Angry Birds Maker Posts Loss Despite Jump in Sales

Angry Birds Maker Posts Loss Despite Jump in Sales

Finland’s Rovio Entertainment, creator of the popular smartphone game Angry Birds, on Thursday posted a loss for the third quarter despite rising sales, as it increased its investments with a view to boost its winnings in future.

Sales reached EUR 70.7 million (nearly $84 million) in the third quarter compared to 50 million the previous year, but year-on-year the company lost EUR 800,000.

Rovio posted a profit of EUR 3.9 million in the third quarter of 2016.

The company said this quarter’s negative result was expected as it invested EUR 22 million in top performing games, hoping this would boost its profits in future.

“In line with our growth strategy, we significantly increased our investments in user acquisition, which predictably led to a decline in profitability,” Rovio chief executive Kati Levoranta said in a statement.

“We expect the payback time for these investments to be 8 to 10 months,” Levoranta said, adding the launch of the new Angry Birds Match game could become one of the company’s “best performing”.

The group entered the Helsinki Stock Exchange at the end of September and was valued at 950 million euros.

On Thursday morning, the company’s share price was down by 19 percent.

Rovio has accelerated its diversification in recent years.

The release of the Angry Birds movie (2016), produced by Sony Entertainment, was a huge success that grossed $350 million worldwide, and is expected to help bolster Rovio profits in 2017 and 2018.

The company also runs Angry Birds theme parks in several countries, including Finland, China and Spain.

It oversees the publication of children’s books in a dozen languages, while boasting an average of 80 million active players per month and 11 million per day.


Despite recent setbacks, India needs more private education

Currently, private schools can only be run as an educational charitable trust which means any profits the school makes have to be retained and cannot be taken out. In turn, the government often provides land at highly concessional rates to set up these schools. Photo: HT

Currently, private schools can only be run as an educational charitable trust which means any profits the school makes have to be retained and cannot be taken out. In turn, the government often provides land at highly concessional rates to set up these schools. Photo: HT

In the wake of the tragic murder of a seven-year-old boy at Ryan International School in Gurugram, followed just a few days later by the ghastly molestation of a little girl at a school in the capital, the lens is once again on private schools. In any case, the business of private education has been under fierce scrutiny for a long time now with the Delhi government currently engaged in a battle of wills with private schools over fee hike which it deemed exorbitant. Government schools, by contrast, are seen as catering to the poor and the marginalized.

The manner in which the debate has been framed seems to suggest a different set of expectations from private and government schools. That relates not just to outcomes but also to conduct and staff behaviour besides, of course, physical infrastructure. Given the kind of money they pay, parents of children who attend private schools, expect high standards of safety and security.

Evidence now suggests that’s not been happening. Indeed, private schools, which abound in India and have a long history in the country, haven’t quite delivered the goods.

India’s best colleges in engineering, management, medical and legal education have carved out a name for themselves in global ratings of higher education institution even if their rankings in various lists tend to be low because of a few factors. The same, however, cannot be said of even the elite private schools in the country, none of which have any global standing. That may be because they are forced to adhere to a curriculum and structure that lacks both imagination as well as excellence. But that doesn’t absolve them of their continued mediocrity.

All this suggests that private education isn’t the way to go for India in terms of quality as well as quantity. In developed Western countries with much higher GDP, the bulk of school education is in the public domain with only a few private schools catering to the rich. In the US, for instance, only about 10% of schools are in the private domain.

Yet, in India, even though government schools outnumber private institutions, they have been grossly inadequate in meeting the aspirations of the people. With a few exceptions, Delhi being one of them, most Indian states seem completely incapable of providing a half decent education infrastructure for young Indians.

According to research by Geeta Kingdon Gandhi, professor of education and international development at the Institute of Education, London, and president of City Montessori School, a private institution in Lucknow, as quoted by IndiaSpend, between 2010-11 and 2015-16, the number of private schools in India grew 35% from 220,000 in 2010-11 to 300,000 in 2015-16. By contrast, the number of government schools in the same period grew just 1%, from 1.03 million to 1.04 million. This, despite the fact that the 2009 Right to Education Act as per which all children between the ages of six and fourteen should be provided free and compulsory education, effectively makes it mandatory for state governments to set up more schools.

If the growth in numbers is beyond the capacity of the states, any improvement in quality isn’t even a priority. Indian students fare abysmally in global tests related to early school education.

Admittedly, in a few of the states like Punjab, Gujarat, Maharashtra, Andhra Pradesh, Karnataka, Kerala and Tamil Nadu, government schools have been seen to outperform private schools in reading skills in local languages, once household and parental characteristics were controlled for, according to a state-wise analysis in Annual Status of Education Report (ASER) 2014.

Part of the reason why private schools have failed to deliver is also because they have little transparency in their working and consequently, no accountability. Currently, private schools can only be run as an educational charitable trust which means any profits the school makes have to be retained and cannot be taken out. In turn, the government often provides land at highly concessional rates to set up these schools. It isn’t a model that can appeal to a company. Those that do have to use a complicated method whereby the school trust hands over its management and operations to a private company against a steep charge.

Instead of the current debate about private versus public schools, the focus should be on enabling the private sector to set up more schools but under direct and close scrutiny of regulatory authorities. Given the limited resources of the states, there is no point heading off private intuitive in education. Instead, it should be encouraged but made much more accountable for quality and conduct.

Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider will look at current issues and trends in the corporate sector every week.


Push for US Encryption Law Falters Despite Apple Case Spotlight

Push for US Encryption Law Falters Despite Apple Case Spotlight

After a rampage that left 14 people dead in San Bernardino, key US lawmakers pledged to seek a law requiring technology companies to give law enforcement agencies a “back door” to encrypted communications and electronic devices, such as the iPhone used by one of the shooters.Now, only months later, much of the support is gone, and the push for legislation dead, according to sources in congressional offices, the administration and the tech sector.

Draft legislation that Senators Richard Burr and Dianne Feinstein, the Republican and Democratic leaders of the Intelligence Committee, had circulated weeks ago likely will not be introduced this year and, even if it were, would stand no chance of advancing, the sources said.

Key among the problems was the lack of White House support for legislation in spite of a high-profile court showdown between the Justice Department and Apple Inc over the suspect iPhone, according to Congressional and Obama Administration officials and outside observers.

“They’ve dropped anchor and taken down the sail,” former NSA and CIA director Michael Hayden said.For years, the Justice Department lobbied unsuccessfully for a way to unmask suspects who “go dark,” or evade detection through coded communications in locked devices.

When the Federal Bureau of Investigation took Apple to court in February to try to open the iPhone in its investigation of the San Bernardino slayings, the cause gained traction in Washington. The political landscape had shifted – or so it seemed.

The short life of the push for legislation illustrates the intractable nature of the debate over digital surveillance and encryption, which has been raging in one form or another since the 1990s.

Tech companies, backed by civil liberties groups, insist that building law enforcement access into phones and other devices would undermine security for everyone-including the U.S. government itself.

Law enforcement agencies maintain they need a way to monitor phone calls, emails and text messages, along with access to encrypted data. Polls show the public is split on whether the government should have access to all digital data.

The legal battle between the FBI and Apple briefly united many around the idea that Congress – not the courts – should decide the issue. But the consensus was fleeting.

Feinstein’s Democratic colleagues on the Intelligence Committee – along with some key Republicans – backed away. The House never got on board.

The CIA and NSA were ambivalent, according to several current and former intelligence officials, in part because officials in the agencies feared any new law would interfere with their own encryption efforts.

Even supporters worried that if a bill were introduced but failed, it would give Apple and other tech companies another weapon to use in future court battles.

Burr had said repeatedly that legislation was imminent.

But last week, he and Feinstein told Reuters there was no timeline for the bill. Feinstein said she planned to talk to more tech stakeholders, and Burr said, “be patient.”

In the meantime, tech companies have accelerated encryption efforts in the wake of the Apple case. The court showdown ended with a whimper when the FBI said it had found a way to get into the phone, and subsequently conceded privately it had found nothing of value.

The FBI goes to battle
A week after the San Bernardino attack, Burr told Reuters passing encryption legislation was urgent because “if we don’t, we will be reading about terrorist attacks on a more frequent basis.”

FBI Director James Comey told the Senate Intelligence Committee soon after that encryption was “overwhelmingly affecting” the investigation of murders, drug trafficking and child pornography.

A week later, the Justice Department persuaded a judge to issue a sweeping order demanding Apple write software to open an iPhone used by San Bernardino suspect Sayeed Farook, who died in a shootout with law enforcement.

Apple fought back, arguing, among other things, that only Congressional legislation could authorize what the court was demanding. Many saw the Justice Department’s move as a way to bring pressure on Congress to act.

President Obama appeared to tacitly support Comey’s court fight and the idea that there should be limits on criminal suspects’ ability to hide behind encryption. But even as the drive for legislation seemed to be gaining momentum, consensus was dissipating.

Senator Lindsey Graham, an influential Republican, withdrew support in a sudden about-face.

“I was all with you until I actually started getting briefed by the people in the intel community,” Graham told Attorney General Loretta Lynch during a hearing in March. “I’m a person that’s been moved by the arguments of the precedent we set and the damage we may be doing to our own national security.”

On the Democratic side, Senator Ron Wyden vowed to filibuster what he called a “dangerous proposal,” that “would leave Americans more vulnerable to stalkers, identity thieves, foreign hackers and criminals.”

Senator Mark Warner advanced a competing bill to form a commission to study the issue.

A half dozen people familiar with the White House deliberations said they were hamstrung by a long-standing split within the Obama Administration, pitting Comey and the DOJ against technology advisors and other agencies including the Commerce and State Departments.

They also said there was reluctance to take on the tech industry in an election year.

© Thomson Reuters 2016

Tags: Apple, Apple vs FBI, Encryption, FBI, Mobiles, Tablets, iPhones

Lego Sticks to Bricks, Despite Apps, Games and Flicks

Lego Sticks to Bricks, Despite Apps, Games and Flicks

In a low-rise factory on the outskirts of Billund, a small town in western Denmark, robots stand holding trays at the ready as pistons spit out hundreds of pieces of Lego every few seconds.

The plant churns out 100 million of the brightly coloured plastic bricks every day and is set to increase output this year, in line with Lego’s ambitions to dominate the global toy market.

The Danish company could overtake Barbie doll maker Mattel as the world’s biggest toymaker in 2016, analysts say, helped by its push into movie franchises, video games and smartphone applications.

Most of its 25 box-set themes now have some digital content: Nexo Knights, introduced last year for example, comes with an app game.

Yet, while Lego has embraced the digital age as more kids play games on iPads and smartphones, parents who fret their children spend too much time staring at screens shouldn’t worry: online is not the toymaker’s ultimate destination.

Rather, its digital push is aimed at bringing children back to its core product: the Lego brick, first produced in its current form in 1958.

The driving force is extrovert, quirky CEO Jorgen Vig Knudstorp, appointed in 2004, a year after the company flirted with bankruptcy, and the first chief executive from outside the Kristiansen clan, Denmark’s richest family.

He set about reviving Lego’s core business, by firing consultants and hiring new designers to come up with higher-margin products that were up to date but still looked like Lego, an abbreviation of the Danish “leg godt”, meaning “play well”.

The company now has 250 designers and launched 350 products last year.

They included the Lego Dimensions box set, which puts together characters from “Lord of the Rings”, “Batman” and the Lego movie, allowing kids to build portals and vehicles which are transferred to an online game by placing the pieces on an electronic “toy pad”.

Announcing another year of record results last month, Knudstorp, 47, made a celebratory star-jump after Lego overtook My Little Pony producer Hasbro to become the world’s second-largest toy company, with revenues of 36 billion Danish crowns ($5.3 bln).

If the company’s projections for high single-digit revenue growth this year prove correct, it will beat Mattel to take the No. 1 spot, analysts say.

“If you look at the toy market through 50 years, you’ll find there’s always Lego … At the same time we recognise, to stay at the top of the wishlist, we need to do something new and exciting,” Knudstorp said.

“I think that’s how we can continue to, not go fully digital, but leverage the digital technology as a way of making the physical play even more exciting,” he told Reuters from his office packed with box sets and a large model of Darth Vadar’s Lambada spaceship.

Not constrained by reality
Lego argues that some of its digital content is free and can be enjoyed without buying a box set, and so is not even a marketing tool. Rather, children are simply attracted to the “seamless play” between the physical and digital worlds.

“The vast majority (of sales), with a capital ‘V’, comes from bricks,” Chief Financial Officer John Goodwin said.

Stephanie Wissink, a US-based analyst at Pipe Jaffray & Co covering Mattel and Hasbro, said toy companies have had to shift their attitudes to digital play given that many children these days own several digital devices.

“Initially companies went down the path of almost trying to convey to the parents that you’re a bad parent if you let your kid play on a digital device,” she said. Although that stigma has disappeared, the digitalisation is “not replacing a physical play opportunity, it’s complementing it”, she said.

Ricco Rejnholdt Krog, a design director at Lego, says children are brought in weekly to test drive products and twice a year the designers travel around the world testing themes and changes.

“We’re really listening, we’re paying attention to what they say,” he said. Designers made changes to a police station box set after a Chinese child complained there weren’t enough get-away possibilities to make for exciting “cops and robbers” play, he said.

The company is due to start production in China next year, another step in its global expansion.

When asked how big Lego could get, CFO Goodwin said: “We don’t want to be inhibited by realism.”

© Thomson Reuters 2016

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Tags: Apps, Gaming, Home Entertainment, Lego, Lego toys