How Finland's games industry is weathering the storm

Despite becoming one of the world’s key games industry hubs over the years - powered by highly successful studios like Clash of Clans developer Supercell - Finland has found itself facing challenging times.

Speaking at Pocket Gamer Connects Helsinki 2024, Neogames Finland director KooPee Hiltunen said, citing 2022 data from the association, that by the end of 2022, total turnover of the Finnish games industry reached €3.2 billion, up from €2.4bn in 2020.

According to Hiltunen, Finland’s games sector ranked among the five largest games hubs in Europe in 2021. During 2021 to 2022, seven M&A deals took place, including Sony’s acquisition of Returnal developer Housemarque.

Overall, that period saw a 12% increase in the number of industry employees, growing by 500.

Years of struggle

But in 2023, as with the rest of the industry, the environment started to change. Hiltunen cited a number of challenges in what he called the ‘years of struggle’ - a period he doesn’t have an end-date for.

• The impact of inflation and decline in consumer purchasing power. The games industry was resilient against COVID-19, but a drop in purchasing power is our kryptonite.
• Mobile Winter. E.g. IDFA has had a dramatic effect to mobile games industry. According to some estimates, 15% to 30% decrease in revenues and higher user acquisition costs.
• Market slowdown reduced financing options. Over-investment during the pandemic, followed by shifts in the operating environment, has resulted in underinvestment in the post-pandemic period.
• General instability, such as geopolitical tensions. First Ukraine, then Palestine. War is bad for business.
• Increased competition. Developing games has never been this easy. Doing game business has never been this hard.

In an article earlier this year on the state of Finland’s mobile games industry, local industry developers and leaders discussed a variety of issues with PocketGamer.biz, also including issues with new immigration policies and a rollback of government incentives in Helsinki.

Consequences

The challenges cited by Hiltunen have had a number of consequences, including mass industry layoffs. Hiltunen noted both positive and negative results:

The bad:

• Globally around 25,000 jobs lost in the games industry between 2023 to 2024. More than ever before.
• Layoffs and reduction of working hours in some companies. Only when nothing else helps.
• Studio closures including some major ones. Way too many examples about this.
• Strategic changes in business of some studios. Pivoting from own IP development to subscontracting. On the latter, he noted that if there are more companies offering subcontracting services than there is demand, that isn't good for anyone.

The good:

• Companies in good financial position are hiring and growing.
• Availability of senior employees is better than before,
• Companies are forced to think about their strategies and apply more systematic approach.
• Number of new startups is increasing. Like always in hard times

On the latter point, Hiltunen said that whenever Finland’s games industry goes through tough times, there are always new studios emerging. He estimated that since 2022, there have been 20 to 25 new studios.

Weathering the storm

Hiltunen discussed how the industry in Finland is weathering the storm, including the impact on senior and junior talent.

• Some studio closures 2023 to 2024, but not “excess mortality” as such. It is quite normal that a certain number of studios shut down even under ordinary circumstances.
• Growth in turnover is back to the pre-pandemic track. 2023 turnover estimated to be better than 2020.
• Layoffs by smaller companies have been mostly covered by big companies hiring new employees. The headcount of the industry is quite steady.
• However, for juniors getting employed it's even harder than before. Some companies have launched new mentor programs.
• The community is still great. Industry associations have stepped up to do their part.
• Sharing is caring. Culture of sharing is still strong in FInland.

Conclusions

Sharing a slightly more positive outlook for the sector, Hiltunen rounded up the session with a few thoughts on the state of play and the future of the sector.

• This is not the first time in history when things have gone south. We have recovered before.
• There is still increasing demand for good games. Demographics are expanding and emerging markets offer new opportunities.
• Changes and disruptions are always also a possibility to small stack players (studios).
• Regulatory changes (like the DMA) might offer a new opening to the value chain.
• New technologies (like AI) might e.g. reduce development costs and allow smaller studios to make bigger games.
• VCs have to start investing at some point. Money doesn’t spend itself.

Perhaps alluding to the ‘survive to 2025’ saying that has swept across the industry this year, Hiltunen closed with “Waiting for 2025? So am I”.