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Why ‘Angry Birds’ publisher Rovio laid off 38% of its staff

Angry BirdsAngry Birds

Rovio, the maker of the popular Angry Birds mobile game franchise, has had its wings clipped. The Finnish developer and publisher laid off 260 employees Wednesday—more than one-third of its workforce—as part of a restructuring.

“This is personally a difficult decision,” said Rovio’s CEO Pekka Rantala in a statement. “However, it is certain that a leaner and more agile Rovio is absolutely necessary to move forward and take the company to new successes in the future.”

The cuts are not the first at Rovio. In 2014, the company cut 130 jobs.

The Angry Birds franchise has been a consistent presence on the mobile gaming scene since 2009—spawning 14 sequels and spin-offs, most using some variation of the same game mechanic. The game quickly became a pop culture phenomenon, selling more than 10 million toys in its first two years. The company’s characters were also found on everything from t-shirts to cookbooks to soft drinks.

But in the past two years, the first signs of trouble began to become clear. Profits as the studio fell by nearly 50 percent in 2013, sliding from $76.8 million to $37.3 million. And a slew of app store imitators made the once unique game somewhat ubiquitous to iOS and Android gamers.

Analysts say that lack of diversity likely played a big role in the layoffs. While Rovio rode Angry Birds a long way, it failed to create any other franchises that resonated with players. And in today’s disposable mobile gaming world, that’s a recipe for disaster.

“Diversification in a number of places is critical,” says Billy Pidgeon, an independent analyst who specializes in the video game industry. “It comes down to companies that can develop good properties, keep them going and develop new properties that do very well. SuperCell is doing very well. Zynga, not so much.”

Curiously, the one Rovio unit that was spared cuts is the group that’s at work on the The Angry Birds Movie, which will feature Jason Sudeikis, Josh Gad, and Peter Dinklage, among others. Due in May 2016 and budgeted at $80 million, the film is an apparent key to Rovio’s turnaround.

The problem is: There’s not a lot of buzz for the film.

“There’s certainly no demand,” says Pidgeon. “Nobody is asking for an Angry Birds movie at this point.”

Rovio says it plans to focus on three areas: Games, media, and consumer products. Rantala, in his statement, conceded the company “did too many things” in the past, as a result of overenthusiasm brought on by its past successes.

If there’s one bright spot for Rovio, it’s that the company’s most recent gameAngry Birds 2—is still being embraced by players. In its first month, it was downloaded 50 million times. But since the game is free to play (with in-game purchases), there’s no way for external audits to determine how profitable it has been, compared to previous titles.

Rovio’s cuts follow layoffs at Zynga and a disappointing stock performance for Candy Crush Saga maker King. And Pidgeon says the layoffs should serve as a warning to other mobile game makers—especially as bigger publishers, like Electronic Arts, become bigger forces in the mobile gaming world.

“It’s going to be tough for mid-range publishers to succeed in the market,” he says. “You can’t over promise and under deliver. It’s not going to work for you. Mobile is getting to the point where we’re seeing consolidation and shakeout. It’s starting to mature.”

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