Saturday, October 06, 2007

Mindtrek 2007 (5)

The Finnish gaming industry

On Thursday morning there was a session especially for the Dutch delegation (see photograph by Cai Melakoski) on mobile games. The organisers of the trip of the Dutch delegation, Hans Sleurink of Media Update and myself, had requested this special session with the following brief: (a) overview of the state of art of the Finnish gaming industry; (3) a mobile game developer, which turned out to be Nokia; (3) mobile game development for education; the delegation got an encore with a presentation of mobile gaming education.

Mr KooPee Hiltunen started his presentation with a reference to a recent report about the Finnish gaming industry (please register to read the full report). Here is the summary:
From an industry of a few companies in the late 1990s, the industry has, since the mid 2000s, become an integral part of the Finnish content export industry. According to a study published by Neogames in 2006, the growth rate in 2004-2005 measured both by net sales and employment effect was 50%(Publication of the Finnish Gaming Industri, Finnish Game Companies 2006/Neogames). The growth rate for 2006-2007 is, based on this study with a smaller sampling (11 companies), estimated to be approximately 20% in both sectors.
In 2005, the annual net sales of the gaming industry were estimated to be approximately EUR 65 million and involved the employment of approximately 1,000 people. There is no aggregate figure for 2006 but simply in light of this study we have reason to claim that the above mentioned figures grew in 2006 and the growth seems to continue at approximately a 20% rate in 2007.
According to our estimate, the 2006 net sales of the Finnish gaming industry was EUR 70-80 million and involved the employment of 1,200-1,300 people. In a gaming industry culture export report compiled by Neogames for the ministry, the 2012 vision includes the following figures:
- Employment 2,500-3,500 people.
- According to our estimate, this is the structural employment of the gaming industry in Finland. In addition, the Finnish gaming industry is likely to employ approximately 1,000 people in international subcontracting companies. In addition, a considerable number of Finnish gaming industry professionals also work abroad.
- Net sales EUR 500-700 million of which 90% from abroad
- Net value of sales EUR 1.3-1.5 billion. The figure takes into consideration unit sales but not the indirect employment effect of the industry or the skirt industries.
- 50-60 gaming companies. The industry becomes centralised.
- Average company size approximately 50 people (now approximately 10 people).

In an earlier study, the strong development of the Finnish gaming industry was estimated to be based on four factors:
- technological and content know-how of the companies
- excellent price-quality ratio of gaming production
- delivery reliability
- international growth in the mobile entertainment sector.

In light of this study, the above mentioned issues have remained strong competitive factors.

The study also confirmed the finding that the dependency of the Finnish gaming industry on mobile operations is no longer true. For instance Max Payne (Remedy), FlatOut and FlatOut II (Bugbear) and Habbo Hotel (Sulake) prove that the front extends to PC and console games as well. This side also shows signs of new implementations in utilising digital distribution.

Mobile game operators are, however, still strongly represented and in the mobile sector in particular the technological lead gained in the late 1990s seems to be important especially as the number of mobile devices increases and, in order to be successful, a single game must be developed for several hundred different handsets both in the European and US markets.

An interesting growing trend is in handheld devices. Both PSP and to a wider extent DS seem to interest new players. It remains to be seen whether it is possible to build a solid business only on these devices.

So what are the game developers doing, Mr KooPee Hiltunen (see photograph) asked himself. Four years ago 75 percent of the game company employees – many former Nokia employees) - were in mobile games, using Finland with 5,3 million inhabitants as a testing ground stimulated by education and Nokia. But it is no longer mobile anymore. Mobile has become complex due to the fragmentation in handsets. Only big firms can handle the porting to this range of devices. Besides mobile gaming did not get the push from N-Gage as expected. The Nokia effect faded away. Mobile is no longer the entry platform; when needed, companies subcontract porting to big companies as they can build porting production streets for the diversity of mobile phones. Big companies of 160 employees are Digital Chocalate, owned by Trip Hawkins, or Mr Goodliving and Universum. The small companies do the concepting, while subcontracting the technical development.

There are many similarities between Finland and the Netherlands. Both countries have a relative small amount of in inhabitants with Finland 5,3 million people and the Netherlands with 17,2 million inhabitants. Both countries have a minority language. Both countries work cost efficient as the standard costs of living are high. Both markets are small and can be exploited as test markets; so companies have to go global immediately. The Finnish gaming industry is reliable as it is not overpromising or underdelivering.

Blog Posting Number: 886

Tags: games, game industry ,

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