In 2023, Japanese video games giant Sega Sammy acquired Angry Birds maker Rovio for $776 million.
In idea, it was an ideal coupling. Whereas Sega already had a cellular enterprise, it lacked hits, at the least within the West. Rovio was a local cellular juggernaut with deep information, experience and – most significantly – expertise. That is on prime of an iconic property in Angry Birds, the unique smash hit cellular IP.
However issues haven’t gone nicely. In February, Sega recorded a $200 million impairment on the price of buying Rovio, stating that its profitability “has fallen beneath the preliminary forecast.” Talking to traders, Sega CEO Haruki Satomi stated one drawback was its incapacity to combine Rovio’s Beacon expertise with its personal cellular titles.
“Our goal was to strengthen efficient operations and world rollout by making use of this method to Sega’s cellular titles for core customers,” he stated.
“Nevertheless, upon precise set up with current reside titles, we discovered that the operational and advertising and marketing strategies and approaches considerably differ from Rovio titles and new cellular video games are but to totally exploit Beacon. Consequently, we have now sadly not achieved the extent of outcomes that had been anticipated previous to the acquisition.”
Talking to traders about its 2025/26 monetary yr, Sega stated that Rovio was going to be targeted on “rebuilding,” and as soon as that is carried out, the Angry Birds agency would proceed to attempt to construct a “world game-as-a-service.”
Three years in the past, a union between Sega and Rovio a match made in heaven. So what went wrong?
Previous its peak
For Louise Wooldridge, senior analysis supervisor for video games at Ampere Evaluation, a couple of elements are at play.
“Angry Birds, although extensively recognised, is a mature model and not likely a serious development franchise – it had already peaked, and turning the tide on this might have been very troublesome,” she says.
“The cellular video games market additionally modified significantly post-acquisition. The deal was priced primarily based on the idea of continued, speedy development within the cellular house and low-cost consumer acquisition, however as a substitute, we noticed development sluggish, and advertising and marketing prices rise. Video games basically can also be battling extra social, creator-led platforms like Roblox and TikTok for client consideration.
“Plus there’s the lasting impression of Apple’s App Monitoring Transparency (ATT). Though that got here a pair of years previous to the Rovio acquisition, its results persist, and it has been particularly damaging for mature franchises like Angry Birds which rely extra closely on paid promoting for consumer acquisition.”
Many of these sentiments are shared by business analyst Joost van Dreunen of Aldora, who additionally believes that Sega put an excessive amount of religion in a franchise gone its prime.
“Leveraging IP tends to offer a false sense of safety,” he argues. “Regardless of being a comparatively well-known property, Angry Birds’ cultural peak is clearly behind it. Sega, in impact, acquired a fading franchise. In keeping with its earnings, Rovio’s gross sales fell from €309 million to €181 million, and administration described Angry Birds 2 as having ‘bottomed out’.
“Extra usually, the cellular video games market has dramatically modified since Rovio had its second within the solar, and easily constructing a large library of IP alone is not adequate given the frenzied competitors for viewers consideration.”
Pascal Clarysse, the founder of Huge Karma and the creator of The Slingshot System: How Angry Birds Launched Their Method from Indie Recreation to World Icon, agrees on the cellular market shift, pointing to the quantities of cash that established gamers must spend with the intention to keep on the prime.
“The cellular market has matured to some extent of saturation during the last couple of years,” he says. “Each style has its dominating leaders which have the capability to spend large quantities in consumer acquisition and retention to keep up their positions. Rovio was by no means the best spender nor essentially the most knowledgeable workforce on the planet relating to such data-intensive actions. Which means that the projected income of new titles after the acquisition date has been missed by a big margin, whereas legacy titles have additionally barely under-performed as nicely.
“Even on Angry Birds 2, Rovio’s technique is extra targeted on partnerships and barter offers with different mega-brands, which is value efficient for reside ops and group attraction for positive, however not sufficient to compete and develop to the highest of the charts anymore.”
A recurring sample
This is not the primary time {that a} main AAA writer has acquired a cellular giant solely to face, at the least initially, disappointing outcomes. In 2022, Take-Two revealed its intention to amass Zynga for $12.76 billion, which was briefly the most important acquisition in video games historical past till Microsoft introduced its $68.7 billion buy of Activision Blizzard eight days later.
Early indications weren’t promising. Within the two years following the Zynga buyout, Take-Two recorded a number of billion {dollars}’ value of goodwill impairment, seemingly associated to the acquisition.
After that, although, all of it got here good. Zynga has turn out to be an vital and worthwhile half of Take-Two’s enterprise, producing simply over half of the Grand Theft Auto giant’s income for the 12 months ending March 2026.
So why do these cellular offers appear to lead to preliminary disappointment for AAA giants?
“The cellular video games market is much more fragile than it seems,” Wooldridge explains. “Profitable cellular video games demand long-term upkeep of numerous transferring components, equivalent to app retailer visibility, environment friendly consumer acquisition, participant engagement and extra, and any of these features can simply be destabilised. Cellular recreation economics have extra potential for speedy change than within the console house, for instance, the place issues are much more static and glued. Additionally, and possibly most significantly, these cellular corporations are usually valued at their peak, so when development inevitably slows, forecasts should not met.”
One other issue is, as soon as once more, expectations. Clarysse says that always console-focused acquirers forecast large development primarily based on the brand new market that having a cellular enterprise would open. Half of that is imagining what cellular specialists may have the ability to do with their AAA console IP.
“Cellular recreation economics have extra potential for speedy change than within the console house”
Louise Wooldridge
“Issues should not at all times that straightforward,” he says. “I’ve seen numerous cellular video games with sturdy mechanics reskinned with AAA IPs not survive soft-launch simply because of the daunting economics of the sector. On the finish of the day, in case your lifetime worth is considerably inferior to your opponents, they are going to at all times have the ability to outspend you on a per-player foundation with the intention to hold the perfect positions within the promoting ecosystem and hold different new titles out on the gates.
“AAA branding does not repair this. It may marginally decrease the prices of advertising and marketing, however the price per set up low cost is normally not sufficient to offset what it takes to compete with the cellular incumbents on the return on ad-spend entrance. It takes a couple of tens of millions to make the sport, however a whole lot of tens of millions to make it aggressive in right now’s cellular panorama. So for ten hypothetical hits, solely between zero-to-two actual hits make it out in the true world within the following years.”
Within the case of the Sega/Rovio deal, Clarysse says that Sega was shopping for not simply Rovio’s portfolio and transmedia potential, but additionally the corporate’s “capability” to make cellular hits primarily based on Sega IP.
“This final half clearly did not materialize in any respect, regardless of the perfect efforts of either side,” he continues. “And from all communications and reorg choices, it appears to be the half which Sega is totally giving up and writing down as a correction of their incomes studies.”
Aldora’s Van Dreunen argues that the Take-Two/Zynga deal could be very totally different to the Sega/Rovio acquisition, but additionally factors to the truth that the Grand Theft Auto agency’s cellular enterprise is now booming.
“Take-Two’s acquisition of Zynga was totally different as a result of the technique behind the acquisition had much less to do with shopping for up IP and as a substitute centred on a legacy writer increasing into cellular gaming,” he says. “Given how standard Take-Two’s IP is, as an example, on platforms like Netflix, vertical integration made sense.
“Furthermore, the timing of the Zynga deal appeared unlucky, because the market’s common decline on the time made it seem to be a lemon. Nevertheless, since then, Take-Two’s cellular division has turn out to be its largest line of enterprise, producing $843.9 million in its most up-to-date quarter and representing 50.2% of whole income. It’s similar to Activision Blizzard’s $5.9 billion acquisition of King again in 2014 and extra of a distinction to Sega’s acquisition of Rovio than the rest.”
The long run
What path ahead does the Angry Birds maker have? The corporate is bringing Angry Birds 2 to mainland China, and plans to launch “new Angry Birds IP titles” this fiscal yr. The third Angry Birds movie launches in December. The main target, in the intervening time at the least, seems to be completely on Rovio’s flagship model – Inventive Officer Ben Mattes instructed GamesIndustry.biz as a lot in April. The important thing will likely be how the corporate approaches it.
“[Sega and Rovio’s] huge wager is to deliver again the transmedia vibe that constructed Angry Birds’ success as a character-centric model extra so than only a portfolio of cellular video games,” Clarysse says. “A number of factors of entry to the model. In that sense, Angry Birds The Film 3 is the all-in second. The groups coordinating the brand new movie are the identical groups behind the Sonic films that rejuvenated the hedgehog model, so there’s excessive hope round it.
“It is also an incredible alternative to provide new waves of merch and toys as nicely. Think about new collabs with prime influencers who’re nostalgic followers of the model, like MrBeast is joining the voice flock, and one of the issues Rovio does finest: versatile co-brand campaigns throughout a number of industries.” In January, Sega introduced it was rolling the Angry Birds IP into its formidable transmedia licensing organisation, plugging it right into a worldwide community of merchandising and model companions.
One other thought is to satisfy youthful gamers the place they’re.
“One suggestion can be to time the upcoming launch in December of Angry Birds Film 3 with a broader presence in Roblox,” van Dreunen says. “It resonates with younger audiences, however is more and more much less seen and hasn’t but transitioned convincingly to new distribution channels.”
Ampere’s Wooldridge agrees, however provides that Sega and Rovio must be a bit much less insular relating to cross-promotion occasions for Angry Birds.
“Rovio must pivot in the direction of what makes video games and platforms profitable in right now’s market,” she says. “It must turn out to be extra social or creator-focused to cut back the reliance on paid promoting for consumer acquisition and generate extra natural development. Many franchises have gained visibility via collaborating with the likes of Fortnite or Roblox, equivalent to Overwatch very not too long ago, whereas the one current Angry Birds crossovers, I consider, have been with Sonic video games.
“Sega’s wider leisure ecosystem must also be leveraged for a broader transmedia method utilizing video games, merchandise, movie and TV, and reside occasions. With a cohesive technique set out early on, these components might be tied collectively to assist model growth. Sega/Rovio can study from Sonic Rumble and hopefully not dismiss future efforts on this house; they need to look carefully on the information, and take the profitable components ahead into new tasks.”
However Rovio additionally must look past Angry Birds. Wooldridge says that this ought to be a background focus whereas the Finnish agency focuses on new tasks with totally different IP. “Different Sega IP, like Persona, would maybe be a greater match for a brand new cellular title,” Wooldridge says. “Notably given its gacha-friendly construction and recognition amongst youthful audiences in Asian markets, which generally monetise strongly.”
She concludes: “Finally, I believe Angry Birds shouldn’t be handled as a development engine, however as a gentle income generator, and funding ought to be targeted on different, maybe current Sega IP.”