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With studio numbers up 75%, the Norwegian game scene is booming but it's not without its challenges

With studio numbers up 75%, the Norwegian game scene is booming but it's not without its challenges

This is an article in a regular series of guest columns from Nordic Game Bits.

Jesper Krogh Kristiansen is its Editor-in-Chief.

Produsentforeningen, the Norwegian trade organization representing the game developers of the country, recently merged with the Enterprise Federation of Norway.

This would be of minor interest to outsiders, had it not been for the new extensive report on the Norwegian games industry that the Enterprise Federation of Norway decided to compile.

For the first time, we now have access to several of the key figures of the Norwegian industry in a format that is clearly inspired by the great yearly reports published by Sweden's Dataspelsbranchen and Finland's NeoGames, and, to a lesser extent, the report serving film, TV and games published by Denmark's Producentforeningen.

Boom in developer numbers

The big revelation is just how many new Norwegian developers have entered the market. No less than 60 companies have been formed the past three years, and that is out of a total of just 140 companies in the whole sector.

The graph depicting the number of developers is as steep as the ascend to Mount Everest.

However, this can probably be explained by the fact that almost all of the newly established companies are more indie-inspired, basing themselves on smaller teams, producing smaller, often more experimental titles for PC and mobile platforms, rather than traditional gaming consoles.

The growth in Norwegian game studios 1990-2015

This, however, is not just a reflection of what's in fashion right now. It is also a reflection of the current state of the Norwegian games industry, where there are very few established companies to soak up the new talent entering the business.

"Lots of people are taking an education in game development or similar, but since there are so few jobs, I guess it's natural that some of them form new studios," says Bendik Stang, game director at Oslo-based Snowcastle Games and board member of Produsentforeningen.

Of the 140 Norwegian game developers, 60+ have formed in the past 3 years.

An effect that has also been sped up by the country's single major triple-A developer moving development overseas.

"When Funcom moved much of its production to Montreal, it left some experienced talent in Norway who then started new companies," Stang explains.

This change is reflected in the choice of platform. 35 games were released last year by Norwegian developers - 27 of these were available on mobile platforms.

Revenue trailing

While things are definitely happening in the Norwegian games industry creatively, there are also other metrics that suggest that the one major problem for the developers in Norway is to monetize their products properly.

The Norwegian games industry consists of 565 people, resulting in each employee generating a turnover of about $74,000.

This places Norway far below its local competition. It's $170,000 per employee in Denmark, $288,000 per employee in Sweden and a massive $648,000 per employee in Finland.

An equally interesting number is the one that shows that the growth in total revenue of the Norwegian games industry hasn't tracked the growth in the number of developers.

According to the report, the Norwegian games industry managed a turnover of $42 million (NOK 330 million) in 2014, compared to $36 million (NOK 287 million) in 2012, according to a report published by the Norwegian JoinGame network.

So while the number of developers has grown by 75% over three years, turnover has only grown by approximately 15% (albeit over a slightly shorter period).

However, there is an expectation that turnover will pick up over time, as the newly established developers find their bearings, especially in the extremely competitive mobile market. Another factor is the average development time for a Norwegian title. At just under two years, many of the newly established developers haven't had time to release a game yet.

There are still structural monsters for Norwegian game devs to slay

"Obviously, we would want the turnover to grow in tandem with the increase in the number of developers, or even faster", says Kaja Hench Dyrlie, head of production at the Norwegian Film Institute.

While the number of developers has grown by 75%, turnover has only grown by 15%.

"A lot of developers have had some bad experiences with the mobile market, but hopefully some of the things that are happening now, will give more developers the opportunity to make money."

Investor risk and reward

The report also tries to point out the biggest threats to the continued growth of the Norwegian games industry. And as is the case in Denmark, the biggest issue is the lack of investors.

The report points out how the investors themselves, the financial system, and the public authorities, are all geared towards more traditional investments in oil or real estate.

However, the problem also ties into the current setup of the Norwegian games industry, according to Bendik Stang.

"It's natural that many of the indie startups that are formed by students straight out of school feel like very risky investment cases," he says.

And if that wasn't enough, the inherent characteristics of the games industry make it scary and unpredictable for investors who are used to more traditional business models.

"The video game industry is an ever-mutating monster that even developers and publishers have hard time keeping up with. So I think many investors simply don't understand the market and decide to avoid investing," Stang says.

According to Stang, a good start would be an innovation and tech-oriented funding system akin to Finland's very successful Tekes program. That would automatically lower the risk for the private investor dramatically.

"If the Norwegian government could form something like Tekes in Finland where the government match the private funds, then it might lower the risk enough for some investors to consider indie games," he ends.

Nordic Game Bits is the leading games industry news media for the Nordic countries, acting as a hub for everyone interested in the Nordic game development scene.

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Daniel Kromand
Small typo in the text:
"$288,000 per employee in Sweden and a massive $648,000 per employee in Sweden." I'm guessing the latter should be Finland...
jon jordan
Thanks - corrected