You are here: Home » International » News » Companies
Business Standard

CEO of Rovio, maker of Angry Birds, to step down

Mikael Hed is stepping down after the company failed to respond to recent trends in gaming

Mark Scott  |  London 

The chief Angry Bird is leaving the nest.

Rovio, the Finnish gaming company behind the popular Angry Birds franchise, said on Friday that its chief executive, Mikael Hed, would step down by the end of the year as the company struggles financially.

Rovio has struggled recently after quickly rising to prominence in 2009 when Angry Birds became a global phenomenon. The company has failed to respond to more recent trends in gaming, and the announcement highlighted once again the precarious situation of many mobile gaming companies, whose fortunes often rely on a single franchise or technology.

Gaming are often dependent on a sole blockbuster franchise like Clash of Clans, a game produced by the Finnish company Supercell. Others, including Zynga, also have faced difficulties in reducing their reliance on social networks like Facebook, which were instrumental in promoting the games when they were first introduced.

But people's online habits change quickly - and franchises like Angry Birds can lose their popularity as quickly as they gained it. Analysts question whether Rovio and its rivals have the staying power to meet people's fast-changing interests. And creating a second big hit has often proved elusive.

"Most of these have been unable to replicate their past successes," said Paul Jackson, a gaming analyst at the research technology company Ovum in London. "Mobile games are very transient. There's no guarantee that people will play new games when they're released."

Hed co-founded Rovio with his cousin Niklas Hed in 2003. The company is majority-owned by Mikael Hed's father, Kaj Hed, who remains chairman of the company, which is private.

Hed will be replaced as Rovio chief executive by Pekka Rantala, who is not a member of the family. Rantala, the company's chief commercial officer, previously spent 14 years working at the Finnish telecommunications giant Nokia.

Hed has been nominated to the company's board, and will also become chairman of the company's animation and movie business, which the company has expanded into in the last few years.

"It has been an amazing ride," said Hed, who has typically worn a bright red Angry Birds hoodie during his public appearances. "In the coming months, I will be very happy to pass the hoodie to Pekka Rantala, who will take Rovio to the next level."

Angry Birds was one of the first games made for smartphones and tablets to take off in a major way, as millions of people paid $1 to download onto their mobile devices. The various versions of the game and its characters - including plump colorful birds that knock over structures - became a cultural symbol from San Francisco to Shanghai.

But while Angry Birds expanded into all sorts of merchandise and other entertainment forms, including apparel and movies, other game makers started to find financial riches in a different way.

like King Digital Entertainment, the maker of the Candy Crush franchise, discovered millions of players and financial success with so-called freemium games, which let users play free but require the purchase of upgrades to gain access to premium content.

Rovio is a relative newcomer to freemium, introducing its first freemium game last year. The company said this year that its net profit for 2013 fell by more than 50 per cent, to $37 million, compared with the previous year.

The company introduced its freemium game, Angry Birds Go, last year, but has diversified into movies, animation and theme parks to reduce its reliance on online gaming.

And in contrast to rivals, which typically charge players less than $3 for in-game purchases, Angry Bird's first freemium offering included upgrades that cost as much as $60 each to allow online characters to get to later stages of the game.

In a sign of how much Rovio has changed since the original Angry Birds game was released, the company now generates nearly half its revenue from licensing the Angry Birds brand for consumer products like candy dispensers and lunchboxes, according to the company's latest annual financial report.

Cracks also are starting to show in other mobile gaming companies, many of which have been valued at billions of dollars through lucrative initial public offerings. Investors worry that mobile gaming companies may not be built to sustain momentum once one of their games becomes a major hit because of the fleeting nature of the public's preferences.

Some gamers and regulators also are starting to question whether companies are misleading customers by not adequately disclosing the cost of the extras, while other consumers are walking away from existing mobile games in search for new titles.

"It's very difficult to attract users when they're always on the lookout for the next big thing," said Brian Blau, a gaming analyst at the technology research company Gartner. "There's always a bit of luck involved in making games."

Zynga, whose share price has fallen more than 70 percent since its initial public offering in December 2011, reported a $62.5 million loss in the second quarter, compared with a $15.8 million loss in the same period last year.The company has closed gaming studios and stopped development on weaker games to concentrate on fewer offerings. It also has signed licensing deals to diversify away from its FarmVille franchise into mobile sports games.

"These games are insanely profitably when they're successful," Mr. Jackson of Ovum said. "But people quickly get sick of games, and it's almost impossible to predict if a new game will be successful."

©2014 The New York Times News Service

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Sat, August 30 2014. 22:16 IST