02:01 pm - Saturday 18 November 2017

Angry Birds Star Wars is the third major Rovio debut in seven months

By Parvina Purkayastha - Tue Oct 09, 3:56 pm

The app market has evolved from paid apps to free apps

An entertainment media company and the creator of the globally successful Angry Birds franchiseRovio has increased its game launches.  Aiming at merchandising opportunities, Angry Birds Star Wars is the third major Rovio title to debut in seven months.

Three years ago, most app vendors had a simple goal, maximize the download number of apps. In 2011, the number of free apps soared as some companies figured out that giving away apps and then luring consumers into paying for in-app purchases can generate more revenue.

The app market has evolved from paid apps to free apps and as it turns out, the free apps proved to be stronger revenue-generators. Except that it’s not quite that simple. There is another, rare category of apps — games as vehicles for merchandising and franchising deals. This requires hundreds of millions of downloads to build brand awareness to the level that persuades major retailers such as Toys R Us and Hot Topic to pledge marketing support.

In Helsinki, it is widely assumed that merchandising revenue is set to top 40% of Rovio’s total revenue this winter. Rovio is thought to get roughly a 2% to 4% cut of the retail price of the merchandise sold under the Angry Birds banner — calendars, coffee mugs, baby clothes, etc. The company itself has only released year 2011 numbers, so visibility to its finances is limited.

In any case, the licensing fees growth explains a few puzzling things about Rovio’s strategy. Unlike most of its rivals, the company has not focused on in-game revenue generation. Rovio is still focusing on maximizing download numbers – not game revenue.

A new wave of game vendors has figured out how to foster gradual growth of a loyal user base willing to pay for multiple upgrades inside the game. These games can generate massive revenue — Rage of Bahamut is rumored to be grossing more than $5 million a month even though the game does not even crack iPhone’s Top 500 in downloads.

But these lucrative high-loyalty games do not have the kind of mass market audience that fosters a compelling merchandising universe. They have a relatively narrow, fiercely loyal fan base. Rovio is going the opposite route, still trying to max out download numbers instead of in-app revenue generation. Retail chains love overexposure.

The traditional video game console market was essentially static for more than two decades, from early ’80s to mid-Nineties. The rapidly mutating mobile app market is an overclocked laboratory of capitalism.

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