Rovio's Gamble

It's the first weekend of The Angry Birds Movie release, and already the big bet appears to be paying off.

The producers of “The Angry Birds Movie” are taking a page from the unlikely playbook of “Iron Man” and “The Avengers” for their big-screen version of the mobile-game series.

Rovio Entertainment Ltd., the Finnish company behind “Angry Birds,” decided four years ago to take a gamble: Rather than license its characters to a Hollywood studio in exchange for a percentage of the proceeds, it would finance a $73 million movie with its own cash. That means most of the profits or losses from the film will accrue to its bottom line.

The high-risk, high-reward approach is unusual in Hollywood, where even large companies such as Lego A/S and Hasbro Inc. typically rely on studios to finance their films. If widely adopted, however, Rovio’s model—similar to the approach that made “Iron Man” pay off for Marvel—would pose a risk to studios that count on long-term control of franchises to drive their bottom lines. ....

Writing, storyboarding and other development was done in a small Los Angeles office, while other artists contributed from around the world and animation production was handled by Sony Pictures’ Imageworks division in Vancouver, Canada.

The “virtual studio” approach allowed Rovio, like Illumination, to make its movie for less than half of what Disney sometimes spends on its animated pictures, produced by full-time employees. ...

What's going on here, of course, is the Chris Meledandri/Illumination Entertainment model. Like IE, Rovio is setting up pre-production in Los Angeles, where experienced feature board artists reside in abundance, and shipping the production work elsewhere, preferably where a state or foreign government provides bushels of Free Money. (Ain't unfettered capitalism grand?)

For Illumination Entertainment, the Free Money comes from the taxpayers of France. For Rovio and Sony Pictures Animation (the contracting studio) it's Vancouver, British Columbia.

The first weekend of foreign release, The Angry Birds Movie raked in $43 million. If these early box office returns hold up, The Angry Birds Movie will be a hit, and all on a budget of $73 million, within the Illumination Entertainment range.

So we now have two proven business models for making high-grossing animated features: The Pixar, Disney, DreamWorks Animation system where all production, start to finish, is under one roof ... and the Illumination Entertainment/Rovio method where story, storyboards and story reels are created in one place and the actual movie in another.

Call me starry-eyed, but I think the "under one roof" model can be cost-competitive with the "done in multiple locations" model", even without the subsidies. But it would take focus and discipline and a stripping away of frills. I think going forward, we will see both methods in play.