Rovio did $3 billion in revenue and is “insanely profitable” | Hacker News Reader

Rovio did $3 billion in revenue and is “insanely profitable”

whiteboardmag.com

39 pointsdirtyaura55 comments

I genuinely like that Rovio is making good money, however it's this type of hyperbolic growth that is (1) not realistically reproducible and (2) makes people think that it's reproducible. In other words, an outlier. It once again reinstates the idea that the general public thinks this stuff is built over night and an app can be made with $10k.

This is not an knock on the author, but I think a more thorough report on the years of poor growth Rovio experienced is much more enjoyable and realistic to read. I can't find it right now, but I believe the Atlantic wrote something just like that.

Edit: I should probably clarify, I actually think the bigger issue I have is that the graph is particularly disingenuous, the "hockey stick growth" should follow the company from when they were founded in 2003...10 years ago. It may actually like more like a traditional hockey stick.

Yep, I've heard that they made dozens of games before Angry Birds took off. I would like to think that this shows the sort of long-term view the government R&D grants can give you.

Which VC would let you continue after, say, ten failed products?

note: I have no info on whether this is the case for Rovio, but I know the government has been trying to support / set up the Finnish game industry cluster for around ten years, and now with Rovio and Supercell that is finally starting to pay off.

Surely you aren't suggesting that the government should fund game developer R&D.

Forcing the general public to fund bringing your ideas to fruition is a completely unsustainable economic model.

Governments all over the world are flat broke from this type of thinking.

Governments can think a bit further ahead than typical venture capitalists... it is not about making an exit year from now, but instead ensuring that there is enough tax revenue coming in when the current generation of workers retires.

In Finland the current focus is ensuring that the economy can transition from the failing mobile phones and shipyards to something else, and the game cluster is a part of that.

Update: found an article about the role public funding played with Rovio's success:

Rovio Ltd. has benefited from support schemes by Tekes, the Finnish Funding Agency for Technology and Innovation. According to the public information provided by Tekes, the company received grants of € 379,510 over the years 2005-2007.

In addition, the Finnish Film Foundation, an institution backed by the state, has granted Rovio Ltd. € 50,000 of support for the production of an Angry Birds animation movie. Already before, Rovio had announced cooperations for producing “Angry Bird” films, including a cooperation with 20th Century Fox.

http://www.proinno-europe.eu/inno-grips-ii/newsroom/finnish-...

How many failed ventures have they funded, for how much?

Anybody funding ventures will mostly fund ones that end up failing. The question is how much value or employment the few that succeed generate.

>Forcing the general public to fund bringing your ideas to fruition is a completely unsustainable economic model. Governments all over the world are flat broke from this type of thinking.

Actually most of the cool stuff we have, we have it because of government funding research. Including the very internet.

While, you are correct that a lot of innovation and "cool stuff" has come from government programs and funding, I would disagree that "most" of it is because of government funded research.

Can you prove to me they wouldn't exist otherwise? People like Tim Berners-Lee didn't come up with the ideas they came up with because they were government funded. They created things because they were innovative and smart.

The fact that YC exists is proof that government programs are not a prerequisite.

>Can you prove to me they wouldn't exist otherwise? People like Tim Berners-Lee didn't come up with the ideas they came up with because they were government funded. They created things because they were innovative and smart.

That's orthogonal. And company X's engineer didn't create Y because he was working in the private sector, he created it because he was innovative and smart.

Still, Tim Berners Lee WAS government funded. As was Arpanet. As was TCP-IP. As was most early work on computers. As was lots of basic physics, chemistry etc research before the US had any scientists worthy of mention (in Germany, France, Britain etc).

Found the article! Very good read: http://www.wired.co.uk/magazine/archive/2011/04/features/how...

The success of Finnish game industry has a very little to do with Finnish Government programs. IMO, the number one factor is a demo scene culture that's been going on since 80s. Also Nokia's success in mobile phones breed several mobile gaming companies already in 90s (in addition to more traditional game studios), which is more important factor than government programs.

Sure, you need both. Private talent and public money. Private money would often work, too, but there is very little of that to go around in Finland.

I think Rovio and other similar (and similarly successful) game publishers owe at least one Ferrari to the Box2D author :)

Seriously...Erin Catto would be a millionare with even the most minimal of pricing structures for using Box2D, assuming another open source engine didn't come to take its place.

One of my favorite moments of GDC 2011 came during the Q&A session of a talk by Rovio about Angry Birds:

Q: “Hi Peter, could you tell me which physics engine Angy Birds uses?”

Peter (Rovio): “Box2D”

Q: “Great. Would you consider giving credit to Box2D in your game?”

Peter (Rovio): “Yes, of course”

Q: “Thank you! By the way, I am Erin Catto the creator of Box2D”

Peter (Rovio): “Great! I would like to talk to you after the session”

Should all of the startups on HN owe the creators of PHP, rails, python, and every other framework a Ferrari too?

It was fashionable in the late 90s dot com bubble to give stock to Linus Torvalds and other open source luminaries before your Linux company went public.

In 1999 Red Hat and VA Linux, both leading developers of Linux-based software, presented Torvalds with stock options in gratitude for his creation. That same year both companies went public and Torvalds' share value temporarily shot up to roughly $20 million

http://en.wikipedia.org/wiki/Linus_Torvalds

It wouldn't hurt the successful ones at all to pay something back.

Especially considering so many sites are fundamentally built on top of open source while being closed source.

>Should all of the startups on HN owe the creators of PHP, rails, python, and every other framework a Ferrari too?

If they are successful and the rely on those programs, sure, why not?

That's how you get more support for Open Source software, and more funds for projects that benefit everyone. OSS was moving faster at the late nineties-early 2000s, when huge companies employed tons of people to work on the Linux kernel, libs, frameworks, the desktop, etc, that it does now.

It may be a cause or effect of this, but the open source culture has fractured in the 2000s to many smaller projects or libraries instead of these huge mega-projects (say Linux, GNOME, KDE, Mozilla, OpenOffice) that mostly come from the 90s.

I'd say it's an effect. Without corporate funding large and co-ordinated projects (Gnome, KDE, OpenOffice et al) have fallen by the wayside.

That's why progress has got so slow the last 6-8 years in so many parts of the OSS world (and on lots of proprietary software, that lazily relies on OSS). Things like Gnome or OpenOffice are essentially the same as they were 10 years ago, whereas the proprietary alternatives have gotten tons of changes.

GTK+, the main toolkit behind Gnome has one (1!) major contributor (which complained about the issue). In a proper world, something like this, used by so many millions, should have at least a full time team of 10 persons.

Contrast the additions to GTK+ in the last 10 years with the development of the corresponding Cocoa libs, and it's like night and day. A tree-view widget here, a spinner there, ...

Small libraries and stuff can still flourish under such an environment, but not big, co-ordinated projects.

I'd agree otherwise, but GNOME is a bad example. In the last couple of years they've rewritten a lot of their stack. All APIs are now on GObject Introspection, the GNOME Shell is a completely new thing, written in JavaScript, new set of default applications, etc.

But then again, they seem to still be receiving some amount of corporate sponsorship from Red Hat.

A few years back (when Nokia stopped supporting the project) things looked a lot more gloomy: http://wingolog.org/archives/2008/06/07/gnome-in-the-age-of-...

Then again, any desktop environment or toolkit is bound to be somewhat unsexy these days when the focus is on web and mobile.

I also wrote about this back in 2008: http://bergie.iki.fi/blog/gnome_in_decay/

Thanks for posting, dirtyaura (I wrote the article). Rovio is insanely good at keeping that Angry Birds brand relevant, but I do wonder whether they're too dependent on that one brand. (Armchair business strategist much, lol?)

Sure, they are a one brand company. It is their Achilles' heel, but I think it doesn't mean that they can't continue their trajectory for a few more years. A rather comparable case of Hello Kitty has been milking billions per year since early 2000s.

Good point.

> continue their trajectory

Nice.

Hopefully they have more products too, just in case current trajectory crashes into some obstacle destabilizing it.

Good story, however I'd like to ask if Vesterbacka made any clearer statements on what "managing revenue" means. Their 2011 filing for the Finnish officials state they made about 75 million euros in revenue (far from the $500 million cited in the article).

Does this number represent the value of the merchandise sales of the company or was he explicitly referring to the revenue of Rovio itself?

Edit: here's the link to the Finnish officials' records http://finder.fi/Televiestintälaitteita%20ja%20palveluja/Rov...

That's a good question. I was also surprised at the number reported by Total Telecom, which is why I asked Vesterbacka to comment via Twitter. No answer yet, though. Thanks for that link.

Thanks for your input - I updated the story.

Finnish accounts show only the financials of the individual P&L rather than the "consolidated Rovio group" P&L. Unless one is provided with an organisational and shareholding structure (with corresponding financials) it is impossible to know what is and isn't accounted.

So you're basically saying we can't know how much business Rovio is generating through fiscally optimized holding structures outside Finland, then?

Updated with your comments, I hope you don't mind, it seemed important for the story to add your perspective. I added a link to the comments here.

Definitely need a clarification.

By comparison, Supercell which has the #1 top grossing app (Clash of Clans) and #4 top grossing app (Hay Day) was reported to have $15M in gross monthly revenue, which is far less than Vesterbacka's statement about Rovio, but closer in line with Rovio's Finnish filing.

Angry Birds Star Wars is currently #46.

Maybe the merchandise and licensing is where the money is at?

Disney at some point was "too dependent" on Mickey (or whatever character). It's how they handle it from here on out. They could go bust or they could become a top entertainment conglomerate.

Yes, agree. They tried that with Amazing Alex, but not too successfully: http://www.whiteboardmag.com/the-app-store-wormhole-why-even...

"I do wonder whether they're too dependent on that one brand"

They'll sure milk it as much as they can. But having something that successful gives you something that most people can only dream of: a gigantic advertising opportunity for their next games.

At any point in time where they're still relevant, they can just buy any small game company making the next great game and advertize it like mad, making the next great game even more successful than what it would have be.

They could have bought, say, Riot games if they wanted: the chinese forked "only" 400 millions to buy Riot Games / Leage of Legends.

Whenever Rovio shall feel like it they'll be able to fork out an height or a nine figures to acquire the next big game.

Rinse and repeat.

Wasnt that zynga's strategy too?

Strongly disagree. Riot/LoL is like the exact opposite of what Rovio is as a brand.

Surely that is an almost impossible feat to pull off

1. $NEXTBIGTHING is tiny and cannot be distinguished from the noise

2. $NEXTBIGTHING is going to be the next big thing, but only a few people can realise this

3. $NEXTBIGTHING is spreading like wildfire - the owners of $NEXTBIGTHING could take 400m from you, or they could take 20m in VC and become the next rovio.

The time period between 1. and 3. is probably tiny compared to the time it takes to broker a 400M dollar deal

Outside of the phone games and some pictures of merchandise from Finland, I had no idea how big their reach was. Then I saw my 5 year old Nephew recently and was covered head to toe in Angry Birds stuff, coloring a Star Wars Angry Birds coloring book surrounded by Angry Birds toys.

I asked my brother how good my nephew was at playing the games on the phone (considering my brother and his wife don't have smartphones) and he responded "they have games too?"

I've found Angry Birds merchandise in remote villages in Thailand. It's reach is unimaginably large.

they are diversifying a bit, such as with the bad piggies (https://itunes.apple.com/gb/app/bad-piggies/id533451786?mt=8) which was pretty popular when it came out (probably still is)

In other news, you guys crashed the server. It will be up again soon.

Which games take off is not super correlated with quality; I would argue that Angry Birds is above average, but not exceptional. The whole "hit" phenomenon is highly dependent on initial conditions, a sort of semi-random positive feedback loop. When building a game, one's idea of success should be the cultivation of a dedicated audience large enough to sustain your business. Counting phantom billions will lead to terrible design decisions, usually imitating random aspects of successful projects, like some statistically-illiterate lotto player diligently searching for patterns in previous winning numbers.

As I originally posted this to HN, I must say that the claims in the article don't hold on closer inspection. I shared it too quickly without checking facts and thinking it through, shame on me on spreading misinformation.

Good commentary about the claims: http://bgr.com/2013/02/11/rovio-revenue-debunk-324583/

As the author of the article, I share your concerns.

I asked Vesterbacka for comments when I posted the first version, but he only responded later this afternoon. (I'm now waiting for feedback from the Marketwatch/WSJ reporter where the claims originated).

If you've followed the post, you'll see that I updated it regularly in the course of the day with information from this thread, with a window of a few hours where unfortunately I couldn't update the post because the site went down.

It's reprehensible that they aren't directly funneling all profits to the creator of the Box2D framework. All they did was skin a few Box2D function calls.

Yep, and they did it brilliantly and then promoted and sold it brilliantly. Technical stuff isn't worth that much money on its own.

I think alot of that revenue was from toys and stuff too.

My apologies if you're joking or being sarcastic and I didn't detect it.

I suppose if that's "all they did" - any of us who could do that could've been sitting on that 3 billion, right? Heck, even the Box2D guys could've done it.

There's a small difference in saying "they should've employed the Box2D guys" or "generously funded the project" and "they should funnel all profits" - perhaps Rovio deserves some credit here for turning a little casual iPhone game into a household name.

Parent should really adhere to Poe's law of internet trolling.

Heh. It is a lovely example of a game that's almost entirely about the polish, with relatively little substance.

Why was Crush The Castle not as successful? Marketing and polish. If your aim is commercial success, it's obvious what your focus has to be.

You should talk to the author of GORILLAS.BAS

Why are they not funneling all the profits into the creator of iOS, Android, Windows Phone, Webkit, and all number of other frameworks. The app wouldn't run with out them. Rovio made the effort to market and capture the imaginations of people so that they want to spend money on the games, toys and t-shirts. This reminds me of pac-man from when I was a kid. I had a Pac-man birthday cake, Pac-Man clothes, Pac-Man Underroos, etc. I know my 5 year old son is obsessed with the angry birds as characters, and wants to know their back story. This is what drives him, not the framework used.

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