The Hedgehog and the Birds: The formula sounds like a La Fontaine fable title. It sums up well the future acquisition of the video game studio Rovio by the publisher Sega, respectively responsible for the eponymous birds of the video game Angry Birds and the hedgehog Sonic, icon of the 1990s who became a movie star. A friendly takeover offer for the Finnish mobile game specialist by the historic Japanese video game player was formalized on Monday April 17 in a joint press release: it amounts to 706 million euros.
“Sega’s long-term goal is to accelerate its growth in the [mobile video game] industry,” said Haruki Satomi, Group Chairman and CEO of Sega Sammy Holdings. The company, whose annual turnover was around 2.6 billion euros in 2022, wishes to diversify its catalog: for the moment, its flagship licenses, such as Sonic, Persona and Yakuza role-playing games (recently renamed Like a Dragon), Total War strategy or management games like Football Manager are mainly popular on console or PC.
Sega thus demonstrates its interest in the know-how and technologies developed by Rovio in the field of “online exploitation services”, a category of games generally offered for free download but profitable over time thanks to the sale of optional bonuses or paid updates.
This economic model enabled video games on smartphones to become the leading market in the industry in the 2010s. In 2022, its turnover was 84 billion euros worldwide, according to the results of the specialized firm Newzoo , compared to 47 billion euros for console games and 35 billion for PC games.
A historical player in mobile games
Rovio has twenty years of experience in the field of mobile gaming. After a few years working for Nokia, another Finnish company, Rovio flew on its own from 2009 by betting on the personal project of two of its employees, with an unlikely pitch: that of colorful birds fighting against green pigs who have stole their eggs. The success of Angry Birds propels the team to the forefront of a rapidly expanding sector: that of video games on smartphones. Initially offered for less than one euro, it transformed the company of a dozen employees into a multinational established in five countries and with five hundred employees. In 2012, Angry Birds became the first mobile game to surpass one billion downloads, according to Guinness World Records.
After a dazzling takeoff, however, Rovio is experiencing turbulence. First, the company is forced to abandon the business model of paid games to adapt to the completely free imposed by its rivals, in particular Clash of Clans and Candy Crush Saga. Then, it suffers from an all-out diversification, risking launching derivative products and even amusement parks which cost it dearly.
Over the years, the former champion takes the lead in the wing. The mobile gaming ecosystem, while constantly growing, is close to saturation, and Rovio’s turnover remains just stable – it was 317.7 million euros in 2022.
Two companies in search of renewal
“Many investors and observers criticize Rovio for not having been able to renew itself,” notes analyst George Jijiashvili, specialist in the video game industry for the British strategic analysis firm Omdia. By passing into the fold of Sega, the Finnish company can hope to break the glass ceiling facing its growth, by exploiting other emblematic licenses.
The hedgehog and the birds also have some similar ideas behind their heads. Rovio and Sega have been actively working in recent years to bring the adventures of their iconic characters to the big and small screen. Sonic and the Angry Birds have each had two successful film adaptations. These films were successful enough for a third episode of each of the licenses to be started. The characters have also been transposed into various animated series. “After the success of The Last of Us and Super Mario Bros., the movie, adaptations are popular. The phenomenon could be as important in the 2020s as that of superhero adaptations in the 2010s, ”considers George Jijiashvili.
Cinema and mobile games are a new development for Sega. After having to abandon its role as a manufacturer of video game consoles in 2001, the company was forced in 2022 to close its arcades, which historically constituted its core business. However, it continues to develop and publish video games for consoles, PCs and arcade terminals.