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Rovio Entertainment - EY - Russia

Exceptional CIS, September 2012-January 2013

To the Moon and beyond

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“One of the good things about operating from Finland is that, if we want to succeed, we instantly need to be international.“
Mikael Hed, CEO of Rovio Entertainment.

Devious pigs and angry birds might sound like an unlikely recipe for success, but these colorful characters have transformed the fortunes of Finnish game development company Rovio Entertainment.

If you’re not an Angry Birds addict, it’s probably  because you haven’t played it yet. This simple game, in which you use slingshots to launch furious fowl at smug green pigs, first appeared in Apple’s App Store in December 2009. Since then, fans have downloaded its various iterations more Ithan a billion times.

“We certainly didn’t anticipate that it would be this huge,” says Mikael Hed, CEO of Rovio Entertainment, the Finnish game development company. “We had already developed 15 of our own games and published a total of 51 games, so we were quite realistic about our expectations.”

The phenomenal success of this simple yet maddeningly addictive game has meant a seismic shift for Rovio, which had just 12 employees when Angry Birds launched. Its workforce has since ballooned to more than 300 — and most of that growth has been in the past 12 months.

Revenues hit roughly US$100m in 2011, and unofficial estimates have put the company’s value in the billions.

Getting off the ground

It’s an impressive result for a company that was, not too long ago, on the verge of collapse. Niklas Hed, Mikael’s cousin, had founded Rovio with two of his university friends in 2003. But when Hed joined a few months later, things hadn’t exactly taken off.

“There wasn’t really any activity in the company,” he says. “They were thinking about doing some games or some programming, but nobody had any idea of how to structure that into a proper business.”

Luckily for the fledgling company, Niklas’s cousin had a passion for games and a head for business.

It was a dream come true. “I was returning to Finland after eight years abroad, and this job opportunity was the least lucrative one,” he says. “My gut feeling was that there was a high likelihood it wouldn’t fly, but I wanted to give it a try. It was a chance to get a foot in the door of the gaming industry and to work with my cousin. That made it worth taking the risk.”

Now armed with a proper business plan and a small but enthusiastic team, Rovio got to work producing a string of successful mobile games for third parties and made plans to develop its own titles.

In 2005, Hed’s father invested a substantial amount in the company. It heralded the beginning of a rift that would change the course of the company.

The senior management team wanted to build Rovio’s development capabilities rapidly and then sell the company. For Hed and the “old-timers,” this was entirely the wrong approach.

When his father backed the senior management team, Hed decided to remove himself from the conflicting situation. And so he did. He dabbled in comic books and book publishing, and built a sizable portfolio as a property developer. But these weren’t mere side projects: the skills he acquired during this time would inform the future development of Angry Birds.

In early 2009, he got a call from Niklas. Rovio was teetering on the edge of failure and had laid off 38 of its 50 employees. “We sat in a meeting room for several weeks and questioned everything we knew about game design and the game industry,” says Hed.

In devising their strategy, Mikael and Niklas realized two things. First, they needed to develop something for the iPhone. Second, it was all about visibility and cost: at the time of launch, Angry Birds was competing against 150,000 other games.

Rovio’s strategy was to price it at 99 cents and keep it there. “We wanted to make it like a snack — an impulse purchase that people didn’t think twice about.”

It worked. Angry Birds not only entered iTunes’ top 10 paid apps chart, it also stayed there. It is now selling in its millions on a number of other platforms, including Android, PC and Facebook.

To aid Angry Birds’ global domination, Rovio has set up an office in Shanghai and plans to open a second development studio, possibly in Stockholm, Sweden.

“One of the good things about operating from Finland is that, if we want to succeed, we instantly need to be international,” says Hed.

In March 2011, Rovio received US$42m in venture capital funding from Felicis, Accel and Atomico, money that would be invested in expansion and game development. Just as Walt Disney started with a single Mickey Mouse cartoon, Rovio has visions of a lasting entertainment empire.

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