Earlier today, Rovio said it would lay off 260 employees. This was fascinating news to the Internet, given Rovio’s status as one of the vanguards of mobile gaming as the iPhone and Android exploded.
But in reality, all games eventually fade into obscurity, and even viral phenomenons like Kim Kardashian: Hollywood, Candy Crush Saga and FarmVille become distant memories among the fickle gaming population. Most gaming companies that ride the strength of a massive hit will experience a decline — it just depends on at what speed. Those companies and game developers need to figure out a second act.
But first, let’s talk mechanics. The success and longevity of most games depends on a couple of factors, including virality, monetization and short- and long-term retention. The last one is arguably the most tricky, because it’s harder to ensure. However, long-term retention drives the longevity of a game and determines whether it has staying power that it can leverage into a platform to drive adoption for other games — and please investors with dividends and stock payouts.
Take Candy Crush Saga from King.com, for example. Still among the top-10 grossing games on the App Store, Candy Crush Saga nails the viral component of game development. To monetize its games, King created a viral loop that encourages players to purchase upgrades at just the right moment to finish off a level. And it continued coming out with new levels, driving long-term retention. Candy Crush Saga was so successful it created a multibillion dollar public company that has spawned money-making titles like Candy Crush Soda Saga.
Games like Candy Crush Saga come down to how much content is available in the game, and the most avid players tend to blitz through that content quickly. Like Candy Crush Saga, Kim Kardashian: Hollywood supported itself with a strong brand — in this case, basing the game around a superstar — but it still requires developers to churn out new content to encourage retention.
For more in-depth and challenge-driven games — in the industry, these are referred to as “midcore” — the long-term retention is centered around user-generated content (UGC). In the case of Clash of Clans, UGC is built around creating and raiding bases. Each moment of attack and defense is a new element of user-generated content in the same way that every player-versus-player encounter in World of Warcraft is.
And then there’s Game of War, which has been able to create a brand for itself beyond just being a video game. It ran a promotional campaign ranging from app install ads to campaigns that are centered around Kate Upton, which has made it consistently one of the top-grossing apps on the App Store. The company’s combination is not only a mid-core title, but a strong brand behind that title that everyone is aware of. Supercell, the maker of Clash of Clans, also runs TV spots for its games, building that brand.
These games are still in their prime and continue to have massive staying power, while recent Angry Birds games tend to be one-offs. They are launched with a boatload of content that are well-designed, but players blitz through the games quickly and their popularity — and success on the App Store — quickly fades. Diminishing returns for Angry Birds games, driven by the insane popularity of the original game, has essentially started to kick in and the company needs to figure out its next steps.
To be sure, new Angry Birds games aren’t complete failures when it comes to making money, but they aren’t a second act that replicates the worldwide phenomenon of the original Angry Birds. As my colleague Romain Dillet pointed out, Angry Birds 2 was for all intents and purposes a success in the eyes of the App Store.
But for a company like Rovio, which has built a massive brand around Angry Birds with toys and cartoons (and even a movie), the trick is to ensure Angry Birds turns into a multi-faceted franchise that creates a viral phenomenon beyond just a video game.
A case in point is Minecraft, one of the most successful games of all time. But it wasn’t just a game — there were conventions, toys, and a whole lot of other branding elements. Rovio may have to lay people off, but it also has to focus on being as much a brand as it is a games developer.
King has been trying to find its follow-up act by creating sequels and new games, but so far it hasn’t been able to replicate the incredible viral success of Candy Crush Saga. It has already begun to see a decline in its business as it moves to diversify beyond Candy Crush Saga. Games like Pet Rescue Saga and Candy Crush Soda Saga haven’t been enough to help it continue to build a strong business, so it has started to not only slow, but reverse its growth.
This is essentially a fate that most gaming companies searching for their second viral act will eventually experience. Zynga, for example, has shown lackluster performance since its massive Facebook hits and is now reorienting itself around its strengths, Zynga Poker and slots games. Still, it’s been unable to hold off its user exodus.
To become that entertainment brand that Minecraft succeeded in making and Rovio has been hard at work building, the company needs to retool and set different expectations for itself. It’s the difference between finding a future beyond a hit game, and milking its existing games into obscurity — paying out dividends as it rides off into the sunset.
As for Rovio, its second act has yet to be written — and simply making new games, as emphasized by the company’s retooling today, may not be enough to find that next step. If it is to succeed, it needs to find a way to make the company itself a viral hit and not just its games.