A, then you would have bought
into Rovio at the hypothetical IPO price immediately after their success with Angry Birds, Seasons,
and Rio. At the time, the world believed that Rovio
was worth around nine billion dollars, and so had they IPO’d in 2011 your one dollar
would have netted you one nine-billionth of the company. If you chose B, then you would have been a
part of the proposed acquisition of Rovio by Zynga–who offered them 2.3 billion dollars. They didn’t really want Angry Birds, though,
they wanted the staff who knew how to produce mobile games for iOS–something that Zynga
desperately wanted to be successful at. Of course, this value disappears over time
as more people get knowledge about how to do that, how to make games for a touchscreen,
so this is exclusively about getting in early–and turning that purchase into games quickly for
as much profit as possible. You would own 1 of 2.3 billion shares of the
company in this example. Finally, with C, you would have just bought
into the company when they eventually did an IPO in 2017. This was, as you might imagine, considered
to be very very late for them to have gone onto the stockmarket–well past the prime
of their nine billion dollar valuation in 2011, and instead netted them a value of only
900 million dollars. Your one dollar here would, as you imagine,
have given you 1/900millionth of the company, one tenth of their potential IPO. So, which one would have been the smartest
investment? Well, A obviously not–if you’d bought in
at the 9 billion dollar price, you’d get 3 cents back today. Not, one dollar three cents like if you’d
invested this year, no–3 cents total. If you chose B, well, you’re not much better
off–Zynga would own a company today worth 13 cents on the dollar. And if you chose C? Well, sadly, you’re still not well off. For your one dollar in their IPO? You’d get just about 36 cents back. Unfortunately, no matter when you invested
in Rovio, they were always going to lose you money. If you were an early investor, before Angry
Birds, you could only be angry today as you realize that not only are they 97% less profitable
this year than last, they’d also lost you 97% of the investment potential. If they’d IPO’d in 2011, or sold to Zynga,
you’d be dozens of times wealthier than trusting them to continue leading themselves. The question of how much is just about timing. With all things Rovio, it’s all about timing. Thank you for watching, please consider sharing
this video if you found it interesting, but feel free not to. If you’d like to watch another video, you
can click on one in the corner right now, and as always we’ll see you on the next
one.

11 thoughts on “Angry Birds & Rovio | CryMor

  1. There was a whole lot of interesting things I learned while writing and researching for this video. Did you learn anything you didn't know? The % of revenue that the Top 1% brings in was insane!

  2. wow, I really didn't know that much about Rovio. Hmmm and I always thought they were so successful, very insightful information. Honestly the music in the background was pretty engaging with some of the visuals that appeared from time to time. I personally really liked it.

  3. I'll be honest, I picked A just because of the risk alone lol. Really great video and I'll be sure to binge the rest over time. If there was any companies I could think for the future. I think Capcom's Rise, Fall, and then Rise again could be interesting or if you haven't the Wii U era. Once again great video!

  4. I've been so interested in the history of the these games ever since I saw the amount of spin offs on the play store. Thank you for making this video and giving insight on the subject!

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