Supercell's Record Year: Crushing It, But At What Cost?

[Music] extra long super sized supercell segment go well this is not mine this is this is extra long em letter from from the uh from the CEO but yeah so in short supercell had a record year and I think everybody is happy because of that I mean supercell is probably the most beloved company in gaming I would say on par with Nintendo so this is from their annual blog post and personally I think it's a gold standard for industry PR so the headline is of course is that supercell broke all the records so 2024 I'm going to quote Ila was the best year for supercell ever among other things our live games hit 300 million monthly active players worldwide for the first time since 2014 all the games grew in Revenue compared to the previous year also we had record year in terms of gross revenue so pretty amazing hit all the records and all the numbers so in terms of the numbers Revenue €2.8 billion which means 77% growth

year-over-year iida grew 78% year-over-year to 876 million EUR which is probably close to a billion and this is super impressive because the market has been struggling as a whole and especially if you look at their last year's shareholder letter blog post ik was talking about how supercells struggled to grow its live games and it caused actually supercell to drop from being the first global mobile game publisher in 2016 and falling outside the top 10 in 2023 and that was kind of like a big wakeup call so now they're back back in the in the top charts and just killing it so what drove the growth is they increased the live Ops Team sizes they made huge investments into marketing that kind of takes away the story which was in previous that 70% of their players are coming from organic sources so no more flexing of that and I found this a really the Brilliance of the

because it's in a way an apple level like they're they're communicating like look we grew by increasing the team size being able to produce more content and by working with Brands and marketing more and of course everybody in the game industry knows this is how it goes like you invest into marketing you invest into the teams you create more content that people like and that's how you grow your games but when supercell says it it's almost like apple says like we in put in like camera into a phone and now it's a camera phone it's like Samsung's like what are you talking about we've been doing that years like and and so this is the same kind of a communication well hold are we going to actually talk about these numbers I don't know Eric I'm trying to get you weighed in I mean they have to report to the Finnish government though they have to at least report high level metrics so we know what their revenue in iida is and their eida looked a lot more sobering than their revenue so costs are way up which I assume is part of the expansion and I would also assume is brawl Stars marketing which we don't know a lot about except from what you just mentioned Mishka

yeah the marketing costs way up should I be less impressed by this Eric well you know I actually the brawl Stars actually looks really bad more now that I look at it from the perspective of like they just spent a [ __ ] ton of money marketing this game to push downloads which helped them in the short term but the revenue is starting to Trail off now and that's brawl Stars which was like the most successful which creates actually a really tough comp potentially for next year right do you want to say the line is brawl Stars profitable do you want to no I was really trying to bait you into it really I think I think brawl stars is very profitable don't get me wrong but the fact is that they are basically finding new religion in terms of spending I mean their spending like doubled in the last two years so it's like that is a lot of [ __ ] money to be spending for them and I think a lot of The Upside is from what these charts look like because this again the revenue is starting to decline pretty

precipitously after they stopped spending don't forget that the squad Busters launch budget is in this so it's not all brawl Stars no yeah and so that's the next thing I I just was trying to isolate bra stars because everyone keeps talking about how successful that game was in terms of like unlocking liveops but I'm sure that was a lot part of it but also was a lot of money being spent on UA that's kind yeah I I think it's a combination you know they did all the liveops changes they probably changed their monetization everyone moves the battle passes from multiple months to one month you know shortening that cycle I think Phil that's that's a u ISM and then clearly on the marketing side supercell is known for a brand and they have slowly been shifting over time to up the UA reduce the brand except for the squad Busters launch which is a whole other topic and you're starting to see you know a little bit more of the scopely Monopoly go Playbook you also are seeing the collaboration playbook in our SL go really funny it's like Mike what is it

Michael Bolton and the Barbarian in Clash Royale are they're doing a collaboration which again the collaborations golf clap chef's kiss are just brilliant from you know the SpongeBobs to the baby sharks to the Michael Bolton like the humor you know it's very on brand for them so anyway all right and then so moving on to Squad Busters right clearly that title is not profitable right like I mean absolutely the amount of amount of dollars that were spent to Market this thing for just to Peter out to basically nothing well did you did what did you think about the clues that were given in the piece where they had ano who's the game lead directly answer question from ilka that this has been asked many times with inside of supercell why did it launch why did it launch why did it launch and it was very similar to what we suspected they had a lot of really positive metrics from their over 120,000 player closed betas their Partners at Apple and Google were very excited about the game and of

course we know why that's important because it suggests that you're going to secure featuring which is something that we covered in squadb Busters one year later been five years since they launched brawl Stars they wanted to get [ __ ] moving they wanted to take a shot on goal like this is a lot of what we wrote they didn't want to be a company that got so sighted up with success that they don't risk failure that was a recurring theme from the letter yeah I I think it was it was brilliant How It Was Written in the blog post they kind of like they covered all these reasons why why they launched and there was a quote from ANA who was used to be the chief game design officer or something like that I think he's now a game lead but the quote was self- launching the game globally and taking more time with it perhaps would have given us indication of the true audience and what they want or perhaps not we will never know and I'm looking at this graph I'm like are you kidding me like no we know we know can we just say that hey we should have probably cooked it a little more like there's no point in in doing this company PR and it was it was interesting kind of see this and I understand

because I was drinking the same Kool-Aid of of launching this game like I remember we did the podcast with Phil like they had this long dry season of not launching since 2018 and they had so much success with brawl stars with just investing into updates and into brand and into liveops that they're like [ __ ] it let's go let's storm the beach biggest launch ever this can't go wrong and I was this kind of reminded me of Kim nordstr book up down up where he talked about hubris that companies have and his quote is the first clue that company has peaked and of course supercell hasn't peaked often comes with Hubers there's a level of arrogance that comes with success a feeling that you are invincible and then you can achieve anything you want and I kind of felt the same way like I was I was thinking that that they can't do anything like look at brawlstar six years old and just crushing it there's no way Squad Busters can't miss and and you know apparently it can all right can we just like leave the poor game

alone I know I'm kind of done yeah I've been convinced by you Mishka over the years about like really starting to read this as a PR piece and I was extremely disappointed in this year's letter it felt defensive to talk about the future I mean it's all been about the next chapter but 80% of the letter is about brawl Stars gloating and defending Squad Busters mistakes which first of all they're entitled to do all that again they don't know us anything but you know you're a company that's about to IPO and the only other thing that I think they really talked about in this letter is spark they're like team psychologist process which I've been hearing some hilarious things about what oh it's oh it's boot camp is it is boot camp It's Hard Knocks for game development I guess is one way to put it yeah the the spark stuff is actually really fascinating so it makes this remark in the blog post kind of saying like yeah launching games is difficult as we've seen other companies struggle kind of like you know know balancing it off and and yes we

know that and then he kind of doubles down on how important it is for a company to develop new games unlike some other companies that just acquire games kind of like a little bit this year yeah it's got a little little Zuck RZ know was coach by the same people it was it was a nice jab towards other companies for acquiring other Studios and and and growing them and so then he goes and talking about this spark model and and he talks about the word startup but this is not a startup so essentially the reason why they have a spark clouds you have to read between the lines he says there's a quote Squad Busters development started in early 2020 based on a cancelled project that started even earlier than that so the reason why they're having spark is because they're really slow at developing new games it takes them years and years in order to get first signals from the market so so they break down they're like okay let's fix how we make new games we've separated them from live games that was a major success we have different team running live games different ones making new games okay how do we make it faster let's bring in people into an incubator

program that's what spark is and I'm going to quote Ila he says we use this time spark program to evaluate the teams and if we feel that the team is as good as the best teams in supercell we Greenlight the team not the game so to me as Phil said this sounds like a really brutal recruitment process for folks coming in to build new games because reality is you kind of leave your job for example you join spark Labs you travel to hink and you start making games and there's like there's these prototypes everything is coming everything should be fluent yes there's a psychologist to help you overcome the stress you're getting this brutal feedback from everybody but at the end of the of this experience just like in pop stars or whatever talent show what might happen is they would say hey Phil you're not good enough so here's your T-shirt here's a plush toy and good luck sir and then that's it and this is life it's a it's a rough School

the spark Labs it sounds fun but it could be probably pretty Soul crushing like I said this is compy that's about to I they need to have their head in the game and focus on like the actual things that should be delivering results which I would have loved to hear more about supercell engine where are you supposed to be huge Advantage North America you know is there is there a heartbeat out there what's going on like I don't know Eric Jen have you have you met someone from the studio like PC games what what's going on where is North America Investments has anyone heard anything about the Investments that used to be a big thing we we had the news now that space a became supercell London and both of the founders have left yes and I new Studios I'm hearing your Chrome Valley Customs getting spin off in their studio so they're kicking off all the games like the beat Stars so the music games goes with the next beat and as you said the puzzle games are getting spun off so I'm kind of like interested of what yeah

what do super London do so essentially it's a co-development studio for Helsinki right cuz like they they have been already working on Boom Beach they're working on Heyday as an external part so it's like if you don't want to move to the cold North you can work out of London yeah this is the only thing I wish we heard more about is things like you know what is the culture like this was supposed to be the huge thing is that it's a super cell and that now you're scaling he hasn't once to my knowledge talked about what the strategy is to maintain what it means to be supercell in the face of scaling like that's the talk I want to hear like I know he gave a talk earlier in the year IL where he mentioned that the company had been effectively split into two live teams and then incubation teams or smaller teams they aren't the first Studio to do that like I mean that was something I heard at scopely a lot you know it's not the first time I've heard this model okay is this the model you're you're doing okay what does it still mean to be supercell in this model I mean again they don't owe us anything but I wish we got a little bit more this year than whatever this was I don't know what this was I think the last part to that that I

find interesting I I just wanted to hear what's your opinion on it like there's a couple of times that Ila kind of brings forward the brand of a World's least powerful CEO and it's a it's a very humble thing to say it's a great read and it's a great way for him to move the spotlight away from him like look he he runs a company that makes gazillion dollars like it's one of the most best companies ever and he's like it's not me it's the team here I get that on the other hand it creates this illusion that he has no input because many times he's like well you know I have no idea why we're grew I had no idea what we do but then there's like other posts where like we as a management team got together and we decided to focus on Clash franchises and took away the resources from brawl stars and then they grew because they had no pressure so of course he makes a lot of decision of course he manages this company and does it extremely well but I'm I'm just curious like how do you read this notion of world's least powerful CEO like that typ brand normal

CEOs never even talk about themselves so that's weird to begin with right does Andrew Wilson or Strauss get up there and be like let me talk about me and how I fit into this no he's selling a culture he's selling a cult though that's not uncommon for those type of CEOs that talk like this okay but the my problem with this whole narrative is that like look metrics are metrics right he knows the metrics everyone knows the metrics they saw what the beta looked like they knew what they were heading into this is not rocket science right it just wasn't ready the game wasn't ready and they have like perfect information right there's no like yeah he wants them to have independent and and creative Authority Etc on the game but metrics are metrics it should have they should have waited but I don't know all right and the marketing costs not mentioned in the blog post but they were in the finished newspaper that was that was interesting