By Jussi Rosendahl
HELSINKI (Reuters) - Hatch Entertainment, a spin-off from the game maker behind the Angry Birds franchise, is testing streaming access to mobile games the way Netflix does for movies or Spotify for music.
The Finnish company that grew out of Rovio believes the gaming industry is ready for flat-fee monthly offers to give players a greater choice of titles and replace the irritating free-at-first, pay-later model that has dominated this decade.
"This is a new way to play mobile games, and at the moment we don't see any direct competition," Hatch Chief Executive and Rovio veteran Juhani Honkala told Reuters.
The streaming model faces scepticism from an industry that currently makes its money per game, charging fees for props or upgrades within games.
"High-quality content is more likely to attract new players than positioning around innovative streaming technology," said Jack Kent, an analyst at IHS Technology.
Spotify makes its debut on the New York stock market next week in a listing that could value the business at $20 billion, but it took the company years to persuade music publishers of the attraction of streaming services over single music purchases.
More than 100 game developers and publishers are ready to give the new business model a try, including SEGA, Square Enix and Bandai Namco, Honkala said, though the beta version has only 10,000 user downloads so far in the Google Play store.
Hatch's platform, which runs on Android phones and is being tested in 18 European countries, has also racked up support from U.S. wireless chip giant Qualcomm and China's Huawei, the world's third-largest smartphone maker.
"We have very strong industry backing," Honkala said.
Rovio is stepping up its investment in Hatch, looking to secure a new revenue stream after a dramatic profit warning sent its share price tumbling by 50 percent last month.
Rovio owns 80 percent of Hatch, which operates as an independent subsidiary.
Smartphone-based games are currently dominated by a free-to-play model that makes money through in-app purchases that help players to progress.
The model rewards games that have become mass-market success stories but makes life challenging for lower-ranked titles and smaller publishers who have trouble getting discovered as players stick to games they know and have invested in.
Rovio itself has struggled in recent years to repeat the success of Angry Birds and has had trouble forecasting future revenue because of heavy marketing costs and increased competition.
Hatch now offers 100 games on its platform and it has signed up about 200 more, including SEGA's Sonic the Hedgehog games, Crazy Taxi and Virtua Tennis. Honkala said the service will pay 70 percent of its revenues to the publishers of its games.
The model would also allow more room for educational or strategy games that have longer narratives, he said, adding that running the service from the cloud rather than locally on the phone should also improve the experience for multiplayer games.
The company does not have a target schedule for formal launch but Honkala said it could happen this year. He declined to say how much the subscription price would be.
(Reporting by Jussi Rosendahl; Editing by Eric Auchard and David Goodman)