Clever IPO Strategy, or Jedi Mind Trick?

When it comes to protecting intellectual property, few companies are as aggressive as Star Wars creator Lucasfilm. And for good reason: decades of merchandising revenue have helped give rise to an (ahem) empire worth billions. Series creator George Lucas is personally worth $3.3 billion, Forbes estimates.

Thus, if the Star Wars imagery appears in anything -- especially a promo video -- you know it's with the express permission of Lucasfilm, which wouldn't grant it without expecting a few fat checks to arrive at Skywalker Ranch. And that puts Finland's Rovio Entertainment, creator of the megahit mobile game Angry Birds, in rare company:

Nice, right? Forget for a moment that the game itself could set download records when it goes live on Nov. 8. For investors, the less-thrilling business details are what make this interesting. Lucasfilm and Rovio are also partnering on merchandise, selling a number of themed toys through Toys R Us. (Check out the samples Mashable previewed during the New York opening.)

Brilliant licensing like this illustrates a key difference between Rovio and rivals such as Zynga (Nasdaq: ZNGA  ) , which hasn't done particularly well with generating supplemental merchandising revenue.

A better comparable might be Hasbro (Nasdaq: HAS  ) , which is not only teaming up with Rovio and Lucasfilm to produce the toys based on Angry Birds: Star Wars, but which has a lot of experience extending its brands into other markets, like feature films. Hasbro and Rovio appear to be on a similar path.

And that's important: In May, reports surfaced that Rovio plans a 2013 IPO. Can the Angry Birds creator succeed where Facebook (Nasdaq: FB  ) and Zynga have thus far failed? I like Rovio's chances, if only because merchandising revenue should create a buffer that would prevent a failed game from ruining the profit picture.

Zynga has a much bigger problem. Not only is it embroiled in a patent fight with Electronic Arts, but its customer base -- teens and twentysomethings, mostly -- are fickle users. Can Zynga rev its innovation engine as Rovio cranks its licensing machine? Will it make a difference over the long term?

To answer this question, one of our own star analysts has published a premium report on whether Zynga is a buy right now -- and why. Click here to get your copy instantly.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's web homeportfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Facebook and Hasbro and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook and Hasbro. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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