Supercell demonstrated the difficulty of staying successful in mobile gaming as the Finnish maker of Clash of Clans and Hay Day posted its second consecutive year of declining profits and revenues.
Revenues and earnings before interest, tax, depreciation and amortisation at Supercell both fell by about a quarter in 2018 and are at their lowest levels since 2013-14. Revenues were €1.37bn and ebitda €537m, both below their peaks from 2016 of €2.1bn and €917m.
The Helsinki-based group, which is 88 per cent owned by China’s Tencent, only released its fifth game — Brawl Stars — in December, and the lack of new games since Clash Royale was released in 2016 is widely blamed for the worsening financial results.
Supercell is widely considered one of the most successful mobile gaming companies, making large profits despite only having 283 workers and five games rather than hundreds of titles such as some rivals.
But the mobile gaming sector is under pressure from the success of Fortnite, the video-gaming phenomenon of last year that is mostly played on consoles or PCs, as well as continued questions over whether studios can replicate their blockbuster success.
Supercell has fared better than rivals such as Rovio, the company behind Angry Birds, and King Digital, which developed Candy Crush Saga, by ruthlessly killing off games in development that do not make the grade.
Ilkka Paananen, Supercell’s chief executive, said in a blog post that he had been asked if he was disappointed with the consecutive declines in revenues and profits.
“Well, sure, of course it would be great if the numbers always grew from the previous year. But, focusing on short-term financial metrics has never been the most important thing for me or for us as a company. Our concern is that if you start to be driven by short-term financials, you may be tempted to release average quality games too early or be overly focused on monetisation,” he said.
Supercell has focused on creating games with small groups — cells — of people, who then develop the game by adding new features and levels over the years. Mr Paananen said that each of its first four games had earned more than $1bn in lifetime sales while Clash of Clans and Clash Royale had jointly made $10bn, more than the box-office receipts of film series such as Harry Potter and Lord of the Rings.
Supercell’s games — like much of the mobile gaming industry — are free to play and instead make much of their revenues from a few “whales”, the big-spending players who pay to speed up their progress.
The Finnish group has struggled to crack the Asian market like many western gaming companies. But Supercell opened a new games studio, only its second, in Shanghai last year and Mr Paananen noted that Brawl Stars was the most downloaded game in Japan, South Korea and Taiwan at the end of last year with a Chinese release still to come.
Supercell has tweaked its model slightly over the years, starting with buying up smaller gaming groups and on Tuesday Mr Paananen said it would partner with external studios to help develop content for its existing games.
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