How Supercell is transforming for its next chapter

Supercell is modernising its culture. Will it lead to bloat or will the famous Finnish developer truly expand?

Supercell's 2023 financial results are set to be unveiled this week. Ahead of the announcement, we're republishing the below analysis on changes at the company following last year's financials and CEO Ilkka Paananen's appraisal of Supercell's recent past and plans for the future. This article was originally published on December 18th, 2023.

The world’s most famous mobile games developer, Supercell, has found itself in a tricky spot.

The Finnish company’s revenue fell by 6% year-over-year in 2022 to a still very healthy €1.77bn. EBITDA, meanwhile, fell by 14% Y/Y to €632m. But the real story is how Supercell has actually faced a decline for many years, perhaps propped up by the pandemic boost many games publishers saw in 2021.

In 2016, Supercell reported revenue of €2.1 billion and €917 million in EBITDA. Each year after that, it saw a decline, dropping to €1.3 billion revenue in 2020 and €407 million EBITDA - still very enviable figures for most publishers. In 2021, there was a significant boost to €1.89 billion revenue and €734 million before dropping back again in 2022.

For comparison, as Supercell noted itself, Newzoo reports player spending in the mobile games market fell by 6.7% overall - but that doesn’t include direct-to-consumer web stores - while mobile market insights specialist Data.ai claims mobile game consumer spend fell by 5% Y/Y.

But however you cut it - Supercell is in decline and has not had a global launch since Brawl Stars on December 12th, 2018. The mobile games market has evolved and its most prolific developer has struggled to do the same.

The next chapter

At the beginning of the year, Supercell CEO Ilkka Paananen published his annual blog post on the state of play at the company. Calling it “The next chapter of Supercell”, the article provided an honest appraisal of the company’s successes and failures, while proposing a manifesto for its future.

The company’s mission to “create great games” remains the same - a dream not unique to Supercell - but its approach was set to change. A company famous for its small ‘cells’ of top talent building the world’s most famous mobile games was now proposing larger teams for live ops, and with it a different approach to the foundations of its multi-billion dollar success.

The key objectives were:

• We always have to figure out how to create ANOTHER great new game. (And IF we do, then make it better!)
• We have to keep making that first live game better every day, week, month, and year…forever.

And, while Paananen admitted Supercell doesn't have all the answers to solve its current challenges, he pointed to some key changes for the company as it looks to adapt to the new landscape:

• “We will improve and expand our internal engine, maybe even to rival third-party engines”
• Exploring other platforms outside of mobile
• Larger live ops teams
• Continued investment in other companies
• Opening up to remote-work and junior employees

So what has Supercell done in 2023 to turn around its fortunes and return to the forefront of mobile innovation and success? While it still hasn’t launched a new game globally, it’s been very busy.

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• Recruitment drive

  

  Supercell has been particularly busy in the recruitment department. At the time of writing, it has at least 23 open vacancies across its offices in Finland, the US, South Korea and China. One of those roles, the senior product manager for the Supercell Store, is specifically open to remote working candidates. It's not a core game production role, but nevertheless shows Supercell is following up on its New Year mission statement.

  A recruitment drive over the past year - just when other developers and publishers are cutting costs and staff - has seen the company grow beyond 500 staff, a landmark which it recently announced through LinkedIn.

  Supercell’s evolving approach to game production is partially shown in their hunt for new lead producers for Clash Royale, mo.co and Brawl Stars. It even pointed out in the job listing that it would be the latter game’s “first-ever” producer.

  Leadership hires

  Other key open roles this year have included live operations and monetisation leads for Clash Royale, Brawl Stars and Hay Day, a monetisation manager for growth, and a live ops manager for live and new games.

  Supercell has already made a number of senior hires, including the expansion of its leadership team. It recruited former Mojang head of games Sara Bach as its head of live games and ex-King CMO Fernanda Romano, meanwhile, has joined as Supercell’s own chief marketing officer.

  In some ways, Supercell is becoming more like a traditional company as it combats its own decline and faces a market reality that has been largely true for years now: mobile games are bigger than they used to be, and they require more investment and larger teams, particularly in live ops.

  It’ll be interesting to see in 2024 how these new layers of management brush up against the cell culture and a company full of would-be CEOs. Will more management stifle Supercell’s creativity and speed, or will it free up its talented teams for bigger bets, more innovation and ultimately better live ops?

  For new games, it's too early to tell. But its expansion is already having an impact on live ops and other areas of the business.

  
  

• New and expanding teams

  

  In just the past year, Supercell has doubled the team size for its flagship game Clash of Clans. The title’s GM Stuart McGaw said the small team size had “become an obstacle”, admitting that players hadn’t been getting the best possible version of the game under the previous self-imposed structure.

  “With this bigger team, we have some ambitious plans for 2024,” he added.

  For the first nine months of 2023, AppMagic data shows Clash of Clans player spending on the App Store and Google Play down 23.9% Y/Y. Current Q4 spending is also tracking significantly lower. Next year will be key in proving if this strategy can provide more lucrative results.

  Builder Base

  Not just expanding its development teams (including those new senior hires and producers), Supercell has stepped up work in other areas too.

  In November 2023, it opened up its Creator Program to more up-and-coming influencers by lowering the threshold to gain access to the initiative. The scheme provides members with game assets, information on updates and new games, and merchandise. It also allows access to the Creator Academy, launched earlier in the year, which provides tips on creating videos and growing a channel.

  The Creator Program is led by Rick Crane, a former YouTube content creator himself, who started leading the new strategy as manager in October 2022 (he previously acted as community manager and player support after joining the company in 2018).

  X marks the spot

  Then there’s Supercell X, focusing on building the player experience for Supercell ID, Supercell Store and Supercell Web. It’s headed up by Aki Saarinen, who joined the Finnish developer in October 2023 after previously working as chief product officer at Mercari.

  The division’s goal? To build a "world-class player experience" with a focus on Supercell ID, the Supercell Store and Supercell Web.

  Supercell ID enables players to keep all their progress on a single account, across devices. This also connects them to the Supercell Store, where players can get special web-based deals on in-game gems, diamonds and season passes. It's part of a ‘direct-to-consumer’ strategy increasingly deployed by the world’s top games publishers to avoid app store fees, generate more revenue and provide better deals for players.

  

  While a web store can’t help grow a player base in a hostile mobile games market - sparked by Apple’s privacy changes with ATT - it can help big publishers like Supercell grow profits by avoiding the 30% revenue share by substantially reducing fees on payment transactions.

  New platforms

  Let’s not forget that the world’s most famous mobile games developer also opened a studio in North America in 2021 to make games for PC and consoles. In the following year, it partnered with Channel37, which is working on an unannounced. PC game. 

  Apple’s privacy changes and Google’s own Privacy Sandbox have seen some mobile publishers flee to other ‘safer’ havens. Paananen noted at the start of the year that while Supercell is known for its mobile games, “perhaps thinking exclusively about mobile is too limiting”.

  “We want to make the best new games, period," he said. "I imagine mobile will remain our most important platform for the foreseeable future, due to its reach, but maybe we need to draw inspiration from everywhere/anywhere innovation is happening.”

  Last but not least, Supercell has an eye on expanding its own internal game engine, “maybe even to rival third-party engines”. It’s a signal that it has eyes on bigger games and potentially making the engine more cross-platform friendly - after all, it has launched Clash of Clans and Clash Royale on Google Play Games beta for Windows PC.

• Supercell’s investments coming to fruition?

  

  Just a few years ago, Supercell’s investments formed a curious and somewhat offbeat strategy. It was hard to see how some of this M&A activity would really grow, with a lot of investment in highly talented teams, but ones that hadn’t really proven themselves at the upper echelons of the top grossing charts.

  It’s not been clean sailing. Shipyard Games didn’t take off after scoring a $2.9 million investment, while Papukaya closed after three years and $3 million in backing.

  Emerging successes?

  But other activity (it now has 15 investments in external companies) looks to be paying off. Supercell acquired a 62% stake in London-based developer Space Ape Games for $55.8 million in May 2017, increasing that to 75% in July 2022 with a further $37 million investment.

  The studio had reasonable success in the past with titles like Samurai Siege, Transformers: Earth Wars and Fastlane: Road to Revenge, but it has broken out with distinctly different titles like music rhythm game Beatstar and (potentially) match-3 release Chrome Valley Customs. These releases came amid the cancellation of Boom Beach Frontlines, based on a Supercell IP.

  These aren't billion-dollar hits, but Space Ape has found its groove after generating $125 million in gross revenue from Beatstar in its first two years.

  Meanwhile, Supercell’s initial €25 million investment in Metacore (formerly Everwear Games, an early adopter of Apple Watch games) has morphed into an absolute beast in the merge genre.

  Merge Mansion’s potential saw Supercell agree a €150 million credit line with Metacore in 2021, such was its faith in the title. According to AppMagic data, that title has now generated $387 million in lifetime gross player spending across the App Store and Google Play. It’ll be interesting how the studio follows up Merge Mansion with Everdale, which it picked up from Supercell after it ended development on the title.

  Then there’s Supercell’s $60 million investment in another London studio, Trailmix, developer of Love & Pies. AppMagic data estimates the title has generated $53.8 million to date from player spending, with 2023 proving to be the game’s best year to date.

  In hindsight, it’s arguable that Supercell could have made a few bigger and better bets. Deconstructor of Fun previously speculated that, in an alternate reality where it was never acquired itself, Supercell might have purchased top companies like Small Giant Games and Gram Games (both bought by Zynga in a much more aggressive M&A growth strategy), and even Peak Games and Playrix.

  It’s still a mixed bag, but there are some payoffs.

  
  

• Game performance

  

  Soft launches

  One of the defining mantras that Supercell is known for is ‘kill your darlings’, often proudly sharing an image of the Supercell graveyard with the names of titles it has cancelled.

  But Supercell hasn’t launched a game in five years - and it’s not for lack of trying.

  It has delved deep into its top franchises over the past few years with match-three puzzler Hay Day Pop, Space Ape’s 9v9 action game Boom Beach Frontlines, match-3 RPG Clash Quest, action RPG Clash Heroes, auto chess title Clash Mini and Squad Busters.

  Out of these, the last three are still in development and it remains to be seen if one of them will be Supercell’s sixth global launch. Clash Mini has been in soft launch for more than two years, recently launching version 2.0, shifting entirely to cosmetic progression in what community manager Vladislav Perge called its "most ambitious update ever".

  As for new IP, Supercell has canned Rush Wars, Everdale (since snapped up by Metacore) and Floodrush, while Mo.co is the latest game to enter beta.

  For other studios, these games might well be hits, but for Supercell, it’s still finding it tough to find its next billion-dollar blockbuster. It’s perhaps too early to see if changes to its structure will have an impact on new games - though much of the focus seems to have been on changing its live ops culture.

  If Supercell is able to release one of these sott launched games globally in 2024 (or something entirely new), a new potential billion-dollar hit is arguably worth the wait.

  Live ops performance

  AppMagic data shows a decline over the years for Supercell’s biggest hits, revealing the scale of Supercell’s task to return its existing games to growth or at least stabilise revenue across its portfolio, and why it has spent the year making changes to how it operates.

  

  As the Clash of Clans team expansion shows, it needs larger teams to offer bigger and better events and keep up with the content churn and player expectations - just like Supercell's rivals are doing.

  Estimates show that between Q1 to Q3 2023, Clash of Clans revenue was down by 23.9%. Meanwhile, Clash Royale player spending declined by 39.1%, Brawl Stars revenue fell by 49.3% and Hay Day dropped 11.4%.

  It’s important to note: Supercell is still on track to make close to $1 billion in gross revenue from App Store and Google Play spending, according to these estimates, while they do not include other revenue streams for Supercell such as web store spending or third-party Android stores in regions like China. Its games remain highly successful and lucrative, having each surpassed $1 billion+ in lifetime revenue.

  But it does reflect the need for change in how Supercell approaches live ops. To this end, 2024 will be a defining year for the company’s new strategy.

• History clashes with the future

  

  A bigger Supercell reflects a changing industry.

  It has already brought together some of the most talented developers and CEOs in the business under one roof, and now with the expansion of its teams and a willingness to hire more juniors, it's adapting to changing needs (which is also great news for the local industry in Finland).

  But 2024 will be the real test. Estimates show a drop in revenue for the year (we'll have to wait until February for the official figures to get a more accurate appraisal), but it'll take time for Supercell's new strategy to really show the fruits of its investments.

  Will all of these changes result in greater revenue and profit? After years of decline (but still one of the most lucrative portfolios in the business), Supercell is modernising and coming to terms that what made the company so successful is not what will make them as successful for another 10 years.

  It used to be that where Supercell goes, the industry follows. Will 2024 see it take the lead again?

  Supercell will be speaking at Pocket Gamer Connects London, which takes place on January 22nd to 23rd. You can register here to gain access to talks like this and more.