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Annual Rovio EBIT down 73% as merchandising falters

Games income growing but consumer products plummets

Rovio has reported its preliminary figures for 2014 entire, revealing a drop of of nine per cent in overall revenues and a 73 per cent drop in earnings before income and taxes thanks to a big shrinkage in merchandising income. It's the first year in five that the company's bottom line has dropped. (2010: €6.5 million, 2011: €75.6 million, 2012: €152.2 million, 2013: €173.5 million).

Total sales value for the firm was €158.3 million last year, compared to €173.5 million for 2013. Of that, €110.7 million was booked for games - a significant growth over last year's €95.2 million, whilst consumer products dropped from €73.1 million to €41.4 million. Media rose from €5.2 million to €6.2 million. The most damning figure, the EBIT, or operating profit, dropped from €36.5 million to just €10 million.

The growth in games comes from the launch of six new titles and a continuing program of updates for existing titles, leading to nearly 600 million downloads for the company's games and putting Rovio in the top five most downloaded publishers.

"2014 results show that steps in the game portfolio, free to play competency building and advertising are going in the right direction," said CEO Pekka Rantala, who took over from Mikael Hed last year. "I am confident that with new simplified organisation and clearer vision, we will be back to the path of growth in 2015."

However, for a company which has always been very clear about the broad nature of its business, indicating in January 2014 that less than half of its staff were working on games, the dip in income from merchandising and other consumer products is a difficult one to swallow.

"On the consumer product side, 2014 was not a satisfactory year," admits Rantala. "However, the upcoming Angry Birds Feature Film is getting very positive reactions from major retail and license partners as well as from consumer focus groups. This will have a positive impact on licensing in the coming years. In the next few months, we expect major announcements of partnerships in the licensing space."

With Rovio's very successful prior collaborations with Star Wars, it seems natural to assume that at least one of these announcements will relate to the release of Star Wars: The Force Awakens in December of 2015, which would be likely to have a very positive effect o revenues indeed.

Interestingly, Rovio's own figures show some discrepancy in the revenue figure reported for 2013. At the time, they were reported as being €156 million, but today's report has a figure of €173.5 million for 2013. Rovio has clarified this, explaining that: "In 2014 Rovio, like other game companies, moved towards reporting the Games revenues so that it includes the market places' (e.g. app store) cut of the sales price as per normal reporting practice among games companies."

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