HELSINKI Nov 14 While mobile phone maker Nokia
has hit hard times and looks unlikely to regain its
commanding position in the Finnish economy, nine years ago it
helped feed a newly hatched technology niche in its homeland.
The cellphone giant, which once made more than half the
world's smartphones and 4 percent of Finnish GDP, funded an
award won by Rovio, now one of the world's two leading mobile
gaming firms along with local rival Supercell, which next week
opens a new HQ at former Nokia premises near central Helsinki.
In an industry where many are chasing but few make serious
money, Rovio's Angry Birds game hit the big time with a billion
customers around the world, most of them using smartphones of
Nokia's deadly rivals Apple and Samsung.
Last weekend its new Star Wars version of the birds game
took top spot in global download charts from Supercell, which
had led for weeks with strategic battle game Clash of Clans.
With Nokia expected to report net losses of nearly 5 billion
euros for 2011 and 2012, and its smartphone market share now
below 5 percent, the gaming firms offer promise that Finland
will retain its place at the technology table.
Though they have a long way to go before they fill a
Nokia-sized hole, they could help prevent a brain-drain of
"It's clear that the direct impacts of startups and gaming
firms are not even close to what Nokia still is, let alone what
it was," said Petri Rouvinen, researcher at think-tank ETLA. But
in the long run they are "necessary for structural change" in an
economy, driving entrepreneurship and creating new growth, he
Finland's economic growth is expected to be less than 1
percent in 2012 and little more than 2 percent thereafter, as on
top of Nokia's problems, its other major export, forestry
products, is in decline.
"We don't need a new Nokia, to be totally dependent on one
company. Instead we need a couple of hundred Rovios or
Supercells," said Christoph Thur, founder and chief executive of
small gaming firm Ovelin, one of the first to bet on a rising
trend of apps combining education and entertainment.
Ovelin employs only 12 people, but its guitar-teaching game
WildChords has hit the top spot in music charts in 34 countries,
as app stores give it instant global reach that earlier
generations of startups could only have dreamt of.
Many of the Finnish firms are riding the free-to-play model
that lets gamers try before they buy, making life tough for
physical game product makers such as Electronic Arts,
Activision Blizzard and Take-Two Interactive Software
, whose sales are falling.
Even the most successful of them remain of modest scale.
Rovio employs nearly 500, just a tenth of the people Nokia laid
off over 2011 and 2012 in Finland, where it still employs 6,500.
But Nokia's woes could be a case of creative destruction.
"Nokia employees used to stay with Nokia and avoid risky
ventures, creating an insular bubble of tech expertise that did
not foster startup growth in Finland," said analyst Tero
Kuittinen from mobile analytics firm Alekstra.
"Finland's start-up evolution must now run at an accelerated
rate to mop up IT and marketing experts from the labour pool,"
Marketing experts are a key part of Rovio's success story as
the firm has expanded its one-hit brand beyond games. Last year
it made 30 percent of its annual revenues of $100 million from
merchandising and licensing.
"We have been consistently building Angry Birds as a brand,
much stronger than the game itself," said Petri Jarvilehto,
games chief at Rovio.
Local research firm Neogames forecasts Finnish gaming
software sales of 250 million euros this year, two and a half
times what they were two years earlier, an estimate made before
Supercell revealed its 58 staff generated daily sales of
$500,000 in October.
That kind of growth has made Helsinki the industry hub.
"If you want to make games for tablets and smartphones, this
is the centre of the universe," said Supercell founder Ilkka
It attracts big names like Disney, which last year
bought local startup Rocket Pack, to get access to technology
that enables developers to make games for different platforms,
and French games publisher Ubisoft, which bought
RedLynx gaming studio, known for its Trials driving games.
In September EA opened its own studio focusing on a mobile
version of its hit life-simulation strategy game The Sims, once
the bestselling PC game in history.
"We feel that the talent base in Finland will be a strong
complement to our existing mobile expertise based around the
world," said Lucy Bradshaw, General Manager of EA's Maxis label.
The sector is expected to employ 1,500 people in Finland
this year, up from 1,064 in 2010.
Nokia, which paid just 150 euros to the Finnish tax man last
year, compared with 1.3 billion euros for 2007, in its prime
supported an eco-system of suppliers, which are now suffering.
Electronics company Elcoteq filed for bankruptcy last year
as Nokia turned to cheaper Asian suppliers. Of key suppliers,
casing maker Perlos was bought by Taiwan's Lite-On Technology
Corp, while Digia and Elektrobit
have cut jobs after making losses.
The gaming firms can't turn back that clock, but they might
soon eclipse Nokia in valuation terms.
Alekstra's Kuittinen has valued Rovio at $6-9 billion, based
on expectations of fivefold sales growth this year to $500
million and a 12-18 times multiple. That's only just short of
Nokia's current market capitalisation of nearly $10 billion.