Last week Rovio, the company that created Angry Birds, reported 2012 sales had more than doubled to $194.8 million. The unexpected jump in sales led to earnings before interest and taxes of $98 million, up 64% compared to what the Finnish company made in 2011.
Rovio's explosive growth is an outlier in a video game space that continues to struggle with a transition from high-ticket console games, with price tags often in excess of $50, to tablet games sold at a fraction of that amount.
Nolan Bushnell, the creator of Atari and Chuck E. Cheese and author of the new book Finding the Next Steve Jobs, cautions would-be game makers against trying to emulate Rovio by creating a billion company selling $1 game. Noting that iTunes reportedly has around 300,000 different apps, Bushnell says success for basement developers is reliant more on "discoverability" than catchy titles. Just because Rovio won the app game "lottery" doesn't make trying to beat them at their own game a promising opportunity.
Surprisingly, Bushnell says the console market he popularized with Pong and the Atari 2600 some 30 years ago still has some life in it. The key is marrying relevant technological trends with the unique computing power offered in a console. Bushnell cites Sony's (SNE) as a relic from the days when every new console have to maximize computing power to create the most visually realistic games at the expense of improving the way users interact with their environments and each other.
Chances are your avatar looks as good if not better than is required — or in some cases looks more realistic than is desired. Even when developers are able to meaningfully improve the look and feel of their games, the possible financial reward from increased sales doesn't justify the onerous development costs that come from going back to the drawing board in terms of programming for the latest hardware.
The future as Bushnell sees it is going in the direction of Microsoft (MSFT) and putting an emphasis on downloading content and motion detection. In other words advancing current Xbox capabilities without destroying the old infrastructure. This focus allows for incremental improvements — what the app guys call updates — to more easily roll through changes to the system, allowing for games to evolve in tweaks rather than annual or bi-annual releases of updates to legacy titles.
Where 30 years ago Atari programers spent years trying to crack the code on a working facsimile of Pac-Man, today developers can have a working tablet application in a single day. Between the studios spending hundreds of millions making and promoting titles and hundreds of thousands of kids making apps game creation is at an exciting and terrible business.he gaming experience itself almost, but not quite, as exciting as seeing Pong for the first time back in the 70's.
Gamers win in the fight between apps and consoles. Ultimately that's the important thing. As Bushnell reminds us if no one is having any fun in a business then there isn't any point in doing it.