“Rovio devs must be salivating at the thought of working with these IPs…” The | Pocket Gamer.biz

Earlier this week the news broke that Sega was all set to acquire Rovio for $775 million and we shared six former Rovio employees’ opinions on the big deal. With both Sega and Rovio being notable names with big brand IPs under their belts it’s no surprise that the wider industry also has much to say on the topic.

Is this latest deal a perfect fit for all the parties involved? Or should Rovio have held out for more money? With Rovio’s mobile experience and Sega’s heritage what can we expect to see from the duo? And who’ll be laying out the big bucks next?

We find out what the industry thinks of what could be one of the biggest deals of the year.

What’s your initial reaction to the Rovio/Sega deal?

After the Playtika offer it was quite obvious that there are many companies interested in acquiring Rovio and Rovio considered options to sell. In that sense that deal didn’t come as a surprise. In this deal motives are clear and it’s easy to see how Sega and Rovio can benefit each other.

Is this the best deal for all concerned? Why is Sega doing this?

In my honest opinion, Sega is looking for expansion to western / mobile markets. They have some pretty famous brands Like Sonic which haven’t been utilised on mobile properly. Rovio is very professional in the mobile games area. As a company it’s far more than just Angry Birds. Sega and Rovio have many possibilities to cross utilise their strengths and potentially have a winning combination. Problems may occur, this is the games industry, but two professional companies are well equipped to deal with them.

Is the price about right do you think or could Rovio have held out for more?

It’s better than Playtika’s offer, but less than what was anticipated in WSJ article on Saturday. At the end of the day, if shareholders are happy and willing to sell, it was a fair price.

Is it sad to see another big Finnish studio passing into foreign hands?

All the global reach serves the Finnish game industry in one way or another. From an ecosystem point of view these kinds of deals are somewhat inevitable if we want to continue to grow. I don’t see any reason to mourn or celebrate. It is what it is and we have to make the best of it.

Daniel Carter
Data Scientist

Data Scientist with 6+ years of specialising in applied ML and Deep Learning in free-to-play games. Formerly working at Sega Europe 

Previously: Data scientist at Sega Europe

What was your initial reaction to the Rovio/Sega deal?

Surprised. The Sega of only a few years ago was a bit more risk averse – leaning on the tried and true – preferring to acquire small and cheap if at all. But, after thinking about it, this deal makes a lot of sense for both parties.

Is this the best deal for all concerned – can you see a potentially bright future or will there be problems ahead?

I don’t know if it’s the best deal, but it’s likely better for Rovio (the company and employees) than if they’d gone with Playtika. The deal is also pretty shrewd from Sega’s perspective; Rovio has a lot of capabilities that Sega has struggled to develop internally. Namely, Rovio has honed their machine learning (ML) and live ops expertise over the past few years. ML has historically been underinvested in at Sega, and once upon a time its internal mobile studios were criticised for not having live-ops capability. Rovio brings Sega back up to speed with both of these things in one acquisition. Rovio gets to be the expert in this deal, they’ll probably keep all of their tech, whereas Playtika would likely have shifted at least some (if not most) of their operations to Israel.

How do you foresee IPs being used?

While the mobile games industry has been reeling from privacy changes, Sega has been building out a cross-media presence providing top-of-funnel marketing that is virtually immune to those changes. Angry Birds has strong cross-media recognition too, and Sega must have viewed that positively. The untapped area for the Angry Birds IP is on consoles/PC. Sega has plenty of experienced studios that can help with that. Sega also has a ton of IP that is underutilised on mobile: Total War, Football Manager, Bayonetta, TwoPoint Hospital/Campus, etc. Rovio devs must be salivating at the thought of working with these diverse IPs. The downside is that the biggest IPs in the deal – Angry Birds and Sonic – have already saturated their own markets on mobile, so the proverbial ocean for those two IPs on mobile is more red than blue.

Is the price about right do you think or could Rovio have held out for more? Is Sega the right match over Playtika?

Playtika has recent form for layoffs, ruthlessly driving for KPIs, and acquiring Finnish studios for their IP before shuttering them or stripping them down, like with Seriously and Reworks. Rovio’s management must have been thinking about this during talks with Playtika. On the other hand Sega recently bumped their Japanese employees’ salaries by 30%. The difference in approaches is stark. I know which one I would prefer to work for. Having said that, Sega’s last mobile studio acquisition – Demiurge – was disappointing for both parties. If Sega gives Rovio the same autonomy that its other mobile studio HARDlight enjoys, then Rovio will be in a great place. Still, time will tell if the price was right, and who got the better end of the deal.

Is the Sega of today a different business from the one you worked for?

Organisational structure was a big part of the reason why Sega struggled to put together a coherent mobile strategy during my time there. Studios developed titles mostly in isolation, with little collaboration with others. Those structures – Sega Networks in particular – have since been consolidated in some pragmatic moves. Sega Europe in particular seems to have come a long way encouraging collaboration between studios and bringing them together, but it’s yet to bear significant fruits as far as I can tell.

Any final thoughts on the future of deal?

As with any acquisition or IPO event, some of the old guard will take the opportunity to cash out and leave the company. Sega will need to be diligent to keep Rovio employees’ total compensation from falling too much if stock based compensation suddenly goes away. Rovio has some incredible talent. Sega is acquiring that talent as much as the IP, and it should value them equally to get the most out of this deal.

What are your initial thoughts on the Rovio/Sega deal?

2022 saw Activision, Zynga, SYBO and Bungie changing hands plus the Unity + ironSource merger. Barely into Q2 of 2023 and we have Scopely and Rovio transactions. I don’t get the feeling that consolidation in the games industry is slowing down at all, as the markets recognise that approximately half the world’s consumers can be reached through the games they play on their mobile devices.

Like anyone who has been in the games industry for any time, I have a ton of respect for what Rovio achieved: they successfully navigated multiple game monetisation models, from freemium to ad-supported free-to-play to IAPs, and were arguably the first mobile game publisher to create mass success for their IP outside of mobile.

Of course it is also worth remembering that Rovio were one of the earliest proponents of in-game brand activations, bringing non-endemic brands such as the NFL, Duolingo, and UNICEF directly into Angry Birds mobile games and paving the way for dynamic in-game ad platforms including AdInMo.

Was the price right? And is this the best deal for all concerned?

An acquisition price of 2.5x revenues doesn’t seem like a great deal for Rovio shareholders, but on the other hand it also feels like the best days of the Angry Birds brand are behind us. Presumably the value creation in this deal was less about further growth of the Angry Birds brand and more around Sega leveraging Rovio’s mobile free-to-play and liveops expertise.

For Sega this makes a lot of sense, they have great IP and a strong portfolio of console and PC games, but have struggled to successfully capture mobile audiences outside of Japan.

Is it sad to see another big Finnish studio passing into foreign hands?

This is an amazing outcome for the Finnish games industry! Mobile game publishing and development doesn’t have a single centre of gravity in the way the tech industry has the San Francisco bay area, but Finland has to be pretty near the top of mind for most mobile games developers, designers, and entrepreneurs.

The Finnish government can take a lot of credit for creating a thriving games industry ecosystem, with this deal as a case in point.

Any final thoughts on the deal?

One thing I don’t look forward to, but worry the corporates may be considering: Sega and Rovio, please please please do not ever consider some sort of Sonic + Angry Birds mashup!

What do you make of the deal?

In addition to the success of the Angry Birds IP in both games and film, Rovio has also built the publishing platform Beacon which helps its teams to smoothly and efficiently operate live games. As such, it did not surprise me when I saw the announcement of Sega’s acquisition of Rovio; particularly after Rovio declined the non-solicited bid from Playtika. Helsinki as a region is still recovering from the impact that Playtika had on the closure of subsidiary studio Seriously.

Is this the best deal for all concerned? Why is Sega doing this?

Sega’s acquisition of Rovio provides value for the following reasons. Firstly Rovio can expand game development to console and desktop as initially stated in the opening of Rovio’s studio in Montreal Canada. Plus, Angry Birds can continue to expand to other forms of entertainment, mirroring what SEGA has done with Sonic The Hedgehog.

Secondly Sega can apply Rovio’s mobile game-as-a-service expertise to games such as Sonic Dash or Football Manager.

Any final thoughts on the deal?

In summary, consolidation in the games industry is speeding up and – for companies looking for impactful M&A transactions – there are fewer mid-sized organisations to bid for. I can’t wait to see whether the next bold move comes from Sony, Microsoft, Amazon, Facebook or Netflix.