Building an Angry Birds Empire Is Proving Harder Than Expected

Rovio’s Angry Birds empire continues to show cracks. The Finnish company, which has aspirations to become an entertainment company of Disney-esque scale, said on Thursday that it’s considering reducing its staff by as many as 130 people, or 16 percent of its workforce. “We have been building our team on assumptions of faster growth than have materialized,” Rovio said in a statement. Executives at the company declined to discuss the move in more detail.

It’s been clear for some time that the best days for Rovio’s original business—smartphone games—were probably behind it. The premier Angry Birds game peaked in 2012, and the company’s decision to use the same characters in new titles hasn’t produced any blockbusters. Neither of its two newer releases, the racing game Angry Birds Go! or a game aimed at girls called Angry Birds Stella, are among the 250 highest-grossing smartphone games in the U.S.

This has sometimes been cited as evidence that Rovio has not been able to adjust to the changing business of smartphone gaming. Angry Birds had success at a time when the predominant way to make money from games was to charge a small fee upfront. More recently, the industry has shifted to games that are free to download but charge for extra lives or other digital merchandise within the games themselves.

To diversify its sources of revenue, Rovio hatched a media and entertainment business based on the Angry Birds characters. It’s been working on a movie, selling plush toys, and trying to bring in money from new games by coordinating their releases with new merchandise. The company has done better with this endeavor than it has with gaming as of late. Consumer products grew to almost half its revenue last year, while revenue from gaming actually fell from 2012 to 2013.

Rovio didn’t say whether the job cuts are coming from the consumer-products or the game-development side of the company. If the layoffs are an acknowledgment that it has overestimated the potential of its non-gaming business, that’s especially bad news.

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