The Rise and Fall of Angry Birds: A Mobile Gaming Phenomenon

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-sel

lers 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--ma

ybe 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 exper

tise--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 pr

ofitable. 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 happen

ed 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 f

or 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 maki

ng 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 wor

k-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 t

he 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 p

rofit 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 i

f 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. Rov

io 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 M

ouse, 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 co

urse, 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 mil

lion 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 serie

s 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 t

he 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. The

y 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 ni

ne 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 knowledg

e 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 b

illion 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 bette

r 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 pot

ential. 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.