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Angry Birds franchise can't prevent profits slipping at Rovio

Profits are down at Angry Birds maker Rovio despite some growth in the company's games business.

Profits are down at Angry Birds maker Rovio despite some growth in the company's games business. 

As highlighted in the company's fiscal report for the full year ended December 31, 2019, annual revenue rose by 2.8 percent to €289.1 million ($313.7 million), while adjusted operating profits fell by 42.7 percent to €18.1 million ($19.6 million). 

Rovio said multiple factors attributed to that downturn, including an increase in user acquisition investments, lower revenues in brand licensing, and higher go-to-market expenses in its game streaming subsidiary Hatch Entertainment, which is 80 percent owned by the company. 

The Finnish company has been exploring alternative financial structures and partnerships for Hatch since the start of 2019, but after struggling to secure a deal has now decided to "evaluate strategic alternatives."

"The competition in game streaming has intensified during 2019 while 5G networks and devices rollout has been slower than expected. Due to the changes in the operating environment Hatch Entertainment decided to focus its strategy," said Rovio CEO Kati Levoranta. 

"Going forward, Hatch will focus on Hatch Kids, a subscription and streaming based digital entertainment and edutainment service tailored for children and families. Hatch is planning to restructure its operations to align with the updated strategy and this is planned to lead to an annualized cost savings of approximately €6 million ($6.5 million)."

It's not all bad news, however, and Rovio saw annual games revenue grow by 5.7 percent to €264.8 million ($287.4 million) thanks to big performances from Angry Birds 2 and Angry Birds Dream Blast -- the latter of which became Rovio's fastest growing free-to-play game ever. 

"Angry Birds Dream Blast, which was released in January 2019, continued to grow and reached €18.8 million ($20.4 million) gross bookings. The 2019 full year gross bookings of Angry Birds Dream Blast were €57.6 million ($62.5 million) and it was Rovio’s fastest growing free-to-play game ever," commented Levrotanta. 

"In an increasingly competitive market this is a great achievement from the team and shows both Rovio’s ability to bring innovative games to a broad audience and the continuing success of the Angry Birds franchise in mobile games." 

Looking ahead to the next fiscal year, Rovio is aiming to spend less on user acquisition, is hoping for cost savings in Hatch, and intends to launch up to three new games. 

As a result, it hasn't provided a full-year 2020 revenue guidance figure, but said its overriding strategy is to "seek growth in the games business through improving the performance of our key games and developing new games."

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