Lofted by the 2009 release of the multimillion-selling Angry Birds smartphone app, Finnish game developer Rovio Entertainment Ltd. saw sales slingshot from $9 million in 2010 to $105 million in 2011. As late as last year, Angry Birds was still flying high, as Rovio recorded $216 million in sales and 800 employees, up from just 24 employees in 2010.
To increase its reach, Rovio partnered with brands as muscular as Star Wars for Angry Birds spinoff games, opened a string of real-world Angry Birds activity parks and plans an Angry Birds animated film for 2016. But all these activities are tied to Angry Birds, and the Finnish phenom hasn’t been able to come up with a similar hit even after five years of trying.
That’s especially a problem now that the gaming world is moving away from the freemium business model that helped Rovio prosper. As a result, the company's profits are plunging, dropping by more than half last year as it flirts with being the business world’s next one-hit wonder.
Knocking (Just) One Out of the Park
One-hit wonders have a rich history in the business world. From Pet Rocks to Cabbage Patch Kids, the annals of commerce are littered with huge hits that the companies which created them were never able to repeat. One of the latest is Silly Bandz from marketer BCP Imports in Toledo, Ohio. The stretchy silicon bracelets decorated tweener wrists everywhere in summer 2010. At the time, CEO Robert Croak talked about reaching $1 billion in sales and fielded questions about an IPO. Today, BCP still sells Silly Bandz—including, coincidentally, an Angry Birds-branded line—but follow-up products like a wristwatch haven't caught on.
Being a one-hit wonder isn't necessarily a bad thing, notes David King, associate professor of management at Iowa State University. Companies like razor-maker Gillette and toy brick-maker Lego have earned decades of global success on what amounts to single products. And many entrepreneurs, King adds, are perfectly happy having one-hit wonders that provide them with enough money to live comfortably for the rest of their lives.
Unfortunately, it’s not uncommon for a one-hit wonder to be the predecessor to disaster. For instance, one of the hottest one-hit wonders came from a startup called World of Wonder (WOW) that had the must-have Christmas toy in 1986: an $80 talking bear named Teddy Ruxpin. WOW rang up $327 million in sales its second year in business, went public and was valued at more than half a billion dollars before knockoffs flooded the market and tastes changed. The company’s follow-up products fell flat, and by 1988, the company was bankrupt and soon disappeared altogether.
In It for the Long Haul
If you’d rather be more like Lego than WOW, King says there are some time-tested techniques you can use to turn a one-hitter into more long-lasting success. Patents, for instance, can be a powerful weapon in the battle against knockoffs. Lego’s strong patents kept competitors at bay for years while it built its franchise, King notes.
Without patent protection, companies have to rely on brand, image, quality and other intangibles that are dependent on a fickle market. That can be harder to control but can still help: Lego’s early patents expired long ago, King says, but it maintains a strong defense against predators by keeping quality high.
Lego has also been outstanding at creating new uses for its single product. The company’s plastic bricks have evolved from simple play toys into what are now seen as powerful educational tools for teaching children about building, engineering and science. “They continue to reinvent ways to put the products together,” King says.
Another valuable tool is partnering with existing brands. The owner of a rapidly rising fad product has something other brands want, King notes, so licensing and other deals are likely to be available. Rovio, Silly Bandz and Lego have all done this, and while it doesn’t appear to make a huge difference on its own, it can help a company survive longer on the business battlefield.
Why One Never Becomes Two
Perhaps the best way for a one-trick pony to prosper in the long run is to acquire a new trick. But that’s not always so easy. Many business owners end up with a hot product largely through luck, King says. Others are overwhelmed by the challenge of managing white-hot growth and fail to diversify, partner or invest in new product development when the opportunity is there.
Business owners may also fail to protect a one-hit wonder because of a lack of organization ability. For instance, smaller companies may not have teams of lawyers who can send cease-and-desist orders to stop knockoffs in their tracks. Other business owners may not follow up adequately due to what amounts to a dearth of imagination. As King says, “Lack of professional management experience [on the part of] entrepreneurs is one reason. A corollary is not envisioning their business beyond one product.”
As is the case with many business challenges, it’s possible to be too overly concerned about diversification as it is to neglect that critical part of your business. Small-business owners, in particular, are often enjoined to “put all their wood behind one arrow.” And while this can certainly work, as Lego’s half-century run with plastic bricks illustrates, it works best when entrepreneurs have patents, tie-in wisely and keep their products relevant despite changing market tastes.
Today, the viral reach of social media probably makes it easier than ever to have a huge one-hit wonder, King says. He points to the Flappy Bird smartphone game that was released by a small, Vietnam-based game developer in 2013 as evidence. At one point, Flappy Bird was the most downloaded game from Apple’s app store and was generating tens of thousands of dollars a day in advertising revenue. “It was instant globalization,” King says.
Especially for digital creations, the ability today to find worldwide markets and instantly supply them with huge quantities has never been matched. At the same time, global exposure means global competition, and that means one-hit wonders have even less time to make the most of their moment in the sun. As King explains, “It’s kind of a double-edged sword.”
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