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Supercell reveals latest fiscal figures, defends free-to-play model
Supercell reveals latest fiscal figures, defends free-to-play model
February 12, 2014 | By Mike Rose

February 12, 2014 | By Mike Rose
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    21 comments
More: Smartphone/Tablet, Business/Marketing



We already knew that Clash of Clans studio Supercell was making a lot of money from just two mobile games. Today the company disclosed just how much revenue it has taken over the last fiscal year.

During the 2013 fiscal year, Supercell recorded GAAP revenues of $689 million, and EBITDA (earnings before interest, taxes, depreciation, and amortization) of $322 million. The company noted that it paid approximately $345 million in taxes.

Supercell's Ilkka Paananen noted that these large-scale earnings are allowing the company to plan for the long-term future. "We have the financial security to do so," he added. "So we can think what's best for the players and Supercell."

Paananen also took the opportunity to announce that the company's third game, Boom Beach, will launch next March.

The game soft-launched in Canada and Australia recently, and currently sits at number 5 in the top grossing iPhone charts in both countries. The company is obviously looking to replicate the success it had with Clash of Clans and Hay Day with this new release.

Paananen noted that the company has hired 60 new staffers during 2013. He also added that Supercell does not plan to support the Windows Phone platform, as he says that, "The focus for us is a fundamental value we believe in, and we want to be very focused about the platforms we support."

Defending the free-to-play model

During a press Q&A this morning, Paananen was forced to defend the free-to-play model, and discussed the "whales" that play Supercell games.

As Gamasutra has investigated previously, high-spenders in free-to-play games can find themselves in difficult financial situations, as they struggle to stop themselves spending too much money on games that provide no spending ceiling.

But Paananen said simply, "I think you could say the same thing about every single form of entertainment - it's not healthy to watch movies all day, for example."

He added that Supercell watches over its highest spenders, and has invited many of them to visit the studio's headquarters in Finland.

"It's no secret that some players spend substantial amounts of money on these games," he noted. "But I wouldn't say the vast majority of revenue comes from them. These people usually come from an investment banker or lawyer background, and they spend a lot of money on golf courses and so on. I've asked them 'Why do you spend so much money on these games?' and they say 'People spend money on golf, I spend money on Clash of Clans.'"

He was keen to add that, "It goes without saying that it's not healthy to be just playing mobile games - just like with many other forms of entertainment."


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Comments


Pau Ruiz
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"I think you could say the same thing about every single form of entertainment - it's not healthy to watch movies all day, for example."

Spending money because the game entices people to do so using well-studied psychology is not the same as "watching movies all day".

How can anybody say this with this a straight face? It find the comparison simply disgusting.

Alan Boody
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This is obviously how he convinces himself that whale hunting is ethical.

Jay Anne
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@Paul Ruiz
Lots of common businesses are built around slimy things. Overcharging people for monthly services like cable or phone merely because people aren't aware that they should have gotten a better price. Charging ridiculous prices for printer ink. Using hidden fees to extract more money from people. Receiving kickbacks for packaging in unwanted software in your installer. Receiving kickbacks for pushing unneeded medicines to patients. Creating incredibly disproportionate penalty fees for simple banking mistakes. The list goes on and on and it's as old as time.

Think of it this way: the practices in these games aren't anything new. They're just catching up to the rest of the world.

Shea Rutsatz
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@Jay While I sadly agree with that, it's no excuse! If we can have any influence or say in our industry, we should try our best to not catch up to the rest of the world in this regard.

Jay Anne
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@Shea Rutsatz
I believe the indie scene will largely try to uphold that and that is admirable. But for companies higher up than that who need to be generating large revenue, especially public companies, the fact that they had not caught up was of great concern to their business.

Mark Velthuis
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While he's right that doing anything too much is bad for you, I think it's still unacceptable when the game is in fact designed to manipulate you into playing/paying too much (I haven't played Clash of Clans, so I can't realy say if that game fits into that category).

Still, free to play only sais so much. I think it might be time to split that payment model up into categories that are more specific.

There's the games that are actually completely free.
Then the ones that have adds. (Tho personally I would still consider this to be completely free).
We've got the games where you can buy things that only have an aesthetic value.
Then the games where you can buy things that are more a quality of life thing (like inventory space)
The games where you can buy everything you'll ever need/want in the shop (the so called pay to win)
And the games where they actually put up a wall that basicly prevents you from playing unless you pay.

I think we should not have to defend the payment models of Team Fortress 2 and Path of Exile just because Dungeon Keeper Mobile and Farmville abuse players using a similarly named but in my opinion completely different payment model.

Jay Anne
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I don't see how you can defend TF2 and Path of Exile while condemnjng Clash of Clans. They're doing similar things. Same con, different marks. I also think that many successful businesses are built on unspoken ethical grey areas. Unless your crusade includes shutting down Vegas, I don't see what the ethical dilemma is.

Mark Velthuis
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Like I said, I'm not condemning Clash of Clans since I don't realy know much about this specific game. I compared TF2 and Path of Exile to Dungeon keeper mobile and farmville. I think you'll have a very hard time convincing anyone that these games are in fact doing similar things.

For example, Path of Exile doesn't tell me "you need to play this game tomorrow or some of your investment is lost unless you pay to recover it". Nor does it tell me "You need to wait 24 hours before you can run another dungeon unless you pay".

Jay Anne
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@Mark Velthuis
If harsh penalty methods invoking loss aversion is the only ethical line that must not be crossed, then I respect your opinion. Though I personally feel that is splitting hairs. Because that still all falls under the main broad business model of "creating a highly addictive game that creates pain and then sell an expensive resource that alleviates that pain". To make a fun little analogy, if a taco shop put heroin and ghost peppers on their food and then sold $100 water bottles as their only beverage, most would think that is crossing an ethical line. The fact that you can slowly earn water bottles for free by eating more ghost peppers would not be much comfort to them. But this is what all these games do. Personally, I'm fine with all of it in the same way that I'm fine that gambling is still legal. I believe it's hypocritical to protest any of these games while not protesting legalized gambling. But mainly I find it funny that people want to split hairs and draw seemingly arbitrary ethical lines.

Mark Velthuis
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"creating a highly addictive game that creates pain and then sell an expensive resource that alleviates that pain"

But this is exactly the point. This is something neither Path of Exile, nor TF2 does. Nor do they have certain mechanics built in for the sole purpose of more addiction. Their GUIs aren't cluttered with links to the item shop either. I'm starting to think you've never actually played Path of Exile or TF2, because what you're discribing most certainly doesn't fit these games.

Also I'm not protesting against any of these payment models, I'm merely suggesting we make categories for them so people have a bit more information about what to expect (or more like what is expected from them) when they pick up these games. If they want to play a pay to win game, that's fine with me. That's why gambling is called "gambling" and not "playing games", to warn people about what to expect. And its clear that "Free to play" is not specific enough for people to base their expectations on.

If I'm realy just splitting hairs here, why is it that nobody ever complained about the monetization method in Path of Exile, and that it is in fact an example people often give as "Free to play done right", while on the other hand many are cursing EA for what they did to Dungeon Keeper Mobile ? If you're right, and these are in fact the same things, then why do the people see them differently ?

Jay Anne
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@Mark Velthuis
There are likely many factors causing the Dungeon Keeper backlash to go viral. One, DK is a respected old-school brand with many fans who had expectations of an old-school style game and also had not been exposed to this new world of shadier practices. So it was a surprise to them that one of their favorite brands was now being utilized for an aggressively pinch-heavy mobile game. And that crowd is vehemently against these new business models, because they are largely still spending their video gaming money in traditional ways. Two, EA's existing PR image fanned the flames. Three, there was already the tinder of disliking these practices, but there wasn't a recent scapegoat or poster child to pin them to. When DK's story first got publicized, it quickly became an easy target to lump all that latent pent-up hostility onto it.

I guess if you're ethically okay with a drug dealer as long as they clearly label themselves as a drug dealer, as well as making sure to cut their heroin with enough filler, then that's the way you see it. I personally think a drug dealer is a drug dealer, regardless of how slimy.

Stefan Park
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I have to agree with Mark here. Path of Exile NEVER ONCE made me feel like I had to buy anything. It never prompted me to buy anything. It never put up a wall and said "if you buy this we can make xyz easier". Never, ever, once ever.

Another example is say, Halfbrick's Jetpack Joyride. This falls into the 3rd category as well. In fact, yesterday when I looked at their coin purchases (and I've NEVER felt I needed to buy these), they were actually reasonably priced. The most expensive thing to buy was 1million coins (I think this is enough to buy everything in the game at the start) and that is $64NZ (coins are the only currency). Compare this to say, the gems in Dungeon Keeper at $165NZ for the most expensive pack (which will probably allow you to game for another few days before you have to pay for more), then you can see the vast difference in how these companies operate ethically. Jetpack Joyride has no pay walls. It has no "you must wait a day before you can ride again". I can sit down for 2 minutes or 30 minutes for a game.

As I've stated on many occasions, the main problem I have with these games is MANY of them are DIRECTLY aimed at younger people. Many younger people have little or no concept of what they are spending (watching my 5 year old son play Angry Birds Go was a prime example of this).

Peter Young
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Contrary to popular belief, scheduling mechanics are not rooted in monetization. They are rooted in retention. Sure, it's nice if someone pays to skip the timer, but the first priority for f2p pubs is get you to keep playing. The "investment you lost" from missing the timer is usually just a slap on the wrist.

Both Clash of Clans and Hay Day are worth trying, even for hardcore gamers. The mechanics are thin (don't expect kara cancels and invincibility frames), but the designs and user flows are world-class and worth a look. You absolutely can have fun with both without paying a dime.

Josh ua
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Funny, those scheduling mechanics are the exact reason I quit playing those games. Let me play when I want to.

And Jay, your statement that POE and Clans are basically the same model is waaaaaaaaaaaaaaaay off.

Mark Velthuis
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"I guess if you're ethically okay with a drug dealer as long as they clearly label themselves as a drug dealer, as well as making sure to cut their heroin with enough filler, then that's the way you see it. I personally think a drug dealer is a drug dealer, regardless of how slimy. "

You can keep comparing free to play to worse and worse things, first gambling, now drugs, but that's comparing apples and oranges. Also I live in the netherlands ,we have a very loose drug policy here. I can go into a lot of detail about why this is generaly a good thing, but there's probably better sources and places for that.

The fact is still that not all free to play implementations are alike. And some shape player behaviour in a negative way while others don't. Some are actually free to play while others use it to lure people in hoping to trap them. I believe it's for the benefit of the players and honest developers to make these differences known.

While you're absolutely right that the dungeon keeper backlash is also caused by the expectations of fans and the allready volatile relationship between EA and gamers, but it's definately not the first time people discussed these payment methods. And I think many of the fans actually do have quite a clear view on many of these practices, after all, it's quite hard to be interested in games and not notice games like farmville and candy crush.

The hate for this abuse of a free to play payment model has been there all along. The reason people didn't care as much about these since they are "casual games" they didn't really affect the so called "hardcore gamer", they would just avoid these games. People are upset now because it's again EA, with a beloved franchise that people considered long overdue for a remake, and in allmost the worst possible way ever seen in Free to play games. You could say (to put it in a very corny way) "Things just got personal".

But again, and I can not emphasize this enough, not all implementations of the free to play payment model are equal. And this is something I think puts certain games in a worse light than they deserve, all because other games are doing it wrong.

Leonardo Carucci
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Gambling companies run programs called "Responsible Gaming", where they set limits to gamblers based on spending habits and other parameters. They usually work with external organizations that support gamblers, operate a 24/7 help line etc to deal with addiction etc.

Maybe it's something the social/mobile industry needs to look into?

Julian Cram
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Show well researched scientific evidence that vast numbers of people are losing their houses, life savings, retirement funds and so on on spending on these games, and then maybe the mobile industry will.

Until then, anything "reported" even by a site as reputable as gamasutra is hearsay.

Nicholas Lovell
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The Financial Times says $892 million in revenue and $464 million in EBITDA. You have $689m and $382m. Is the difference GAAP versus non-GAAP? Do you have a link to the report, or was it a conference call?

Mike Rose
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Hey Nicolas, yeah the figures the FT are giving are the non-GAAP. Supercell stuck the non-GAAP figures on the main chart, then hid the GAAP figures away to the side, so many people missed them. We report GAAP over non-GAAP at Gama

Nicholas Lovell
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I'd also be surprised if the company paid $345 million in taxes. That would be more tax than profit before tax, which even the most socialist person would admit is unsustainable.

I suspect the bulk of that tax bill is Capital Gains Tax (or equivalent) paid by the shareholders who exited to Gungho on the difference between the amount they invested and the amount they sold their shares for. I could be wrong, but I think it is likely to be tax paid by "shareholders and the company", not just the company

Tuomas Pirinen
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Finnish media reported widely on this, the tax bill is indeed by the company and its owners/shareholders. That 350M will pay for a lot of hospitals, roads and pensions in Finland!


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