Rovio splashes over €100m in animated feature

Pekka Rantala, the newly-appointed chief executive of Rovio, pictured in the headquarters of the game and entertainment studio in Keilaniemi, Espoo.

The upcoming animated feature film Angry Birds is an enormous investment for the game and entertainment studio Rovio.

The budget for the film has been estimated at 80 million United States dollars, equivalent to over 75 million euros. In addition, Rovio and its partner, Sony Entertainment, will splash roughly 100 million euros in the marketing and distribution of the film.

Rovio has declined to disclose its exact share of the marketing and distribution costs but will nevertheless invest a total of over 100 million euros in the animated feature. “You can say a lot of things about us, but you surely can't accuse us of a lack of courage,” says Pekka Rantala, the newly-appointed chief executive of Rovio.

A budget of over 100 million euros is unprecedented in the film industry in Finland. The most expensive domestic film production is currently Big Game, an adventure film directed by Jalmari Helander, with its budget of 8.5 million euros.

Angry Birds will première on the silver screen in mid-2016. The box office success of the 3D film will be vital for Rovio because its growth has stagnated.

Last year, the net sales of Rovio fell by nine per cent while its earnings sank to roughly one-quarter of the 36.5 million euros reported in 2013, to 10 million euros. In 2012, the game and entertainment studio posted earnings before interest and taxes of 77 million euros.

“We're clearly not satisfied with the result,” concedes Rantala.

The profitability of Rovio deteriorated largely as a result of a 44 per cent decline in revenues derived from consumer products. Early previews of the animated feature, however, have already convinced new partners to sign substantial licensing agreements with the game and entertainment studio, according to Rantala.

Meanwhile, revenues derived from games jumped by 16 per cent, despite the fact that Rovio no longer dominates the lists of highest-grossing games. In particular, the game developer has struggled to shift from pay-per-download games to freemium games, which generate revenues through in-game purchases.

“It has proven a steeper learning curve than we initially thought,” Rantala admits.

The licensing business has similarly proven difficult. Plush toys and other merchandise sporting Angry Birds characters have been cranked out by several manufacturers, and the quality has not always been up to par.

“I'd be amazed if every single Angry Birds product had met our quality standards,” says Rantala.

Rovio, he adds, has “cleaned up” its list of partner manufacturers. At present, 400 partner manufacturers are cranking out roughly 30,000 Angry Birds-branded products.

Rantala was appointed as the chief commercial officer of Rovio last summer and replaced Mikael Hed as the chief executive later that year as Hed moved on to oversee the animation department of the game and entertainment studio.

Analysts have voiced their concerns that Rovio is en route to becoming the Nokia of the mobile games industry. The game developer appears to have lost its way, and its former employees have claimed that its organisation has grown uncontrollably.

After showing the door to 110 employees last year, Rovio currently provides employment to 730 people.

Rantala admits that Rovio has went through growing pains and that the employees may not have always been aware of the direction taken by the company. He is confident, however, that new games and the animated film will turn around its fortunes.

“I'm confident that we can do it,” he affirms.

The chief executive envisions Rovio as a company that derives revenues in excess of 100 million euros from each of its three business areas: games, consumer products and animation and other productions.

Rovio has yet to successfully expand its brand catalogue beyond the rabid birds, although a number of ideas are in early development, according to Rantala. “Entertainment companies naturally seek to have a solid brand portfolio rather than a single brand,” he acknowledges.

Will the bird characters be able to maintain their appeal without a background story?

This is precisely the question the animated feature will seek to answer, says Rantala. He believes the brand will be less reliant on the success of the game series after the animation has been released.

The chief executive has previously been reluctant to publicly comment on the affairs of the game and entertainment studio in detail. In fact, even the budget of the animated feature had yet to be disclosed – although details of the production were revealed to a business delegation accompanying King Carl XVI Gustaf to Finland in early March.

Rantala reveals that the enormous investment certainly stirred the interest of the delegation. “At least they listened carefully. I believe someone wanted to make sure that they hadn't misunderstood me.”

Juhani Saarinen – HS
Aleksi Teivainen – HT
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Photo: Juhani Niiranen / HS