In 2009, an unknown Finnish company called Rubio became a global sensation, when the game it launched – “Angry Birds” – reached the top of the world in the download list of iPhone games and remained there for many months. The seemingly silly game where angry birds throw their friends at a pile of indifferent pigs has become synonymous with success in casual games – mobile games that pass the time with increasingly challenging challenges.
● Playtica’s giant deal: Submitted a purchase offer to the manufacturer Angry Bird for 690 million euros
Over time, the company that grew out of the industrial city of Tampere became a media-embracing corporation, reminiscent of the success of the Lego gaming company more than any other computer game. Besides a series of mobile and console games, Rubio launched animation studios that produced many animated series and two full-length films, and established theme parks in the USA, Spain, Puerto Rico, Russia, Qatar and of course – Finland.
Profitable, stable, but not eternal
Not everything went smoothly: although Rubio is a profitable company, which went public in 2017 and maintains stable results, it has struggled to make its brand timeless. In the last decade it has fired hundreds of employees, closed its flagship park in England and replaced several CEOs. Not all the titles launched by her were successful, and if we admit the truth – you can’t live off one brand.
Playtica understood this lesson from the beginning – growth will come through the acquisition of titles that are not necessarily related to the core of the activity. Playtica’s success thanks to its first game, the slot machine game Slotomania, led it to purchase other casino games such as the WSOP poker brand. In the following years, it acquired the Israeli Jelly Button, the Finnish Seriesly and the German Vega – the latter even helped Playtica get rid of the image of a social-casino company and change its revenue balance so that most of it now comes from casual games.
However, the separation between casino and casual society is not always clear. A game called Pirate Kings by Jelly Button, a purchase made by Playtica in Israel, allows the player to conquer islands and build an empire as if it were a strategy game. However, between different stages the player also gets to try his luck with a lucky wheel or alternatively with a slot machine that wins him points. Does the sale offer to Rubio include a clause that allows – or alternatively prevents the integration of elements from the casino worlds into the Angry Birds brand? We will probably know the answer to that later.
With the acquisition Playtica expands to a younger user segment
Either way, acquiring a brand like Angry Birds creates several opportunities for Playtica. First, the Israeli company is thereby expanding to the younger user segment. Playtica’s games of chance are traditionally aimed at 17 and over, while Vega’s adventure games are aimed at teenagers. Angry Birds games, and Rubio’s other prominent brands such as Fruit Nibblers are generally intended for ages 4 and up. Rubio has launched games for teenagers such as the crime quest Small Town Murders and the war game Battle Bay, but its bread and butter is in the younger ages.
Beyond that, Rubio is a profitable gaming company at a bargain price – even though its revenues have struggled to grow over time. It generates annual revenues of around 270-300 million dollars and maintains profitability, albeit limited. It trades at a very low multiple of 0.7 times the revenues and 4.6 times the EBITDA profit (profit without less and taxes), so that even price flexibility and a little goodwill as expressed by Playtica still pays off for it. On the other hand, Playtica is still a “cash machine”, despite a decision to lay off 600 employees in recent months. Its cash for the first three quarters of 2022 is approaching $2 billion, so buying Rubio will leave it with a nice surplus.
Playtica is confident of the company’s monetization capabilities – generating revenue through advertisements or in-app purchases will save Rubio’s dwindling revenue. This may make sense, but Playtica is not Iron Source: most of its monetization methods come from the worlds of social gaming: the ability to convince the user at many points to reach for the credit card and spend money on the purchase of coins, points, new stages or prestigious virtual objects. In the age group of 17 or 18 and above it is easier, but it will be more difficult to convince the average American mother to allow her four or five year old children to pay for virtual goods in mobile games.
If Playtica hints at the ability to distribute Rubio’s games in a better way, then they will have to integrate the various brands in its advertising network and take care of a clear separation between games for 17-year-olds and those intended for children.