The huge international success of Finnish Rovio and Supercell, and the mega success of various Swedish iGaming companies, has created a real gaming boom in North Europe. Foreign venture capitalists are feverishly looking for the next Scandinavian hits. In only a few years, hundreds of new game companies have sprung up in this region, many of them raising millions in funding. The rapid success of the games sector has also given rise to some misconceptions.
1. The games sector is the new hope for the economy
Of course it is not. Making games does not require large numbers of employees, large factory investments or huge amounts of capital. Supercell for instance, may be a driver of growth in the IT sector, but it is not capable of boosting growth in Finland as a whole.
But success can inspire other industries and bring foreign investment to Scandinavia. Finnish game brands, especially Angry Birds and Clash of Clans, are known worldwide, same as Swedish brands such as Betsson and NetEnt.
Other industries can also learn from the gaming industry’s practices and, for example, how to use customer information in product development. In fact, the games industry is more important intellectually than either euros or numbers of employees would suggest.
iGaming sector is restricted
In both Finland and Sweden, the gambling industry is to some extent, restricted. Uudet kasinot netissä,(FI) nya casinon på nätet (SWE), new online casinos, are facing different obstacles depending slightly on the country. In Sweden, the gambling market was liberalised through a licensing system in 2019, but still today the gambling system is quite strict compared to many other European countries.
In Finland, the situation is even more difficult for gambling businesses, as the entire gambling industry is regulated by the state. Thus, the country has one of the only gambling monopolies in the world.
2. All games companies are growth companies
The games industry is not a homogeneous group of companies in the same situation. Instead, companies can be divided into five categories: established companies, super successful companies, hot startups, indie game studios and young first-timers. Assessing the future of the Scandinavian games sector means looking at the challenges and strengths of all of them.
In recent years, Sweden and Finland have seen the emergence of various hot start-ups founded by game industry veterans and serial entrepreneurs. They have raised millions in funding before releasing their first games, and there are high expectations for them. A few have already achieved good growth. But the tip is narrow.
Many of the new companies are founded by young, relatively inexperienced game makers. The position of provincial game companies making their first games is quite different from that of experienced serial entrepreneurs.
Not all of them have the potential to become growth companies and a large proportion of early stage companies do not survive their first few years. And not all of them even aspire to high growth.
3. Games companies are getting millions from investors
For the best teams, international capital has even been readily available in recent years. The hottest Scandinavian games companies have seen their market capitalisations rise, meaning they have asked a higher price for their shares from investors. But the perception that investor money is pouring into this industry is mostly an illusion.
Young entrepreneurs making their first games live in a different reality from the veteran crowd. In the end, the funding rounds have been relatively modest in size compared to the huge returns that can be generated by a hit.
However, there are now signs that investor interest is leveling off. The next step is to look for proof of concept from the start-ups that have raised funding rounds. And even an experienced team is no guarantee of success.
It is likely that a large proportion of entrepreneurs starting their first company will not survive for many years. That is of course part of the nature of the start-up world. Even if individual companies do not survive, they can be beneficial for the development of the ecosystem.
4. Making games is a quick and easy way to get rich
The mobile games market and the igaming sector in particular are extremely competitive internationally. In the crowded app stores of Apple and Google, it is difficult for any good game to stand out.
Success requires solid gaming and marketing skills, adaptability to rapidly changing business models, a good corporate culture and leadership. Although making blockbuster games is extremely difficult, Scandinavians have done it remarkably well time and time again.
5. The game industry is a bubble
When looking at the success of any industry, it’s important to keep your feet on the ground. You need to be able to critically assess whether there is a real basis for the hype, whether the start-ups are really worth the millions that investors are pouring into them, or whether the industry is building a bubble.
Scandinavian games companies have exceptionally strong expertise in making specialised mobile games by international standards.
One hit game after another has emerged from here. It is therefore no wonder that investors believe that there will be more Rovios, Evolution Gamings, Betssons and Supercells to come. Even if not all of them succeed, the expectations are reasonably realistic.
Please play responsibly. For more information and advice visit https://www.begambleaware.org
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