1. What are the advantages and disadvantages of Rovio’s current business model?

2. Do you agree with the company chairman Kaj Hed when he says he is satisfied with Rovio’s current situation?

Rovio Entertainment Ltd is most famous for its Angry Birds smartphone game, in which colourful birds are catapulted at egg-stealing pigs. The company is based in Finland, and its key employees comprise Mikael Hed, former CEO and now chairman of Rovio Animation Studios, Niklas Hed, head of Research and Development, and Peter Vesterbacka, the Chief Marketing Officer and self-proclaimed ‘Mighty Eagle’, the public face of the company around the world. Angry Birds became a top-selling app on Apple’s App Store in 2010, the start of a stream of business ventures including broadcast media, merchandising, publishing, retail stores and playgrounds. Peter Vesterbacka told Wired Magazine that Rovio could follow the world’s largest entertainment company and that it would be Disney 2.0? 1 However, after some years of significant growth Rovio faced several challenges.

The team

Rovio was founded in 2003 by Niklas Hed and two classmates at Helsinki University of Technology after they won a game-development competition sponsored by Nokia and Hewlett Packard. The company initially did well in workfor- hire jobs, developing games for Electronic Arts, Nokia and Real Networks. Niklas’ cousin Mikael Hed, with an MbA from Tulane University in the USA, soon joined. His father, Kaj Hed, had been a successful software entrepreneur, selling an earlier business for $150m (£100m, €110m). Kaj Hed invested €1m and became company chairman: Kaj still owns 70 per cent of the equity. Peter Vesterbacka only joined full-time in 2010, as Angry Birds began to take off. However, Vesterbacka, a business developer from Hewlett Packard active in the Finnish start-up scene for many years, had been encouraging Rovio and helping from the sidelines since 2003.

Although Rovio had been successful at creating games and selling them to established third party companies, the company’s ambition was to create a major game success of its own. Niklas Hed thought it would take about 15 tries to create a world-beater, but Angry Birds turned out to be Rovio’s 52nd attempt. Meanwhile, there were clashes over strategy. In 2005, Mikael Hed left the company after a row with his father, Kaj, whom he accused of being over-controlling. by 2008, Rovio had cut employment from 50 to just 12. but in 2009, Mikael came back, making peace with his father and sensing an opportunity with the new Apple iPhone and its App Store. The combination of the striking Angry Bird characters with the success of the Apple iPhone finally created a winning formula.

Rovio used Chillingo, a well-connected british games publisher, to negotiate a deal with Apple and push Angry Birds into world markets. In February 2010, Chillingo persuaded Apple to feature Angry Birds as the game of the week on the Apple App Store’s front page: Angry Birds shot to No. 1 in the UK; five months later, it was top of the US charts as well. Chillingo was bought by Electronic Arts during 2010, and Rovio declared that it would no longer use any publishing intermediaries. In October 2010,  Rovio launched the free Android Angry Birds, winning two million downloads in three days. by 2011, Angry Birds and its various branded spin-offs had earned €50m, on the back of a game which originally cost only €100,000 to develop. In March 2011, Mikael Hed was cautiously excited, telling Wired Magazine : ‘I know how fragile the gaming industry is; I’m super-paranoid. but I feel at the moment that we are walking. We should be running.’ ¹_........