Angry Birds-dependent games maker Rovio swings to annual profit

HELSINKI (Reuters) - Finnish mobile games and animation studio Rovio Entertainment swung to an annual profit in 2016 as its Angry Birds movie release helped boost its game sales and tackle competition from new challengers such as Nintendo Co’s Pokemon GO.

Angry Birds characters Bomb, Chuck and Red are pictured during the premiere in Helsinki, Finland, May 11, 2016. Picture taken May 11, 2016. REUTERS/Tuomas Forsell

However, analysts noted the private-held company must find new franchises and reduce its dependence on the Angry Birds brand to succeed in the highly competitive game industry.

Following years of falling earnings, job cuts and divestments, Rovio’s revenue increased 34 percent in 2016 to 190 million euros ($201 million). The operating result improved to a profit of 17.5 million euros from a loss of 21 million in 2015.

“Things clicked together in the games business and the movie brought a lot of boost to our brand,” Chief Executive Kati Levoranta said at the company’s headquarters by the Baltic Sea.

“We have a clear focus and aim, and we have learned our lessons.”

The original Angry Birds game, in which smartphone players use a slingshot to attack pigs who steal the birds’ eggs, became a phenomenon in 2009, and Rovio capitalized on the brand early on by licensing its use on consumer products.

But the franchise began to falter amid new challengers, prompting Rovio to cut more than 300 jobs.

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Rovio sought to revive the brand with an animated 3D Hollywood film, financed from the firm’s pocket.

Released in May, the movie earned around $350 million at the box office, though Rovio will record most of the movie revenues for 2017 and 2018.

The mobile game industry was stunned last year by the success of Pokemon GO, in which players walk around trying to catch characters.

Still, Levoranta said Rovio had managed to develop its existing titles, such as Angry Birds 2 and Angry Birds Friends, and acquired new players that made more in-app purchases.

This year, Rovio is looking to launch new games, while a movie sequel is in its plans for the longer term.

The company, which has 476 employees, announced last month it would build a new team of about 20 people in London, tasked to create new multi-player games with a focus on new characters.

Analyst Steve Bailey from IHS Technology said the plan was essential to Rovio.

“The major issue for Rovio is how to create new IP (intellectual property) that can help the company to grow regardless of what kind of market conditions affect Angry Birds.”

“When creating new franchises these days, it is very hard to repeat your earlier success.”

($1 = 0.9446 euros)

Editing by David Evans