The Finnishing Touch

To the casual visitor passing through, Scandinavia’s Russian neighbour certainly feels like a quiet and peaceful country.

With only 5.3 million people calling Finland home, the huge expanse of northern Europe is the continent’s second least densely populated country – something apparent as you stroll Helsinki’s hushed, spacious streets.

KooPee Hiltunen, director of Finland’s Neogames organisation, which promotes the nation’s games industry, jokes that the population of his homeland thrive in the silence that other Europeans find so uncomfortable. Despite his jovial tone, there’s certainly a modesty to Finnish culture, and a happily tranquil work ethic that veils a feverishly productive creative sector.

The country is of course the home to mobile phone giant Nokia, and the phenomenally popular game-based social network Habbo Hotel, but its tech industry output doesn’t stop with a duo of high-profile examples.

Finland has a long established tradition of game making, in part thanks to a healthy hobbyist scene. Making rolling demos to showcase technical skill on platforms new and old continues to prove exceedingly popular in Scandinavia, and the festivals and events that celebrate Finland’s ‘demoscene’ output provide a fertile and talented pool of young developers for studios looking to recruit as they expand.

“The games industry has developed fast here in the past ten years,” enthuses Hiltunen. “In 1999 there were only a dozen game companies in Finalnd, or perhaps less than that. Now we have more than 50 companies. This week alone I am meeting with two new start ups, and I have had discussions with seven or eight start-ups already this year, so there’s quite a fast pace here.”

As impressive as that growth may be, Hiltunen’s statistical description is perhaps another example of Finnish modesty and understatement. In fact, the country’s game development industry is now delivering one of the nation’s biggest cultural exports, according to Neogame’s weighty report on the region’s industry in 2008.

With the industry centred in Helsinki, the sales of Finnish-made games are dominated by the export business, which has recently delivered as much as 87 per cent of the sector’s total turnover.

“Our industry is indeed mainly exports, and the reason for that is of course because Finland has quite a small domestic market,” says Hiltunen, who later reveals that in 2007 the Finnish games industry exports reached around €69 million, and €75 million in 2008. “When we talk about our cultural exports, we can say that games are the most significant in Finland, money-wise.”

After an early boom in mobile content, most of Finland’s studios now produce console and PC games, which usually find their way to the US and European markets. While games like Max Payne are among the Scandinavian territory’s most famous exports, Bugbear’s Flatout 2 offers a more typical example of the distribution of the country’s games across the globe. While as few as 14,000 copies of the destructive racer sold domestically, global sales totalled almost one million units, meaning 98.6 per cent of sales took place overseas.

With a healthy export business, and as a home to companies like Helsinki-based Habbo Hotel developer Sulake – valued at $1.25 billion and listed as the ninth most successful digital start-up in the world – it’s clear that Finland is enjoying a boom in game development.

It’s a little less obvious why, but looking a little closer at the culture and industry of the country that bought the world Formula One champions, Moomins and orange-handled scissors, the benefits studios enjoy there is clear. The fact that studio space in Finland costs a quarter of what it does in parts of the US, and that the country is something of a geographical gateway between Asia and Europe, is just the beginning.

“I think the industry here is in fairly good shape,” says CEO and co-founder of Helsinki’s Recoil Games Samuli Syvähuoko. “There are a couple of companies that have had problems, but there’s a closeness here. It’s a small industry, and everybody knows everybody, and we have this monthly meeting where pretty much all the industry in Helsinki goes to a bar and talks everything over.”

However, as the industry in Finland continues to grow, the intimacy Syvähuoko speaks of so warmly will soon be lost, and it will take more than a few drinks at a local bar to fuel the ongoing progress. Thankfully for Recoil and its contemporaries, there’s a steady influx of talent to promote the expansion in the former Russian Grand Duchy, as Syvähuoko explains.

“There’s a very high standard of living around here, and that’s something that has attracted quite a few great employees to join us over the years. I think that it helps that it’s a beautiful country as well, and of course we have great government support too.”

Open streets, friendly inter-studio relations and a high standard of living are all well and good, but Syvähuoko has touched on what many consider the real reason for Finland’s success as an emerging development stronghold. While government tax-breaks of the kind famously enjoyed by Canadian

studios are non-existent, thanks to the work of an organisation known as Tekes, Finnish developers are eligible for various funding benefits paid for by the authorities.

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The country’s traditional manufacturing trades, such as paper production and forestry, have long been on the wane, prompting the government to look to newer industries to bolster a relatively healthy economy. As a result of that thinking, an organisation by the name of Tekes was established by the authorities.

“Tekes is the Finnish funding agency for technology and innovation, and we are essentially Government organisation for research and development in Finland,” says Mari Isbom, Tekes’ senior technology advisor for its software and digital media division. “We work with a number of different companies, and game companies are a big part of that.”

Tekes specialises in promoting the Finnish technology sector’s more forward thinking projects, meaning it can offer selective project funding to many of the nation’s game studios.

”We encourage innovative and risk intensive projects, and we really are very selective,” reveals Isbom. “We don’t take anything either – just the most innovative and newest ideas. Our funds come from a budget at the Ministry of Employment and Economy from the Ministry of Trade and Industry.”

Despite providing low-interest loans and grants for a number of industries distinct from game making, a substantial amount is still available to developers. Tekes boasts a budget in 2009 of almost €600 million, much of which it can put towards assisting the relatively low number of companies designing and creating games in Finland. Tekes is a non-profit organisation, and as such take no equity or IP ownership, and has no sway over decisions that are part of the creative process.

“Innovation is very important to us,” affirms Isbom. “So we look at research and development quite broadly, meaning we can finance game development, and the likes of feasibility studies and market studies. Additionally, we also finance industrial projects as well as research projects at universities, meaning we have a great deal to offer.”

In 2008, Tekes supported almost 2000 projects with a €516 million budget, meaning game companies faced strong competition from other risk intensive technology sectors out to secure financial aid. However, as studios like Housemarque, Digital Chocolate and Secret Exit continue to showcase the capability of Finnish developers and meet with commercial success and critical acclaim, the government is offering increased benefits to an industry deemed to be extremely important to progress in the country.

“Tekes has identified games as a strategically important research and development area and thus one of the key focus areas. Around €10 million were targeted for game companies in 2008 via the Verso programme,” says Isbom.

Verso, towards which Tekes is providing €56 million of a €120 million budget, is a market-orientated initiative specifically designed to boost the success of the country’s software industry by networking both businesses and research internationally. Its description may sound much like the hyperbole of an excited organisational body, but the reality is already proving a number of game companies with support, including Bugbear, which worked on its Bugbear Game Framework development platform within Verso.

In 2007 alone Tekes subsidies covered almost 30 per cent of the research and development investment of game studios in Finland, and 24 of the 45 companies surveyed in 2008 by Neogames indicated that they had received Tekes funding for R&D, exports or both in the two years the study covered.

Along with the Avek digital demo funding programme, support from the Nordic Game organisation, and EU Media Programming financing assistance, Finnish developers enjoy benefits some of their equivalents in other territories could only dream of.

It’s tempting to paint a picture of Finland as a Mecca for developers, untarnished by the problems all too familiar to other countries, but even in this land of promise there are problem areas.

While 40 per cent of Finnish game companies are owned in part by investors, Hiltunen confesses that securing cash in the country isn’t without the problems faced elsewhere: “In Finland it has been very difficult to get the investors for games because it’s still a hit industry, and because we don’t have all the right industry tools.”

“Research and development for games is sometimes hard to explain to the Finnish Government,” adds Isbom. While the brain drain of the 1990s that saw talent leave the country is now a thing of the past, there’s still another problem far more surprising in a country famed for the quality of its forward-thinking education system.

According to Hiltunen, at present in the entire country there are only 100 students studying games. While the impact of games degrees and courses continues to divide industry commentators globally, in Finland the relationship between education and development in something currently in the sights of organisations like Tekes and Neogames, as they sketch out a plan for the future of the industry.

“We should concentrate on games education at the same time as investment in funding,” sates Hiltunen. “Looking at the Quebec model, we can see that it takes many years before investment and funding has a positive effect, but it is something we continue to try for.

“We are trying to develop our environment for game studios so that those companies like where they are and want to stay.”

Put like that, it sounds so simple.

Financial Aid At-A-Glance

Finland’s Neogames has gathered a wealth of information on the financial support available to developers in various countries. Using that information, Develop has taken a look at the benefits of working in a range of locations.

Finland
• Government body Tekes offers grants and loans for game development, R&D and export
• Finnvera offers non-specific loan guarantees
• The Promotion Centre for Audivisial Culture has a small demo fund for games
• The Verso program helps finance tech companies and supports international networking

UK
• Generic R&D tax credits, which Neogames claims typically return four to five percent of development expenditure
• Modest generic export assistance for new exporters
• The government provides around £1.1 million for game R&D and pilot projects

Canada
• Generic R&D tax credits with a return rate 20 to 35 per cent.
• Some smaller grants from the likes of IRAP support R&D
• Famously, Montreal subsidises as much as 35.7 per cent of games companies salaries for five years, while offering loan guarantees, tax credits and income tax holidays

France
• CIJV National games production tax credit can cover 20 per cent of most production costs on qualified games.
• National Video Game Fund funds up to 35% of game prototypes
• R&D tax credits rebate up to five per cent of R&D expenditure
• Smaller grants, loan guarantees and export grants

(The above information was gathered and provided by Neogames)