angry-birds
Mobile Communications

Finns Adapt to Life after Nokia with Games Tech Boom

When Microsoft agreed to buy the handset business of Finland's Nokia for €5.4bn ($7.2bn) in September, it was a small step towards taking on Apple and Google as a "devices and services" business. However, it delivered a huge blow to the national esteem of Finland, whose people took immense pride in the mobile phone maker. Reactions from ordinary Finns on the streets of Helsinki when I visited the capital recently included shock and disappointment.

Some Finns sense a conspiracy. After all, the deal takes Stephen Elop, Nokia's CEO, back to Microsoft, the company he left in September 2010. And while at Nokia he made a huge commitment to Microsoft’s Windows Phone platform. Suspicion abounded the moment the Microsoft buyout was announced, according to some locals we spoke to. As the Finns say, Ei vanha koira valetta hauku: The old dog does not begin to bark without reason.

Whatever the motive, the outcome was the same. Alf Rehn, chair of management and organisation at Åbo Akademi University, said the emotional impact on Finland was significant.

"It is the end of an era. Finland's image has been bound up in Nokia,” he said. “This will change the mental makeup of the country."

Politicians have tried to exploit the issues, with the True Finns party calling for an inquiry into how a €260bn ($350bn) company could end up being sold for a fraction of the price. It didn’t help that Elop will receive a massive payoff for his questionable tenure.

However, while at one point Nokia accounted for a significant chunk of Finland’s GDP, it is far from the country’s only tech success.

Rovio, maker of the hugely popular Angry Birds app, is one of a handful of companies looking to take over the mantle of Finland’s national treasure. In Helsinki, Angry Birds products are everywhere. Not just the software on people’s phones, but the ‘tat-ware’ – the merchandising. You can buy an Angry Birds keyring in a city-centre shop or choose a giant Angry Birds packet of sweets on sale (for €15 ($20)!) along with Angry Birds stress balls and Angry Birds toys. There’s even an Angry Birds mini-theme park. A spin-off TV series can’t be far away.

Rovio collected €152m ($204m) in revenue for its last financial year, of which a large minority was from merchandising. The profitability is higher in software and media than in handsets, even if there are fewer jobs created. However, those jobs created are generally high-value skilled employment, whereas Nokia created a lot of its jobs in manufacturing. And the difference in wages between a Finnish factory worker and a Chinese one make it unlikely that any global IT player will choose to manufacture in Finland in the future.

The average factory wage in China is $1.36 (according to the Chinese State Administration of Work Safety) while a Finnish worker can expect at least 10 times that amount, according to Eurostat data. In July 780 Nokia workers were laid off at its plant in Salo. Meanwhile, back in the games software industry, Rovio had 28 employees in 2010 but it now has 224.

Rovio’s success has inspired a host of other entrepreneurs, and revenues from the gaming sector countrywide have grown nearly 60% to €165m ($222m) in the past year, according to the Finnish National Centre of Game Business Research and Education.

Grey Area Labs has moved into Rovio’s territory with a smartphone game, Shadow Cities, which uses the player’s immediate surroundings as the backdrop for a battle of wizards. Other bright young companies that have emerged in recent years include Mountain Sheep, Supercell and Grand Cru.

Supercell is mooted as the most successful games developer for the iPhone. In recognition of this, it was awarded $100m to invest by a consortium of shrewd venture capitalists at Index Ventures, Atomico Partners and Institutional Venture Partners.

Grand Cru CEO Markus Pasula has a different philosophy for running a business. If a games project fails, the person behind it is rewarded with a bottle of champagne. The rationale, according to Pasula, is that he’d rather encourage a project to die early on than become an expensive distraction that never takes off. It’s a model that seems in line with the rapid growth and decay of modern technology.

After raising $2m in seed funding last year, Grand Cru won an extra $11million from investors this summer to help take the company forward. One of them was Nokia Growth Partners, the handset maker’s startup accelerator wing.

As traditional sectors like paper and telecoms suffer, Finland’s government is keen to support new industries that bring jobs and growth. Finland is small but its universities and developers are helping it lunch above its weight in the gaming arena. And to forget about Nokia.

VOX POPS

Are ordinary Finns really devastated? We asked a random selection of people in Helsinki and in Nokia’s spiritual home Espoo, where the company has its headquarters.

Majeli, in the Angleterre pub, Helsinki: “Nokia made all kinds of things before the mobile phone industry took off and made them rich. But phone manufacturing is a commodity market now and nobody can compete with the Chinese. At least they grabbed the opportunity while it lasted.”

Jorma, Espoo: “The guy from Microsoft was appointed as CEO. That was the writing on the wall. Now Microsoft has bought the company. Don’t tell me that’s not a coincidence.”

Ali, taxi driver, Espoo: “Helsinki has got very good technology universities so they can produce more whizz-kids.”

Katja Hagelstam, owner, Lokal art gallery, Helsinki: “It was very sad and disappointing. Helsinki is a very creative town.”

Antti, in Henry’s Pub, Helsinki: “Shocked. Disappointed. It was a bit of a blow to our self-esteem.”

Helga, visitor to Lokal art gallery, Helsinki: “We still make nice things.”

Dutch tourist in Henry’s Pub: “There are very few big European technology companies that can compete on a global scale. In Holland we’ve got TomTom but that’s slowing down now.”

Felix Nilsson, Swedish visitor, in Tektor store, Helsinki: “I’m not sure about Nokia. In Sweden everyone uses the iPhone. Stockholm has the highest concentration of iPhone users in the world. All my friends think I’m mad for using a Google Android phone, but it’s a lot cheaper.”

 

Nick Booth worked in IT in the UK’s National Health Service, financial services and The Met Police, witnessing at first hand the disruptive effects of new technology.

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Nick Booth

Nick Booth worked in IT in the UK’s National Health Service, financial services and The Met Police, witnessing at first hand the disruptive effects of new technology. As a journalist and analyst, his mission is to stop history repeating itself.

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