Technology - Opportunities and Challenges

AI, Web3 and Regulation

Mainframe Industries - Concept Art

Quicksave Interactive \\ Tezotopia Battles

Creative AI: The rapid evolution of creative AI offers intriguing opportunities for Finnish game developers, but its implementation in the game development process remains uncertain. In the short term, AI disruption may not significantly impact core game development processes. However, improving AI tools present competitive challenges for subcontractors, freelancers, and self-employed asset creators. Staying up to date with AI advancements and incorporating them into business strategies and production pipelines can be challenging. In the long run, AI may enable developers to create more complex, high-quality games at lower costs and offer tailored content for individual players.

Web3: By the end of 2022, the initial hype surrounding NFTs, crypto, and Web3 had settled, suggesting their long-term presence in the industry. Engaging players is now seen from more than just a user retention perspective. Players are keen to spend more time and money on online and social platforms, demanding greater engagement and ownership from the games they play-to-earn. Game developers can cater to this demand, for instance, through user-generated content, NFTs, play-to-earn models, or a hybrid of these models. While there are only a few Finnish NFT developers, both Web3 and other forms of user-generated content are seen as intriguing and appealing to Finnish game developers.

Regulatory uncertainty and fragmentation hindering market uptake of novel technologies: Regulation has been a significant aspect of the game business for years. However, with the game industry now facing disruptions in technology (such as AI) and business models (including NFTs, distribution channels, and payment systems), regulatory uncertainty and fragmentation are posing considerable challenges for product development and the creation of sustainable business strategies.

New Markets, Return to PC

Bugbyte - Space Haven

Redhill Games \\ Nine to Five

New market opportunities and challenges: The games-as-a-service model continues to gain popularity. In recent years, the number of new Finnish games published has been decreasing, while the turnovers of Finnish game development studios have been on the rise. This trend indicates that games are lasting longer and are evolving into more service-oriented experiences rather than standalone products. The games-as-a-service model applies not only to mobile free-to-play games but also to premium games on various platforms, such as PC, where games are continually updated and expanded with new downloadable content.

The famous mobile game development country is going PC:
Finnish developers are increasingly targeting the PC platform. According to this study, 64% of the developers are also developing for the PC platform, reflecting a growth of 18 percentage points from our last study.

Emerging cloud gaming and subscription platforms: Cloud gaming and subscription platforms present intriguing opportunities for some game developers, especially as other markets become increasingly saturated. However, the position of game developers in the cloud gaming value chain is often weaker than on other platforms. Game developers may not have access to player data, control over pricing, or the ability to decide how long their game remains available on a platform.

New Platforms and User Generated Content (UGC)

Futureplay - Merge Gardens

HypeHype \\ Concept Art

New platforms: The gaming landscape is evolving as players increasingly engage with various social platforms. This shift encourages game development beyond traditional game platforms and suggests that there could be room for new (social) game platforms. The combination of emerging technologies and monetization models has the potential to challenge the monopolistic positions of established, closed game platforms and distribution channels. However, building a new platform is extremely challenging; new technical tools and business models may not yet exist, and players may be hesitant to trust their credit card details to a new platform or portal. All these factors require time and money, which could be better spent on actual product or service development.

New no-code platforms for user-generated games
: Hyper-casual play-to-earn games introduce user-generated games, transforming players into game developers. Easy-to-use game engines, such as Unreal Editor for Fortnite, empower anyone to create digital content through the low code or no-code movement. This results in a greater diversity of game content than ever before. Nonetheless, operating a profitable games-related business becomes increasingly challenging as competition grows fiercer. Finnish studios like HypeHype and Yahaha are among the pioneers in exploring these opportunities.

New third-party distribution platforms and in-game stores for mobile
: The Digital Markets Act (DMA) is expected to open up closed mobile digital distribution channels for competing third-party application stores and game developer-driven in-game stores in the EU. The first third-party application stores will likely come from major American industry giants, but many Finnish game development studios are also exploring the opportunities of creating their own in-game stores.

Marketing, Monetization & Ecosystem

Dazzle Rocks - Concept Art

Fingersoft \\ Hill Climb Racing 2

After Apple and Google limited UA, traditional brand building, strong IPs, and "know-your-customer" strategies have become essential. Starting in 2020, Apple significantly changed and restricted the use of advertisement identifiers (IDFAs) in marketing. This impacted performance marketing (UA), which had previously facilitated the growth of many game developer studios. Despite these changes, marketing costs continue to soar. Consequently, larger studios rely on well-known IPs and traditional brand marketing, while smaller game developer studios increasingly depend on viral marketing and user-generated content for visibility.

Hybrid monetization is the future
: Mobile, PC and console games are increasingly adopting hybrid monetization strategies, providing players with multiple ways to access content (e.g., free, advertisement, subscription, and micro transactions). Hybrid monetization models are also more likely to adapt to economic downturns, as players search for more affordable gaming options.

Inflation puts pressure on salaries and affects players' purchasing power, resulting in lower incomes for studios. This, in turn, creates pressure to raise prices. Newzoo estimates that mobile gaming spending is more affected by recessions than PC and console gaming. Deloitte also predicts that inflation will push consumers from subscription-based services to advertisement-based services. A global economic downturn means heightened competition for game developers, not only from industry peers but also from social media services and other entertainment options like video-on-demand services.

The success of the Finnish Game Industry is built on a healthy and supportive ecosystem. However, it is concerning that local and national public support for the industry has decreased during the pandemic. Young start-ups need support for growth, and activities like trade missions are crucial for early-stage companies to establish investor and publisher contacts and test their business ideas. When local support is lacking, there is a risk of brain drain, as skilled developers move to more established regions in Finland.