ANNUAL REPORT the Art of Rovio: Business and Creativity
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ANNUAL REPORT The Art of Rovio: Business and Creativity YEAR 2017 OPERATING ENVIRONMENT STRATEGY BUSINESS MODEL BUSINESS SEGMENTS RESPONSIBILITY GOVERNANCE FINANCIAL STATEMENTS ovio’s business is based on devel- Data-driven and continuously creative game devel- oping high-quality games and peo- opment combined with strong business expertise Contents ple enjoying those games. Under makes a successful game. As we are competing for Rovio in brief and highlights of the year ................................ 3 the free-to-play model, we develop people’s free time, we want to develop our games so CEO’s review ........................................................................... 4 and update free-to-play games, that players are constantly able to find new, engaging Operating environment and megatrends .............................. 6 aiming to keep players and entertaining new elements while playing, Strategy ................................................................................... 9 engaged and willing even in quick sessions of gaming to unwind Rovio’s business model ........................................................ 13 to continue to play the and relax. Our games User acquisition and engagement ...................................... 16 games for a long time. business is based Business areas: Games ....................................................... 18 Our games business is on two revenue We use the Games as a Service (GaaS) model Business areas: Brand Licensing ........................................ 20 based on two revenue streams: in-game in the games we publish. Under the GaaS Employees ............................................................................ 22 streams: in-game purchases and in-game purchases and in- model, the game is constantly developed Corporate social responsibility ............................................ 25 advertising. game advertising. and it becomes an ongoing digital hobby that Board of Directors ................................................................ 28 The high brand awareness of our users can continue for several years. The pur- Leadership Team .................................................................. 31 Angry Birds brand supports our games pose of the GaaS model is to increase user Corporate Governance statement 2017 ............................... 35 business and forms a basis for our licensing engagement and retention. This supports the moneti- Remuneration report 2017 ................................................... 48 business. zation of games, which is important for business. Financial statements ............................................................ 53 At Rovio, profitable business and creativity come Report of the Board of Directors ......................................... 54 Creativity and creative thinking are the foundation of together to generate commercial success. In 2017, For shareholders ................................................................ 140 both our game development and our licensing busi- our revenue increased by 55 percent to EUR 297 ness. Our game studios aim to think one step ahead million, while our operating profit nearly doubled and in everything they do: what will players want next? In amounted to EUR 31 million. doing this, our studios are supported by our analytics We create well-targeted games that can be team,which analyses data on the gaming behaviour played by everyone. This means that the whole world respecting the data privacy of the individual player. will continue to be our playing field and our market. ANNUAL REPORT 2017 2 YEAR 2017 OPERATING ENVIRONMENT STRATEGY BUSINESS MODEL BUSINESS SEGMENTS RESPONSIBILITY GOVERNANCE FINANCIAL STATEMENTS Revenue, Adjusted EBIT, Adjusted EBITDA, Revenue per segment, Thousand euros Thousand euros Thousand euros ThousandRevenue per euros segment, Rovio in brief Thousand euros 297,158 35,889 64,497 Rovio is a global games-first entertainment company that creates, develops and publishes mobile games and acts as a brand licensor in various entertainment and 17% consumer product categories. The Company is best known for creating the global 17% Angry Birds brand, which started from a popular mobile game and has expanded 16,886 191,704 into multiple other games, animated series, The Angry Birds Movie, activity parks 35,376 and various consumer products. Rovio’s operations are divided into two business 142,067 83% 83% units, Games and Brand Licensing. Rovio is headquartered in Finland and has -18,300 offices in Sweden, the United Kingdom, China and the United States. Rovio was listed on Nasdaq Helsinki Stock Exchange in the autumn of 2017. 2016 2016 -3,197 Games 159,039 BrandGames Licensing 159,03932,664 Brand Licensing 32,664 2015 2016 2017 2015 2016 2017 2015 2016 2017 Total 191,704 Highlights of the year Total 191,704 January: Rovio’s subsidiary Hatch Entertainment presents its first public product demo at the Pocket Gamer Connects event in London. April: Many influential gaming industry leaders from Finland 17% 17% and abroad give talks at the Rovio Con seminar. May: Battle Bay game launched. June: Angry Birds Evolution game launched. 83% August: Angry Birds Match game launched. 83% September: Sponsorship deal with the English Premier League 12 months 12 club Everton F.C. 2017 2017 October: Rovio is listed on the main list of the Helsinki stock exchange. Games 248,003 Partnership with the band Iron Maiden visible for example in the BrandGames Licensing 248,00349,155 Angry Birds Evolution game. Brand Licensing 49,155 Total 297,158 December: Rovio wraps up the best year in its history. Average age of employees Number of employees Number of nationalities Total 297,158 Female / Male The milestone of four billion global downloads is reached. employees, % ANNUAL REPORT 2017 3 YEAR 2017 OPERATING ENVIRONMENT STRATEGY BUSINESS MODEL BUSINESS SEGMENTS RESPONSIBILITY GOVERNANCE FINANCIAL STATEMENTS Rovio 2017: the start of a new era Kati Levoranta Rovio is a company with a long history in a relatively young industry. Since 2009, CEO our games have been downloaded more than four billion times. That is an impres- sive number of downloads by any measure. When Rovio went public in October 2017, we sort of went back to year one. Measured by revenue, the year 2017 was the best year in Rovio’s history. The performance indicators of our top games improved and the revenue of our games grew by 56 percent. The Group’s revenue Measured by increased by 55 percent and our adjusted operating profit and earn- revenue, the year ings per share doubled, as we enjoyed strong gross sales of games 2017 was the best while also reaping the benefits of the Angry Birds Movie’s success. year in Rovio’s I would like to thank all of our employees for their strong perfor- history. mance in 2017. In the first half of 2017, we invested substantial resources in our Games business and implemented restructuring measures in our other opera- tions. This led to us establish the Brand Licensing business unit. In consumer products licensing, this means even more extensive and effective use of agents in sales and other processes. We also adopted the licensing model for content pro- duction. The most prominent example of this is licensing the Angry Birds brand to Columbia Pictures/Sony for the production of movie sequels. We launched three new games in 2017. Battle Bay, a 5-vs-5 multiplayer naval battle game, represents our aim of building other kinds of gaming worlds along- side the Angry Birds universe. Angry Birds Evolution saw Rovio entering into mod- ern role-playing-games and targeting new audiences with the help of hundreds of new bird characters. The third new release, Angry Birds Match, combines features of builder games and puzzle games. ANNUAL REPORT 2017 4 YEAR 2017 OPERATING ENVIRONMENT STRATEGY BUSINESS MODEL BUSINESS SEGMENTS RESPONSIBILITY GOVERNANCE FINANCIAL STATEMENTS Our new releases are particularly targeted at the paying adult audience but can be Success built on passionate professionals enjoyed by players of all ages. In line with Rovio’s responsibility policy, our Angry Our success is based on the passion, ambition and strong competence of our Birds games do not include any content that is unsuitable for younger audiences. employees. You cannot overstate the importance of job satisfaction and competence The monetization indicators of our top games saw strong development during development in an industry characterized by intense competition for high-level talent. the year. However, in the fourth quarter, our new games fell short of our expec- As our development work is a continuous process, our employees learn more tations. The competition for new players in the global market intensified which from every task they are involved in. The company culture and size enable that we increased the unit costs of user acquisition. can offer employees different jobs to support further development of our talent. Thus the career paths can take many different forms over the shared journey. In 2018 we seek to grow our Games business through continuous development, renewal, and improved monetization of our current top live games, Our strength is in our innovative, engaging and non-hierarchical and through well optimized user acquisition. A good example of this is workplace culture that emphasises autonomy and responsibility as Angry Birds 2, our internal success story launched in 2015. It started Our success is well as effective interaction. Placing a high value on equality and to grow its revenue