'Angry Birds' developer negotiating with investor for $1.2 billion valuation
Rovio Entertainment, the created of the popular "Angry Birds" game, is in talks with an interested investor to receive funding that would see the company valued at $1.2 billion, according to a new report.
People with knowledge of the discussions relayed the figure to Bloomberg, though they were unable name the entertainment company looking to make the investment. Sources said Rovio is considering the investment, despite the fact that it has, in the past, declined offers from larger institutional investors.
The influx of cash would reportedly be used for continued expansion on projects such as an "Angry Birds" movie, offices outside of its home country of Finland and retail endeavors in China and other emerging markets.
Rovio "Mighty Eagle" Peter Vesterbacka revealed this spring that the Angry Birds franchise is the third-most-copied brand in China, behind Disney and Hello Kitty. The company is currently in the process of setting up a local operation in China with the goal of becoming a "leading entertainment brand" in the country.
In March, Rovio received $42 million in funding from investors including Skype co-founder Niklas Zennstrom's Atomico and Facebook investor Accel Partners.
Vesterbacka showing an early design sketch of Angry Birds
Vesterbacka has attributed his company's success to the iPhone, which he says "changed everything." According to him, Apple opened up distribution channels that allowed developers to directly reach their fans. The executive has also predicted that Apple will remain the number one platform for developers for a long time.
Google's Android OS, on the other hand, has been caused some difficulties for the developer. Rovio apologized late last year for not delivering "optimal performance" on Android because of problems with fragmentation.
Rovio success has also drawn the attention of patent licensing companies looking to ride on its coattails. Late last month, patent troll Lodsys added the company to its patent infringement suit accusing numerous iOS and Android developers of violating a patent related to in-app purchasing.
Rovio's rumored $1.2 billion valuation would rival the $1.3 billion deal that EA negotiated for its acquisition of PopCap Games, which makes the popular iOS game "Plants vs. Zombies." That deal, which was EA's largest acquisition ever, offered $650 million in cash up front and $100 million in EA shares to PopCap, as well as as much as an additional $550 million based on certain performance goals.
People with knowledge of the discussions relayed the figure to Bloomberg, though they were unable name the entertainment company looking to make the investment. Sources said Rovio is considering the investment, despite the fact that it has, in the past, declined offers from larger institutional investors.
The influx of cash would reportedly be used for continued expansion on projects such as an "Angry Birds" movie, offices outside of its home country of Finland and retail endeavors in China and other emerging markets.
Rovio "Mighty Eagle" Peter Vesterbacka revealed this spring that the Angry Birds franchise is the third-most-copied brand in China, behind Disney and Hello Kitty. The company is currently in the process of setting up a local operation in China with the goal of becoming a "leading entertainment brand" in the country.
In March, Rovio received $42 million in funding from investors including Skype co-founder Niklas Zennstrom's Atomico and Facebook investor Accel Partners.
Vesterbacka showing an early design sketch of Angry Birds
Vesterbacka has attributed his company's success to the iPhone, which he says "changed everything." According to him, Apple opened up distribution channels that allowed developers to directly reach their fans. The executive has also predicted that Apple will remain the number one platform for developers for a long time.
Google's Android OS, on the other hand, has been caused some difficulties for the developer. Rovio apologized late last year for not delivering "optimal performance" on Android because of problems with fragmentation.
Rovio success has also drawn the attention of patent licensing companies looking to ride on its coattails. Late last month, patent troll Lodsys added the company to its patent infringement suit accusing numerous iOS and Android developers of violating a patent related to in-app purchasing.
Rovio's rumored $1.2 billion valuation would rival the $1.3 billion deal that EA negotiated for its acquisition of PopCap Games, which makes the popular iOS game "Plants vs. Zombies." That deal, which was EA's largest acquisition ever, offered $650 million in cash up front and $100 million in EA shares to PopCap, as well as as much as an additional $550 million based on certain performance goals.
Comments
Then I go home and play Angry Birds.
So the company comes out with one popular game and suddenly thinks they're worth 1.2 Billion dollars?
If they?re the only ones who think so, then negotiations will be brief
And what patent(s) does Popcap own and/or what barriers of entry prevents competitors from making similar products?
It has no plot, no great action, no challenge. I don't see its point. I like many games, but Angry Birds would ge a 3 out of 10.
Sometimes I see Angry Birds toys at random places like the grocery store, and I wonder when the world went mad.
Then I go home and play Angry Birds.
That put a smile on my face this morning!! Thank you.
It has no plot, no great action, no challenge. I don't see its point. I like many games, but Angry Birds would ge a 3 out of 10.
I know that there are some people who enjoy causal games like Angry Birds and Cut The Rope, as well as deeper games like Arkham Asylum and Half-Life. I'm one of those people. I take it that you too enjoy all kinds of games, but Angry Birds is the exception.
Still, a person who is a dedicated gamer is really not the target audience for Angry Birds. I think it is the appeal to the causal gamer that made it sell so well.
Personally, I do find the game interesting. It may have no plot or action, but I do think it does have a few challenges based on how you use the different birds.
Of course, sometimes I just get frustrated and flip the bird.
1.2 ->BILLION<-
NO, REALLY?
And what patent(s) does Popcap own and/or what barriers of entry prevents competitors from making similar products?
I believe their key patent is in the use of plant based undead defence systems, and is expected to be invaluable in the coming zombocalpyse.
I realise it is a popular game. But 1.2billion, really?
1.2 ->BILLION<-
NO, REALLY?
It didn't even make anywhere near that in profit. It made something like $40m. Valuations should also be based on potential. Putting a Christmas hat on the birds is not potential.
Until they show that they have any chance of continuing their success with new products, their value is a small fraction of $1.2b. $100m I could believe but it seems like this is a MySpace-type thing. Sell out when you're popular and make it someone else's problem how to keep making money.
It didn't even make anywhere near that in profit. It made something like $40m. Valuations should also be based on potential. Putting a Christmas hat on the birds is not potential.
Until they show that they have any chance of continuing their success with new products, their value is a small fraction of $1.2b. $100m I could believe but it seems like this is a MySpace-type thing. Sell out when you're popular and make it someone else's problem how to keep making money.
Bubble 2.0, here we come.
I'd be suprised if this was true. Angry Birds may have been Rovios 40th game but frankly no one gives a damn about the previous 39. So we are saying $1.2 bn for the Angry Birds franchise??? Maybe its Disney and they have big plans for it?
It didn't even make anywhere near that in profit. It made something like $40m. Valuations should also be based on potential. Putting a Christmas hat on the birds is not potential.
Until they show that they have any chance of continuing their success with new products, their value is a small fraction of $1.2b. $100m I could believe but it seems like this is a MySpace-type thing. Sell out when you're popular and make it someone else's problem how to keep making money.
Huh? You think a firm that is the leader in a high growth market and that made 40mil in profits is worth 100mil?
You think a P/E of 30 is unreasonable but that a PE of 2.5 is sane?
It's amazing how some group of people who know how to create games are becoming wealthy. For every successful game made there must be hundreds that just didn't catch on. It's like they're the new rock stars because they had a hit. They had better cash out now while the product is hot. If they wait too long something else will take the place of Angry Birds and their value will plummet.
Exactly.
1.2 billions is quite insane, but they must have internal projects coming along that look promising.
Angry Birds is rather boring IMO, but its simplicity is probably what makes people like to play it on the way home from work.
Huh? You think a firm that is the leader in a high growth market and that made 40mil in profits is worth 100mil?
You think a P/E of 30 is unreasonable but that a PE of 2.5 is sane?
Clearly some people here don't know much about company valuation. I don't know if they actually made 40mil but if they did then 1.2 billion valuation like you said for a high growth market seems perfectly reasonable. Of the recent IPOs LinkedIn's P/E today is 485 and Pandora doesn't even have one because they haven't made any money. That makes a P/E of 30 sound conservative.
Huh? You think a firm that is the leader in a high growth market and that made 40mil in profits is worth 100mil?
You think a P/E of 30 is unreasonable but that a PE of 2.5 is sane?
Rovio isn't a leader in mobile gaming. They have a single popular game. All they do is inflate the value and sell it on to a Japanese company for a ridiculous price like ngmoco. That company was exactly the same, one decent title Rolando and sold for $400m.
Rovio made $40m over 2 years from Angry Birds and this craze is over.
Now obviously, if someone is willing to pay $400m for ngmoco then you could say an inflated valuation is accurate but I don't see any evidence that Rovio's earnings will outlast their one-hit wonder.
Rupert Murdoch bought MySpace for $580m in 2005. Justin Timberlake bought MySpace this year for $35m. If an investment doesn't live up to the amount paid then the value was overinflated.
Mobile entertainment is like reality TV. Try as many formats as quickly as you can at a low cost until something sticks then ride it for all it's worth and get out with the money. The loser is the person stuck with the deflating $1b hype bubble.
These mobile games companies will come and go like the wind. The real leaders are the ones who last. Sony and Nintendo may be going through some difficulty but they've done more for mobile gaming than anyone, they innovate with their games and their hardware and they set a quality bar for developers.
The example that mobile phone developers offer is don't try hard, don't bother about quality, just try to get rich as quickly as you can through marketing. When the values plummet as quickly as they rose, it's clear how superficial the valuations are.
If someone buys Rovio for $100m, they might make their money back in 5 years but I wouldn't count on it.
It didn't even make anywhere near that in profit. It made something like $40m. Valuations should also be based on potential. Putting a Christmas hat on the birds is not potential.
Until they show that they have any chance of continuing their success with new products, their value is a small fraction of $1.2b. $100m I could believe but it seems like this is a MySpace-type thing. Sell out when you're popular and make it someone else's problem how to keep making money.
Please explain to us why your know more about acquisitions than a company which has put together the resources to invest $1.2 B.
And why is putting a Christmas hat on the birds not potential? Cross-marketing is a HUGE opportunity for online success stories.
And what patent(s) does Popcap own and/or what barriers of entry prevents competitors from making similar products?
Who says it has to be patented? Clearly there are trademark issues here - and trademarks have value every bit as much as Disney. How much do you think the Disney trademark is worth? Or the Coca-Cola trademark?
Clearly some people here don't know much about company valuation. I don't know if they actually made 40mil but if they did then 1.2 billion valuation like you said for a high growth market seems perfectly reasonable. Of the recent IPOs LinkedIn's P/E today is 485 and Pandora doesn't even have one because they haven't made any money. That makes a P/E of 30 sound conservative.
Glad someone knows something about business for a change. A p/e of 30 is, indeed, quite reasonable for an early stage fast growth business.
Now, the acquirer has to do a lot more work to determine if it's a wise investment. A few examples:
- Determine the growth rate as accurately as possible. If it has started to level off, that would be very bad news.
- Evaluate cross-licensing opportunities. They're already talking about an Angry Birds movie, so they're clearly on top of that. Lunch boxes, back packs, stuffed animals, bumper stickers, t-shirts, and so on.
- Evaluate opportunity for other games. If they can use the game engine to create other games, there's added value. Look at what TapJoy has done, for example.
I don't have access to the financials or the answers to those questions, so I can't say if $1.2 B is reasonable, but it clearly is plausible.
Rovio isn't a leader in mobile gaming. They have a single popular game. All they do is inflate the value and sell it on to a Japanese company for a ridiculous price like ngmoco. That company was exactly the same, one decent title Rolando and sold for $400m.
Rovio made $40m over 2 years from Angry Birds and this craze is over.
Now obviously, if someone is willing to pay $400m for ngmoco then you could say an inflated valuation is accurate but I don't see any evidence that Rovio's earnings will outlast their one-hit wonder.
Rupert Murdoch bought MySpace for $580m in 2005. Justin Timberlake bought MySpace this year for $35m. If an investment doesn't live up to the amount paid then the value was overinflated.
Mobile entertainment is like reality TV. Try as many formats as quickly as you can at a low cost until something sticks then ride it for all it's worth and get out with the money. The loser is the person stuck with the deflating $1b hype bubble.
These mobile games companies will come and go like the wind. The real leaders are the ones who last. Sony and Nintendo may be going through some difficulty but they've done more for mobile gaming than anyone, they innovate with their games and their hardware and they set a quality bar for developers.
Yep. Just like the established buggy whip manufacturers prevailed over these upstart auto manufacturers in 1900.
The fact is that there are clear signs that mobile games are replacing console usage big time. It's not all over and the console manufacturers could always make a come-back, but it is entirely possible (if not likely) that consoles will be the buggy whip manufacturers of this decade.
If Sony and Nintendo were expanding into the new markets, then you might be right (just the same as if a buggy whip manufacturer had started making steering wheels for cars, for example). But none of the established console manufacturers are making any effort at going after the mobile phone/tablet market. If the current trend continues, their business dries up.
I am constantly amazed how all the posters here know so much more than established companies who have evaluated a potential acquisition and are considering how much to pay. It is really, really unlikely that you know more than the people who are putting together a bid for Angry Birds.
Why is putting a Christmas hat on the birds not potential? Cross-marketing is a HUGE opportunity for online success stories.
There's only so much flogging a dead horse can take. Tetris is still going strong though so you never know but I don't think modern brands have the same strength to them and I would use Rolando and Doodle Jump as evidence of this.
Now, the acquirer has to do a lot more work to determine if it's a wise investment. A few examples:
- Determine the growth rate as accurately as possible. If it has started to level off, that would be very bad news.
- Evaluate cross-licensing opportunities. They're already talking about an Angry Birds movie, so they're clearly on top of that. Lunch boxes, back packs, stuffed animals, bumper stickers, t-shirts, and so on.
- Evaluate opportunity for other games. If they can use the game engine to create other games, there's added value. Look at what TapJoy has done, for example.
I don't have access to the financials or the answers to those questions, so I can't say if $1.2 B is reasonable, but it clearly is plausible.
I'd point back to the profits they've made. $1.2b seems a bit of a stretch when they've sold the most units of any mobile game and still only come out with $40m and they only have a handful of poor titles on top. To me that says one-hit-wonder in an unprofitable market. If they weren't in every damn Apple Store chart, they'd be history by now. I think Apple has cleaned it up a bit now but I don't even get how they managed to be in so many charts. Angry Birds is not an action game and Doodle Jump is not an adventure game.
Apple has contributed to their success far more than gamers and this makes for a very uncertain investment proposition.
The market is also saturated now. In order to make a $1.2b investment worthwhile, they'd have to come up with another 20 games equally as successful as Angry Birds and they haven't demonstrated 1. The movie ideas and marketing seem like fluff to me. Would people really go and see a movie about some angry birds or stick a bumper sticker on their car about it? I highly doubt it.
Yep. Just like the established buggy whip manufacturers prevailed over these upstart auto manufacturers in 1900.
Some fundamental differences here, which help assert my point. Automobiles offer a better experience - faster, not dependent on the health or behaviour of an animal and don't require nearly as much maintenance.
Mobile games don't offer a better gaming experience. They are what Youtube is to feature films. Nobody is putting down the feature films and settling for a quiet night in to watch Youtube videos.
Now people might say 'give it time' but the reality is that high calibre games require artists, developers, directors, script-writers, voice-over artists, musicians, testers, marketing and so on. This requires a high budget. However, the mobile market has determined it should be low cost so something has to give.
The fact is that there are clear signs that mobile games are replacing console usage big time.
Yes, the mobile consoles are in trouble but the games do command a higher price. People will pay $40 for a DS game but won't for an iOS game. The mobile consoles will lose marketshare but not respect - Apple will become the PC and Sony/Nintendo will be the Apple of mobile gaming, where quality of experience comes first.
I am constantly amazed how all the posters here know so much more than established companies who have evaluated a potential acquisition and are considering how much to pay. It is really, really unlikely that you know more than the people who are putting together a bid for Angry Birds.
True and such large sums of money have been exchanged in the past and if they had been failed ventures, they would have served as a warning for future investors so they must be able to make money somehow - I suspect they will be looking long term. I don't think anyone can judge the success one way or the other but I'd say that based on Apple making them successful, the low profits, the saturated market where it's difficult to get noticed, the lack of proven repeat success and the high valuation, it seems like a pretty high risk investment.