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The State of the Nordic Development Scene

We speak with Nordic developers about the current state of the region's game development scene, focusing on the struggles and strengths of a region known for top-notch games and business challenges.

March 2, 2010

15 Min Read

Author: by Andrew Hayward

Amidst last May's Nordic Game Conference in Malmö, Sweden -- simultaneously a celebration of the local industry and gathering of developers and students -- the last-minute revelation that Avalanche Studios founder and creative director Christofer Sundberg would not deliver his scheduled talk didn't seem particularly ominous. But the news that followed would be the first of many notable negative occurrences to hit independent developers in the region in a span of just a few months.

Sundberg's appearance was canceled in anticipation of further layoffs for the Just Cause developer, which shed 20 employees in May -- a sum that followed a previous release of 77 employees in October 2008, nearly half of the studio's staff at that time.

But while Avalanche soldiered on following the layoffs, other Nordic developers weren't as lucky.

The week after the conference, Deadline Games -- best known for Watchmen: The End is Nigh -- filed for bankruptcy, while August brought about the stunning closure of GRIN, a studio that had recently developed high-profile releases for Ubisoft and Capcom, and was rumored to be working on a Final Fantasy title for Square Enix.

Economic hardship has been a reality for developers of all sizes in recent years, and studio closures certainly aren't limited to the Nordic countries. But between the grim announcements and some concerns noted by developers at last year's conference, it became clear that there was a need to investigate how independent studios in the region perceive how their location and state of the local industry impact their success.

Speaking with several Nordic developers and industry members, Gamasutra discovered disparate viewpoints on some topics, yet many concerns are shared by studios throughout the region.

Nordic Origins

Several notable developers call the Nordic region home -- a Northern European area comprised of Sweden, Denmark, Finland, Norway, and Iceland. This includes publisher-owned studios like EA's DICE and Square Enix's IO Interactive, as well as independents like Remedy, Funcom, Avalanche, Starbreeze, and Redlynx.

While languages and currencies may vary between the member countries, the Nordic countries' governments are linked politically through the Nordic Council, and game developers in the region share a common trade and support group, the Nordic Game Program.

Established in 2006 by the Nordic Ministers of Culture (and supported by all five member countries), the Nordic Game Program was designed to make Nordic-designed games better available to consumers in the region, fund local development, compile and share market data, and create a larger Nordic presence at international trade shows.

Its most recognizable contribution, however, comes in the form of the aforementioned Nordic Game Conference, which takes place each spring. In 2009, it attracted more than 1,200 attendees, as well as international speakers like Grasshopper Manufacture's Goichi Suda and Media Molecule's Alex Evans.

Though the Nordic Game Program's website calls the local video game market the "sixth or seventh largest in the world," the Nordic development scene remains relatively small. According to Jacob Riis, communications director for the program, approximately 240 studios resided in the region in 2008, with about 3,300 individuals involved in game development out of a population of some 25 million people.

Riis says the industry evolved from demo groups hacking Commodore 64 and Amiga games in the 1980s, with studios like IO Interactive and the late Deadline Games emerging from that scene to become legitimate development studios. While the 1990s brought a focus from local developers on children's games and edutainment, it also marked the foundation of companies like Funcom and DICE, the latter of which is responsible for Electronic Arts' Battlefield shooter franchise.

However, Riis believes the last decade has seen a something of a schism develop between larger, established studios, and the smaller start-ups that have sprung up in recent years. "New companies have struggled to grow really large," explains Riis. "Today it seems as if there is a gap between big ones (DICE, IO, Remedy...) and the rest, with not that many medium-sized teams, but [rather] a growing number of small studios and start-ups."

Though the downloadable games market has brought success to some local studios, some in the region believe a lack of proper business understanding has kept many developers from weathering economic hardships and finding long-term success.

Lacking Business Acumen?

"Fragmented, naïve, creative, careful, grassroots, passionate, and doomed," asserts former Deadline Games producer Søren Lund, when asked to describe the state of the local industry. "Well, maybe not doomed, but severely in need of more courage, business acumen, and capital. I think [it's] absolutely right to call it a development scene and not an industry."

Lund produced the aforementioned Watchmen episodic series before the Copenhagen, Denmark-based studio's downfall last May, and was working on an original co-op shooter titled Faith and a .45 that failed to find a publisher. In Lund's opinion, some who aspire to create games in the Nordic region aren't putting enough thought into developing the business behind their passion projects.

"There are many really creative people in the Nordic region who want to create games. The only trouble is that the games industry is still not an established industry here in Scandinavia, even though we have some very successful studios. It's still seen as a hobby [or] plaything among the public and not as a viable long-term career," explains Lund.

"Couple that with a national mentality that is not typically entrepreneurial and risk-taking, and you'll find a region filled with grassroots developers who are running very small businesses on pure passion, [with] little ambition about creating viable, long-living businesses."

"There's been too much of a, 'Let's just make a great game and that will solve all problems' attitude, which is rather naïve," affirms Thomas Puha, founder and creative director of H-Town, which publishes the Finnish multiplatform games magazine Palaaja.

Puha also serves on the Nordic Game Conference board, and has contributed to several international gaming publications over his 13-year career. "I look at a lot of developers here, and the ones that had some smart business people -- and of course, luck -- are still here, but too many have lacked that business acumen that would have kept them going."

Digital distribution and the emerging popularity of downloadable console and handheld titles has emerged as a viable business opportunity in recent years, and several Nordic studios have used this trend to their advantage.

Sweden's Outbreak Studios, which formed in 2007 and previously worked with GRIN on a couple of console and PC releases, now focuses entirely on downloadable games for iPhone and other platforms. "It gets us closer to the end consumer, it is a convenient way to distribute games, and it's easier for us to release updates and provide additional content," says CEO Peter Bjorklund. "It is a win for everyone involved, and it's more environmentally friendly."

Finnish studio Housemarque is another developer that has thrived solely on downloadable games in recent years, though the studio emerged in the mid-1990s developing Amiga and PC titles. Housemarque made a big splash on the PlayStation Network in 2007 with Super Stardust HD, and plans to follow it up this year with twin-stick shooter Dead Nation.

Housemarque's Dead Nation

"Downloads certainly offer opportunities for a smaller studios that didn't exist only a few years ago," explains Ilari Kuittinen, CEO of Housemarque. "We found the opportunity very attractive, as it allowed us to concentrate on core gameplay instead of dividing your focus on building a lot of assets or doing [the] countless different features a typical retail console game requires today."

However, while there have been success stories in the digital space, not everyone we spoke to felt it was a surefire model to build an entire business upon. "Many developers look at the casual space and digital distribution as surefire methods to success, and I'm definitely not so sure about that," says Puha.

"You need a large team to produce HD graphics and content even for a downloadable game these days, so it's getting tougher in that space as well. The iPhone market is very crowded and the bigger players are getting more power and shelf-space in the digital world, just as they did in brick and mortar stores."

Moreover, Lund believes the rush to make smaller games may limit the ambitions of some upstart Nordic studios, and that potential failures will only hurt the others in the industry.

"Since the success of a few indie [developers], it has suddenly become attractive to keep it small, 'unambitious,' and safe. The fact that some alternative distribution channels have emerged that allows for viable smaller revenue business models and new grant initiatives from the Nordic governments means that there are more small development studios trying their luck," he explains. "The negative aspect is that these small companies are extremely vulnerable to the slightest economic hardship. This creates a negative spiral where more companies will shut down causing investors to back off, causing more studios to shut down."

From the Top

One obstacle that frequently came up during these discussions was a lack of significant governmental support for the industry -- notably export assistance, since many Nordic developers make their games for a worldwide audience.

"The lack of proper support that other industries enjoy, such as export assistance and whatnot, prevented Deadline from keeping afloat until a new contract could be secured," asserts Lund.

Avalanche's Christofer Sundberg also sees a "lack of support from the government to start up a new business," while Puha believes Nordic governments are slow to see the necessity of supporting the industry. "Governments are getting better, but still not recognizing the potential and importance of the games industry," he says. "We are working hard on this, but the gears are very slow to turn."

As part of the government-funded Nordic Game Program, Riis sees change on the horizon, but confirms that it's been slow to come. "I would say that during the past years, we have seen a growing interest from the Nordic governments in understanding and figuring out ways of supporting the industry," he says. "The Nordic Game Program is one example, but hopefully we'll see more in the near future."

However, with the six-year Nordic Game Program set to expire at the end of 2011, future governmental support for the industry remains unclear, as Riis says discussions concerning a potential follow-up organization have yet to begin.

Bjorklund noted concerns with the current organization, saying "It is hard to tell what services Nordic Game provides and to whom," but shared with us what he'd ideally like to see from such a program: "What we need is an organization that can help the Nordic developers with financing, media coverage, publisher contacts, and getting students interested in game development, [as well as] make it easier to start a business and alleviate the communication and cooperation between the existing developers."

Difficult Exchanges

While Nordic industry members were quick to point out the advantages of living in the region -- with some noting a high standard of living, free health care and university education, governmental transparency, and lengthy paid vacations -- several monetary issues came up in conversation, including high taxes and poor exchange rates with other countries, which can make it difficult to compete for publisher contracts.

"Recently, an internationally well-known UK developer wanted our help on a project," states Bjorklund, "but due to the bad exchange rates with the pound, they couldn't afford it."

However, due to the distinct currencies circulated in neighboring Nordic countries, economic changes can benefit one country while another struggles. "Swedish companies are more competitive due weakened Swedish kronor, but for other countries -- like Housemarque's home country, Finland, using the strong euro -- the situation is different," says Kuittinen.

"For smaller projects, the effects of exchange rates may not be that great, but when it comes to bigger retail titles, it certainly is a major concern."

Due in part to high taxes, Lund says that higher average salaries of Nordic developers over their United States or United Kingdom counterparts can lead to difficulty in securing international contracts.

"The man-month cost for a studio in the Nordic region is quite often a couple of thousand dollars higher than a comparable U.S. studio," explains Lund. "Developers in the Nordic region need to compete by being smarter and developing smarter than their cheaper-region competitors. The problem is that when you present a budget to a publisher with less man-months or a shorter development period, many will see that they are getting less for their money's worth."

As Matias Myllyrinne, managing director at Remedy Entertainment, so succinctly states it, "Let's face it -- if your competitive advantage is based on price, this is the wrong part of the world to be in."

High taxes also make it difficult for Nordic studios to recruit international talent, and with recent economic troubles, it's also becoming a challenge to retain homegrown developers fresh out of university. "Finding experienced talent is always hard, and as the state of the Nordic development scene is quite tough at the moment, many developers move abroad," says Sundberg.

Bjorklund echoed that sentiment, adding, "In many ways, they have given up hope on the Nordic developers. It is up to us to make sure that we have a sound business strategy going forward, so we can gain that trust back."

And while an increasing number of game development programs are springing up at regional universities, not all developers seemed optimistic about the results. "Although the overall standard of education is among the best in the world, most of the Nordic countries don't have good schools or educational programs that would produce enough talent for the needs of growing game industry here," explained Kuittinen. "We have only 25 million people living here in the region, so the talent pool is limited."

Additionally, Remedy's Myllyrinne lamented the region's lack of a strong foundation in animation. "We don't really have a film industry [like] the West Coast in the United States does, and there is no heritage of animation stemming from that," he says. "Clearly, we have some great local talent and have folks from North America working with us, but as a region this is a bit of systematic/ecosystem issue."

Remedy Entertainment's Alan Wake

Doing More with Less

Securing funding from local investors also proved a consistent complaint, perhaps because as with the regional governments, gaming hasn't seemed a major priority. "Most of the investors have been concentrating on IT and technology, and very few have had any interest in exploring opportunities that investing in games might be offering," says Kuittinen.

But while Puha agrees that funding is tough to come by, he believes it's prepared some developers to better weather economic hardship. "We've never had a lot of capital around here; very little in fact," he says. "So developers are used to not having a lot of money, which is kind of a blessing right now, because we are used to getting by with relatively small budgets."

It's a concept that came through time and again in our conversations -- doing more with less -- and while it may be an economic reality for most, it's one that is referred to with pride by some developers. Despite working far from most publishers and dealing with high taxes, inconsistent funding, and less-than-desired government assistance, local developers strive to be more efficient and productive than those in regions with cheaper labor and tax breaks.

But despite the various concerns about the current state of the Nordic game development industry, there are reasons to remain optimistic. As world markets improve, so should those of the Nordic countries, and as discussed earlier, Nordic governments are moving towards a better understanding of the gaming industry, albeit at a slow pace.

And with this year's Nordic Game Conference expanding into a two-city event -- with Malmö, Sweden being accompanied by nearby Copenhagen, Denmark -- Nordic Game hopes to bring the event to more attendees than ever, and possibly even demonstrate a bit more unity between the neighboring countries.

Perhaps most prominently, a number of high-profile releases from Nordic developers are on the immediate horizon, notably DICE's Battlefield: Bad Company 2, Remedy's Alan Wake, and Avalanche's Just Cause 2, while download-oriented studios like Housemarque and Redlynx hope to replicate their previous success in digital distribution.

And though increased player expectations and less disposable income means hit games can be harder to come by, Remedy's Myllyrinne believes Nordic independent studios that weather the economic turmoil and changes from an evolving industry may be all the better for it.

"We are all more experienced and the technology and resources at our disposal are much richer. The value chain has just expanded, and it opens up all kinds of possibilities -- creative, business model and production-wise," he says. "I think the mature independent studios are well placed to react to the changes, and that in such, there are at least as many opportunities as there are threats."

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