The take-away

• Revenues for the video-game sector in Finland reached €2.5 billion in 2016, vs. only €350 million in 2012.
• With its instant success Angry Birds in 2009, Rovio opened the door for the 250 video-game companies now operating in Finland.

In just one year, no fewer than three Finnish video-game companies have floated on the stock market. KooPee Hiltunen, director of the association Neogames.fi, says it’s a sign of maturity for this fast-growing industry. Revenue for the sector reached €2.5 billion in 2016, versus only €350 million in 2012 and €87 million in 2008. But what are the reasons behind this impressive growth? Industry leaders Rovio and Supercell have played a key role in this Nordic fairy tale.

When Rovio released Angry Birds – a smartphone game that became a worldwide sensation – in 2009, it opened the door for the 250 video-game companies operating in Finland today. Rovio was the first company to transform its product into franchised multimedia entertainment. The release of the Angry Birds animated film in 2016 gave the company another boost, and revenue jumped 35% to €191.7 million. In September, Rovio floated on Nasdaq in Helsinki. Minna Tuominen, head of communications, says the company now wants to get more support for its games and improve its competitive advantage.

 

Sweden and France, focus more on games for computers and consoles. But in this industry, it’s the mobile segment that’s growing the fastest,” says Hiltunen. To give an example, Supercell generated €2.1 billion in revenue in 2016, while the French giant Ubisoft generated €1.46 billion. But Supercell has far fewer employees – 224 versus 11,779 – and only four phone apps, compared with more than a thousand games developed by Ubisoft.

“There are historical reasons for Finland’s domination of the mobile segment,” says Hiltunen. “Near the end of the 1990s, Finnish companies started focusing on games for phones simply because they cost less to develop. Plus, the Finnish company Nokia dominated the world market for mobile phones until 2007. Naturally, it ordered some of its games from Finnish studios.”

Maybe it’s the long winter nights; whatever the reason, this Nordic country has a serious gaming culture. Young people aspire to become game developers or entrepreneurs. Several players in the sector say there’s a real community spirit, with companies more than willing to share experiences with one another. “There’s a lot of talent and a real savoir-faire here,” says Sami Saari, marketing director for the gaming company Fingersoft. “The openness of Finnish players in the industry allows new companies to avoid basic mistakes. This means it’s easier to manage risk and be successful.”

Free-to-Play business model

The sector’s ability to adapt is exceptional. In the early 2010s, the industry quickly transitioned to the Freeto-Play (F2P) model, with free products available for download from the App Store and Google Play. In this system, companies generate revenue by offering gamers a series of in-game purchase options to help them advance more quickly. There’s also an addictive component to the games, where users are tempted to come back often to update their characters, universe, and other game aspects.

“The best example of the transition to the F2P model is definitely Supercell and its Clash of Clans, Hay Day and Clash Royale games,” says Hiltunen. “The revenue generated by the company has helped the Finnish video-game sector move into the big leagues.” The transition has also captured the attention of players in the Asian market. In June 2016, the Chinese internet giant Tencent bought Supercell for $8.6 billion.

But the sector still faces a number of challenges. One pitfall would be for companies to focus all their energies on their most popular games. Fingersoft, founded in 2012, has just 40 employees. Its 2D racing game Hill Climb Racing, in which you drive a small car over hilly terrain, has been downloaded more than 800 million times on various platforms. Still, Fingersoft knows it can’t depend on that game alone. “We have to develop new games,” says Saari.

Making a game that keeps people playing and coming back month after month is one of the key qualities of a successful game. Innovation lies in developing new and entertaining game concepts that have longevity. One of the ways we do this are ‘proto’ days where everyone has the time to prototype their own game idea.” It looks like the company is on pace to achieve record-breaking results for the 2017 financial year.

Hiltunen says that to stay competitive, companies will have to innovate in areas with promising futures, such as blockchain and virtual reality. Another crucial factor is how games are presented in app stores. Rovio’s Tuominen says 800 new games are published on the App Store every day. Get ready… looks like the clans are about to clash!

From hot to vintage in one decade

Nokia’s 3310 mobile phone model was wildly popular in the early 2000s, but when the 152-year-old Finnish multinational failed to jump on the smartphone bandwagon, it had to sell its Devices and Services business to Microsoft in 2013. To make things more dramatic, the same business was sold last year to HMD Global (a Finnish start-up founded by former Nokia executives) and FIH Mobile (a subsidiary of Foxconn, the Taiwanese mobile manufacturer). This partnership has led to a new series of midrange, Android Nokia smartphones and, for sentimental tech geeks, a new edition of the classic Nokia 3310.