GAME DEVELOPER INDEX 2014 BASED ON 2013 ANNUAL REPORTS TABLE OF CONTENTS

EXECUTIVE SUMMARY 2 GLOSSARY 3 PREFACE 4 TURNOVER AND REVENUE 5 NUMBER OF COMPANIES 6 EMPLOYEES 7 GENDER DISTRIBUTION7 TURNOVER PER COMPANY 7 EMPLOYEES PER COMPANY 8 BIGGEST PLAYERS 8 GAME DEVELOPER MAP 9 DISTRIBUTION PATFORMS 10 LOCATION OF COMPANIES 10 YEAR OF REGISTRY 10 ACTUAL REVENUE11 NEW SERVICES, NEW PIRACY 11 CHANGING VALUE CHAINS 11 OUTLOOK 13 INVEST IN GAMES AND GAMING 15 NORDIC GAE SALES 15 GLOBALLY 16 THREATS 17 CONCLUSION 18 METHODOLOGY 18

Cover art: Word Monsters, Raketspel

1 | Game Developer Index 2014 EXECUTIVE SUMMARY

The Game Developer Index charts, reports and analyzes the activities of Swedish game developers, as well as international trends, throughout the year by compiling the annual accounts of the companies.

Swedish game development is an export industry, operating in a highly globalized market. The gaming business has in just a few years grown from a hobby of enthusiasts to a world-wide industry with cultural and economic significance. The Game Developer Index 2013 summarizes the reports of the latest financial year. The summary in brief:

• Revenues of Swedish game developers increased by 76 percent to EUR 752 million in 2013.

• The majority of the companies are profitable and the industry has reported a total profit for five years running.

• Employment increased by 29 per cent, or 567 full time positions, to a total of 2,534 employees.

• The proportion of women increased by 38 percent, compared with 27 percent for men.

• The average annual growth rate (CAGR) 2006-2013 is 39 percent.

• 30 new companies have been added, which, after deducting the companies that have dissolved, amounts to 170 active companies - an increase of 17 percent.

• Game development is a growth industry; more than half of the companies were registered after 2010. The games are often launched directly in an international marketplace, which also results in a global labor market. The largest companies are multicultural and it is not unusual for them to have employees of over 30 different nationalities.

• Swedish game developers are characterized by diversity and quality. has world-leading developers within AAA, digital distribution, social games, mobile games and specialized subcontractors.

Everything points to continued growth for Swedish game development in 2014. The biggest challenges are questions surrounding access to capital, access to competence and laws and regulations that are out of step with the evolution around digital markets.

Game Developer Index 2014 | 2 GLOSSARY

AAA: Popular term for lavish games with a big budget and high staff turnover. adverts, or the option to unlock the full version for a fee. Normally released by the biggest publishers in the business, primarily via physical distribution. In-app purchase: A purchase made in an app or game, rather than externally or through a linked payment system. The goods purchased usually consist of new runs, Alfa: Signifies the phase in software development in which the product is ready for equipment, experience points or subscription services. software testing. Indie: from “independent”. A prefix characterizing games from independent de- Beta: Follows the alpha phase. This is normally the phase available for software velopers, usually of the smaller kind, with few involved in the development process. testing for other than those developing the software. These external users are called Lately, indie represents the stream of developers that have reached a wider audience beta testers. thanks to digital distribution, which has made them financially viable.

Casual games: Games of the simpler kind. Often with a minimal storyline, shorter MARPPU: Monthly Average Revenue Per Paying User. learning curves and designed to be played for a shorter length of time. MARPU: Monthly Average Revenue Per User. Cloud gaming: Also known as gaming on demand. It is a type of online game al- lowing streaming of the game onto the servers of an operator or a gaming company. MAU: Monthly Active Users. This allows for game play without requiring a console or high performance computer, since all processing is carried out elsewhere. Middleware: Software used to develop games. Middleware acts as“glue” between two existing software components. CPM: Cost per mille, cost of a thousand advertisement impressions. Micro transactions: A payment involving smaller sums, carried out online. There Crowdfunding: Financing of a project through crowdsourcing. In recent years this are different definitions of the amount of money they can consist of, but in the has become a popular method through which various web platforms collects their fi- gaming business the term is used to describe payment of for example DLC and in-app nancing support for various projects from interested private individuals or companies. purchases.

Streaming: Direct playback of digital material simultaneously transmitted via the Off-shoring: Outsourcing internationally. internet. On-shoring: Outsourcing within the country’s borders. Crowdsourcing: Outsourcing to an undefined group of people, rather than paid employees. Outsourcing: To hire external personnel and specific competence from other companies. Production tasks for other companies.. DAU: Daily Active Users; the number of unique users per day. Serious games: Games with a principal purpose other than entertainment. It can Digital distribution: Sales of digital software through digital channels. refer to simulators, exercise games, learning games, rehabilitation games or com- mercial games, so called advergames. DLC: Downloadable content; downloadable add-ons for computer games, often on a smaller scale than classic “expansions”. Smartphone: Collective term for cellphones with a large computing capacity, with graphical screens and internet connection. Popular operating systems are Android eCPM: Effective cost per mille; effective cost per thousand ad impressions. and iOS.

Freemium: Collective term for a business model where the a product or service is of- Social games: Collective term for social network games, for example Mobage and fered for free, but where the player has the possibility to unlock advanced functions Facebook. and virtual objects or bypass waiting times, by means of micro transactions. Virtual goods/items: Term referring to virtual objects, such as those existing in Free-to-play/free2play: Games that offer the user to play the game for free computer games in the form of puzzle pieces, weapons or other items. in its basic version, but where the income is instead generated through for example

3 | Game Developer Index 2014 PREFACE THE THREE CHAPTERS OF THE SWEDISH VIDEO GAME BOOM

an anything halt the Swedish game developers? Is In 2014 we are halfway through the third chapter of the Cthere a growth cap? You have to ask these questions Swedish gaming wonder. Today, there are games in almost when turnover has increased more than fivefold between everyone’s pocket, games for cellphones and social media 2010 and 2013. Is there any other industry with have made games a popular entertainment. The new target comparable achievements? groups consist of senior citizens, American housewives, middle aged commuters and many others. The potential The success of Swedish computer games has always been audience number billions and the appetite for games is far driven by new audiences. The first chapter of the gaming from filled. In this market the Swedish game developers are wonder was written in the nineties when multimedia was the among the frontrunners and it is against this background keyword and the Home PC reform placed CD-rom equipped that the improbable achievements can be explained. In a computers in many homes. A professional gaming industry way it is normalization. Everyone plays, we have always established by around 50 developers and six or seven played. Everyone has a connection to games like Monopoly companies all viewing the Swedish and Scandinavian and Go Fish. In cultural history there are known games from audience as their target group. With leading games like Before Christ. Games are a part of our civilization. The most Mulle Meck and Backpacker, the family focus was very started program in Windows is not Word or a web browser, obvious and the publisher Levande Böcker promised parents but Solitaire. Computer games as an exclusive domain of a good conscience and clever kids. Chapter two begins teenage boys is in that sense a closed chapter, the with the launch of Playstation 2 in Sweden, Christmas revolution that has turned games into popular entertainment 2000, when the domestic family games have to compete is a return to a normal state where games are for with big international titles with strong brands, high everybody. production values and more modern technology. Shortly thereafter, the dot com bubble bursts and the access to Unfortunately, not everyone welcomes this development. capital is cut off. The days of multimedia are numbered, but Parts of the audience that have made games into an identity from the ashes a new group of companies emerge. DICE are feeling threatened by others wanting to share the joys have a hit with Battlefield 1942, Massive Entertainment of gaming. There are many accounts of the persecution that is praised for Ground Control, Starbreeze create a series can befall women in certain gaming circles. As an industry, of acclaimed games for and Avalanche release Just we have a big responsibility to work against this kind of Cause. All sell millions of copies, but the players are an attitudes. We want more people gaming and more people international audience consisting of “hardcore gamers” in making games. Luckily there are strong forces against these other words the complete opposite of the family audience stale attitudes. The number of women working in the targeted by the predecessors. The global gamer culture Swedish gaming companies increased by 38 per cent in grows, the Swedish companies have competitive 2013. technology, high quality games and often a personal approach, an attitude that differs from the foreign Stockholm, September 2014 competitors. The target group is a large one with a lot of Per Strömbäck, Spokesperson purchase power. Swedish Games Indistry

Game Developer Index 2014 | 4 ted over 550 new full-time positions, factor for growth, and the answer to TURNOVER AND 25 new companies and the question “Why is Sweden such a REVENUE millions of hours of joy for audiences successful game development nation?” Having doubled its turnover only two all over the world. Employment is as simple as it is complex: in years ago, the industry now grows by increased by 29 per cent and Sweden, world class games are made. close to 80 per cent. This equates to a amounted to 2534 full-time positions turnover of EUR 752 mullion plus the in 2013 – 567 more than in 2012. Growth is primarily driven by a small best year ever for Swedish games The number of women in the trade number of large companies, but that export. Video games are the Swedish increased by 38 per cent, number is growing and all companies entertainment product that the compared with the number of men, as a whole is an equally important part masses come into contact with on which increased by 27 per cent. of the Swedish video game boom. In a daily basis. A tenth of the world’s Average turnover per employee is EUR a summary by the market intelligence living population has at some point 297 thousand. company Superdata Research, the two played a Swedish video game. most profitable games for App Store in Unlike other entertainment industries 2013 were developed in Sweden. The Exponential growth comfortably ex- there is a considerable connection most profitable free game was Kings’ ceeds the twofold increase from 2011 between reviews and good sales puzzle game Candy Crush Saga and and in one year the industry has crea- figures. Quality is the most important the most lucrative premium game was

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5 | Game Developer Index 2014 KEY FIGURES 2013 2012 2011 2010 2009 2008 N:o of Companies 170 (+17%) 145 (+24%) 117 (+10%) 106 (+5%) 101 (-3%) 104 (+14%) Turnover 752M (+76%) 414M (+60%) 257.4M (+96%) 131.2M (+22%) 107.4M (-17% 128.7M (+21%) T.O per Employee 297K (+37%) 210K (+23%) 170.2K (+56%) 109.1K (+12%) 97.4K (+3%) 95.1K (+3%) Profit 285M (+635%) 38M (+164%) 14.2M (+747%) 1.7M (-59%) 4 4.1M (+120%) -20.9M (-1121%) N:o of Employees 2534 (+29%) 1967 (+30%) 1512 (+26%) 1203 (+9,2%) 1102 (-19%) 1353 (+17%) Men 2128 (84%) 1674 (85%) 1300 (86%) 1082 (90%) 993 (90%) 1217 (90%) Women 405 (16%) 293 (15%) 212 (14%) 121 (10%) 109 (10%) 135 (10%)

All numbers in € (see currency explanation on page 18)

Mojang’s pocket version of Minecraft. company develops the graphics engine Result-wise, the industry comfortably Both games dominated their respective Frostbite, which is playing an beats previous records. Profit count segments during the year. Digitally increasingly integrated part in the reaches incomparable heights with a measurable revenues for mobile games releases of the owner , total profit well over EUR 100 million, are estimated at $15 billion in the including those developed by other an increase of over 600 per cent year report. studios. The Battlefield series has sold on year. A reassuring majority of millions of copies and Ghost Studios, companies are profitable. With the above result in mind, it is DICE’s Gothenburg branch, has As previously mentioned, two hardly surprising that Mojang retains developed and released a new companies really stand out: Mojang a strong position among Swedish installment of the prestigious racing has a very high profit margin, just like game developers, and the company series Need for Speed. in previous years, and represents 36 represents 32 per cent of the industry percent of the total result of the turnover, after growth of 37 percent. industry, but King breaks the record King was behind one of the most with UR 150 million, 57 per cent of the remarkable achievements of the year. industry total. The Candy Crush creator has grown significantly and the company reports New this year is that the income a turnover of nearly EUR 200 statement is based on EBT instead of billion, 28 percent of the total industry just profit/loss to show a fairer picture turnover. of the profit and contribution in local and regional taxes. This means a Tarsier Studios remain in a good difference of 27 per cent compared to position as a mid-sized developer, and gross profit. continue to work on exciting concepts. In 2014 their new project Hunger was In 2013, Sweden’s GDP increased announced, receiving backing both by 1.6 per cent (Source: SCB). The from the EU’s Creative Europe average annual growth (CAGR) of the enterprise and Nordic Game. Talawa Games is an example of a gaming industry 2006-2013 is 39 per Alongside their own projects, work thriving studio that has progressed cent. continues on extra content for ’s directly from education to enterprise. major franchise Little Big Planet. They have garnered attention with the game Unmechanical and had revenues NUMBER OF shows strong of EUR 290 thousand in 2013, with progress with 40 per cent growth. ten employees. Massive continues COMPANIES Apart from publishing the titles of other to develop The Division, one of the Swedish game development does not developers, the studio has carved its world’s most eagerly awaited AAA only grow in terms of revenue; 30 own niche, so called grand strategy games under production. The studio is new companies and few bankruptcies games, which have garnered success also working with a new graphics give a total of 170 companies on the by engaging the audience both within engine, Snow Drop, which is market. Among the start-ups, a large and outside the games. premiered in the upcoming game. number of profitable studios can be The Malmoe studio also works with found: MAG Interactive, for instance DICE’s continued success with the Ubisoft’s online portal Uplay and is co- enjoys world-wide success with the Battlefield series is confirmed in the developer of several of the big titles of quiz game Ruzzle. In their latest company’s figures. The studio has the publisher, such as Far Cry. business year they grew over 500 grown by 20 per cent. In addition, the percent and reported a turnover of ne-

Game Developer Index 2014 | 6 BIGGEST PLAYERS Turnover M Euro BIGGEST PLAYERS N:o of Employees 1. Mojang 238 1. DICE 518 2. King 210 2. Massive 241 3. DICE 74 3. King 237 4. Avalanche 27 4. Avalanche 165 5. Paradox Interactive 23 5. G5 Entertainment 140

arly EUR 11 million. Though operatio- Avalanche recruited over 30 new accounting year. G5 also has a large nal since 2012, Rovio’s Swedish studio employees during the year and the proportion of female employees, but results are included in this report of Paradox group increased head count King is the company that has the the first time. It is still not official which by 20. biggest number of female staff. game(s) Rovio Sweden has worked on since its inception in 2012, but it The mobile game developer and In addition to the long term process is clear that the company generated a distributor G5 Entertainment is another of attracting more women to game turnover of EUR 3 million and employs challenger with notably 100 new development, gender equality is just 22 staff. Station Interactive is the new members of staff. But it is the veteran as important in the gaming industry as enterprise from Mattias Nygren, DICE that breaks the industry record it is in society as a whole, because it entrepreneur of the year and with 195 new employees in 2013. means securing the best competence previously CEO of Tarsier. Finally, start-ups employ 147 persons and increasing the target group for the in total. games. Women in the gaming More and more app and PR industry can mainly be found in mid- companies use gaming elements in sized and large companies, and a their products and have to some extent clear challenge is making smaller made pure games. Most of these do companies and start-ups include female not have game development as a game developers from day one, as significant part of their operation and well as enticing more women to start have therefore not been included in the their own companies. report. However, going forward, and as gaming features increase, there is Game development is a young a good chance that more companies business. The games are often working with advergames will be launched directly in an international included in the Game Developer Index. As usual, the number of employees is market, which also creates a global calculated using the average number labor market. The biggest companies For reporting reasons, Game of full-time employees in the are multicultural, and it is not unusual Developer Index only include limited companies’ annual accounts, but there to have employees representing over companies in the selection, but if you are in actual fact a lot more individuals 30 different nationalities. were to count game developers of involved in game development during other types, e. g. partnerships and sole the year. As in most technology focused trades, proprietorships, the number of women need to have more influence, companies would be at least 50 but a wide diversity, also in terms percent higher. GENDER of culture, sexuality and identity, is DISTRIBUTION needed to reflect all parts of society. EMPLOYEES The number of new female employees With an increase of over 28 percent, increased by 38 percent, compared to TURNOVER PER or 567 full-time employees, the 27 percent for males. It is pre- industry employed 2534 persons in dominantly the large companies that COMPANY 2013. King is growing considerably employ an increasing number of The start-up rate has a pronounced ef- and employed 85 new members of women: Stardoll has had a large fect, with an increase of 45 percent in staff in 2013. As usual, it is the existent proportion of women from its outset companies with a turnover of less than large companies that make most new (55 percent in 2013) and the number 100 000 EUR. Simultaneously, the hires. Massive Entertainment and of women in DICE doubled in the last proportion of developers with a

7 | Game Developer Index 2014 TURNOVER PER COMPANY EMPOYEES PER COMPANY

>50>5M:15 miljoner >50>50: 9

>1-5M:>10-50 24miljoner 21-5021-50: 12

>2-10 miljoner >200K-1M: 41 11-2011-20: 16

1-2100K-200K: miljoner 7 5-105-10: 30

<100K: 80 >1 miljon 0-40-4: 100

For convenience, Turnover per Company intervals have been converted by 10 SEK = 1 EUR. For more details on currency conversion, see Methodology turnover of between EUR 1-2 million is The number of companies with 11-50 age points. Mojang’s enormous growth reduced by over 60 percent – a sign employees is growing by 55 per of over 50 million EUR also stands out that they have managed to reach a cent, and in companies with over 50 in the resulting figures. No developer turnover from EUR 200 000-1million or employees, the average number has in the top-five list has a turnover of less more. There are more large increased from 138 to 163. than 20 million EUR - a limit that has companies, with revenues greater been raised by almost six million in than EUR 5 million than ever and they the last year. As usual, it is even on the continue to grow. For more BIGGEST PLAYERS top, with Stardoll and Massive having information about the largest King’s increased turnover of over 150 turnovers of EUR 17 million and 16 companies, see Major Players, p. 7-8. million EUR means that the five largest million respectively. The largest compa- game developers represent 76 percent nies employ 51 percent of all staff, a EMPLOYEES PER of the total turnover of the Swedish number comparable to that of 2011. games industry. Compared to last year, At the same time, more companies COMPANY that is an increase of over 13 percent- edge towards a figure of 100 employees or more.

DISTRIBUTION PLATFORMS PC Console Mobile Online Serious Specialized games subcontractors 35 33%

30 This diagram gives an overview of the distribution platforms that the develop- 25 ers work with, by looking at 21% what the developers have 20 17% recently worked on, and are 15% Middleware: working on at present. A de- 3% 15 veloper can be represented Consulting: in two or more columns if 10% 6% 10 they have focused on several

Tech: different formats. 5% 8% 5

0

Game Developer Index 2014 | 8 GAME DEVELOPER MAP

*STOCKHOLM Good Night Brave Warrior Poppermost Productions LULEÅ IMGNRY International Primus Appus Amagumo Games Velcro Interactive Interactive Productline Arcadelia Quel Solaar King Arcticmill Raketspel LaughLoud Labs Arrowhead Rovio Sweden Liquid Media Avalanche Studios Semionetix MAG Interactive Bajoum SimWay Massive Shapes Spelagon Might and Delight DDM Europe Spelkultur Sverige Modesty Defold Star Stable Entertainment UMEÅ Mojang DeNA Sweden Starbreeze Cassius Creative Movinto Fun DICE Stardoll Coldwood Interactive Mute Industries eMocial Gaming Talawa Games Dohi Sweden Neonode Technologies Ventures Tealbit Ice Concept Studios Nuday Games Expansive Worlds Toadman Interactive Level Eight Oxeye Game Studio Fabrication Games Toca Boca Oryx Simulations Turborilla Paradox Interactive Fatshark Tomorroworld Zordix Paradox North FEO Media Visiontrick Media Pixel Tales Filimundus Xpert Eleven Pixeldiet Entertainment Funrock Media SUNDSVALL PlayCom Game Design G5 Entertainment Corncrow Games Polarbit Goo Technologies Ouch Games

SKÖVDE Mandibol Entertainment FALUN Coffee Stain Studios Mobile Storytelling AE Interactive Studios Coilworks Paradox South Boldai Digimundi Pieces Interactive Deadghost Interactive IC You Piktiv Megafront Immersive Learning Shortfuse Games Tension Graphics BORLÄNGE Stunlock Studios Lockpick Entertainment Tenstar Communisport Ludosity Triolith Entertainment UPPSALA Doctor Entertainment TROLLHÄTTAN Game-Hosting GH Hansoft Palderio LIDKÖPING Imagination Studios SimBin KÖPING MachineGames Sweden LS Entertainment Pikkotekk GOTHENBURG MindArk 1337 & Senri Mindshed * STRÄNGNÄS 1337 Game Design Music Instrument Champ ESKILSTUNA Primus Appus Nornware Craft Animations Daikonsoft EPOS Outbreak Studios NORRKÖPING Free Lunch Design Räven AB Goes International Ghost Senri VIsual Dreams Happsan Sleeper Cell VISBY Hello There Starside Lucid Dreams Image & Form WarmBreeze Studios HELSINGBORG Meow Entertainment Itatake Zoink Frictional Games Storm Potion Legendo Entertainment Zoink Localize Direct Three Gates Pixelbite MOTALA LINKÖPING MALMÖ Mandelform Code Club Chillbro Attribite Massive VÄXJÖ Power Challenge Ayeware Mediocre Mabozo Simplygon Binary Peak Ozma Blastdoor Interactive Planeto Nemoria Entertainment Custom Red ProCloud KARLSHAMN Noumenon Games Color Monkey Redikod 12 O’Clock Studios Redgrim SouthEnd Spelkultur i Malmö ALINGSÅS Coastalbyte Star Vault Dead Shark Triplepunch Station Interactive Illusion Labs Gro Play Imperial Games Studio Swedish Game Development Forgotten Key Leripa Tarsier Studios MUNICIPALITY Employees % of total N:o of companies % of total 1. Stockholm 1599 63 62 36 2. Malmö 307 12 19 11 3. Gothenburg 143 6 24 14 4. Skövde 96 4 15 9 5. Uppsala 132 5 6 3

DISTRIBUTION PLATFORMS LOCATION OF COMPANIES The diversity of Swedish game development continues to Above is a table showing the largest urban regions manifest itself in the relatively high numbers for each format. arranged according to number of employees and number According to prevalent forecasts – as in the rest of the world of companies. The table goes by the sum of the percentage – mobile games continue to increase. Owing to the points and does not take the turnover of the companies into increasing popularity of smartphones a rapid transition account. to mobile development is taking place. At the same time, Sweden remains strong as possibly the world’s foremost In addition to the three big city regions plus Uppsala, personal computer nation, with generally good knowledge likewise Skövde is also a perennial contender. For a few and many owners of computers and – especially – years now, the technical university and the local incubator developers having grown up with PC games and who activities in Skövde have continually brought new compa- continue to create games in the format. nies and talents forth. Karlshamn, another town with far- reaching incubator ventures qualifies for a sixth place. Over half of all companies were registered after 2010. It could not be clearer that Swedish game development is a Although the majority of the employees are located in the growth industry. capital, there are considerably more companies outside Stockholm. Some of the Stockholm companies, such as King and Paradox Interactive also have offices in other places in Sweden. YEAR OF REGISTRY

1995-99 8

2000 6

2001 0 All data is based on

2002 7 registration year for active companies. The company 2003 5 may have been formed and 2004 4 active earlier. Company 2005 5 reorganizations and mergers

2006 11 can result in the demise of an older company, although 2007 12 that company essentially still 2008 13 exists. 2009 12

2010 22

2011 38

2012 22

2013 5

0 5 10 15 20 25 30 35 40

Game Developer Index 2014 | 10 Shelter 2 (in development), Might and Delight

hacking or trademark infringement, not copyright infringement. Some examples are fake websites selling accounts for popular games, hacked user accounts, pirate servers for online games and pure hacking, where credit card details is the intended target. Paid apps for the mobile marketplaces are also affected, but here it entails more traditional file sharing via the established torrent and bitlocker services. Many game developers have testified that the number of logins on their mobile servers is many times higher than the actual number of apps sold, confirming this picture.

CHANGING VALUE CHAINS upcoming The Division create just by Game sales becoming more digital is ACTUAL REVENUE looking at the game developer’s an- a shift that has been happening for a When it comes to Swedish game nual report, since income is number of years. Increasingly, developers there are primarily two apportioned among the operators in companies release games only through major kinds. One is the publisher- the supply chain, and is to some extent digital channels and more games owned companies, for example DICE accounted for in the foreign parent reach the mobile platforms which are (EA) and Massive (Ubisoft). Their company (in this case EA and Ubisoft). reflected in this year’s statistics. But it games have high revenues at the If we roughly calculate the proceeds at is not only about games being sold as consumer level, but belong to a value the consumer stage for, say, Battlefield copies through digital channels, it is chain with several middlemen 3, who reported around 17 million about attracting downloads, installed (retailers, wholesalers, distributors) sold copies in the latest accounts, that games and users that play a game and moreover, are part of international means 17 million multiplied by, for several times. groups with parent companies abroad. simplicity’s sake, EUR 50 - no less than The games from these developers earn EUR 85 million, and more than 10 The Swedish games industry is notable much larger sums than those times greater than the revenues of EUR because many of the most successful appearing in the annual accounts that 70 million that the Swedish limited companies are working with form the basis of this study. Conversely, company reported. completely different business models. Mojang, and King report Some create traditional AAA titles that considerable shares of profits and are sold in both physical copies in revenues in the companies that handle NEW SERVICES, retail and as digital downloads, others the actual development. make more restricted titles for the con- NEW PIRACY ventional consoles, while some make One of the biggest challenges in Digital services are sometimes releases through their own channels illustrating the enormous success of considered having less risk of piracy. on the web or on , and others Swedish game developers is showing Granted, there are naturally benefits wholly occupy the mobile platforms. the actual income from a company’s compared to packaged goods that’s Some games are sold both as a digital sales. In some cases, the majority of a an easy target for unlawful distribution, download and on disc in the stores, company’s activities are included in the through file sharing or pirate copies where the latter is still valuable as a Swedish annual accounts. Mojang is of discs. Digital services can also be physical representation with a stable a good example. It is, however, more subjected to various types of second hand value, as well as the sale difficult to tell what kind of revenues infringement and attempts at illegal of value certificates for digital stores. games such as Battlefield 4 or use, although in most cases it is

11 | Game Developer Index 2014 Mirror’s Edge (in development), DICE

More exclusively packaged collector’s editions of games also keep the prices up and create an added value to an otherwise digital product.

In the mobile corner, the distribution channels App Store and Google Play are the largest. Freemium, free downloads with micro transactions, are well established business models and dominate among the most commercially successful games. The exception is Minecraft and the children’s games market, which have managed economic viability in pure copy sales for mobiles and tablets. These games also stand out in the rapidly changing global market. Only five years ago, the most profitable games were ordinary paid games, but prices sank as a response to piracy the image of the gamer and games as and price demands of the audiences Freemium is the most commercially everyday entertainment. and these days free downloads successful business model for mobile predominate. games and forces the developers to The digital distribution reduces the factor in the question of payment distance between gamer and The shift to digital distribution and free during the design process. Not developer and truly moves the games downloads make other demands on primarily in order to earn as much into the living room, onto the bus, into marketing and business know-how. money as possible, but to determine the pocket. It is a shift just starting to Google and Apple make it easy for the where the real value of the game lies. take place, but something that both developer to publish its own games, You are no longer charging for the gamer and game developer must take but it is difficult to reach out amidst all copy, but for the service, the time or into account. It is about finding the the noise, and the editorship with a the extra material. The challenge is to value in free, in a service or a digital selection process and quality seal, that have enough of a game installed so download. It is also about games that a publisher on a traditional platform a sufficient number of users choose to from day one exist on a global has, is missing. pay for one of the extra steps. marketplace, and there is a lot to be An easily overlooked effect of the desired for in regulations around the Naturally, some publishers exist on the freemium games is their world. As digital sales grow, you can mobile side too, but most games are democratizing element. They offer witness a demand for physical self-published. This brings both positive low thresholds for a curious gamer representations. Collectors’ editions, and negative consequences for both to download and test and play, and merchandise and related accessories developer and player. The developer consequently the audience is help take gaming culture beyond the is more dependent on venture capital widened to include new target groups. screen and perhaps it is an indication and own initiatives to make projects A console or a high performance PC of a future in both digital and tradi- break even, but the development is not necessary to play mobile games. tional channels and more possible process is shorter and the total The most popular games on mobile business models than the free effort less than with games for classic platforms are popular just because they download. platforms. In addition the open market function on relatively simple systems allows more indie developers and and children do not have to depend on smaller companies to publish games the finances of their parents in order to without being slowed down by third play the same games as their friends. parties, and make it easier for more Furthermore, they help normalizing people to create games.

Game Developer Index 2014 | 12 The world’s eyes are on Swedish game Warner Bros are planning a film based OUTLOOK developers: in 2013, American Linden on the game and the In the last three years, the Lab, owner of the marketplace Danish building blocks. Sensationally Swedish games industry has gone from and the alternate reality game Second in 2014 Minecraft became the most strength to strength. Everything points Life, bought the Swedish developer sold PC game in history. to continued growth at least in line with Boldai and its game Blocksworld. The the average annual growth of 30-40 British giant Palringo, who runs the Mojang also continue the project Block per cent. eponymous instant messaging service, by Block, together with UN Habitat, a acquired the developer Free Lunch project which aims to involve young The games industry in Sweden has Design in May 2014. The Gothenburg- people in urban planning by creating started opening up in earnest to the based studio is behind hits such as Icy models in Minecraft. By 2016, 300 world of finance with more companies Tower and will assume responsibility public places in developing nations than ever listed on the stock exchange - for the games when Palringo expands will have been regenerated through the something that used to be an anomaly. its operations. CAD masters Autodesk, project. In addition, work on the server behind tools like Maya and 3ds Max, system Realms has been successful and The introduction of King to the US have bought the graphics engine the new game Scrolls will be released stock exchange was a momentous developer Bitsquid, which nevertheless shortly. occasion, and Starbreeze have moved continues under its own management. their stocks from the Swedish stock Arrowhead are working on two games King had global revenues of EUR exchange AktieTorget to Nasdaq in tandem; Helldivers, and a new 1,3 billion in 2013, a figure that’s OMX. Starbreeze also experienced version of the arcade classic Gauntlet. expected to be higher this year. Over one of the most astounding evolutions Under the banner Rovio Stars, the 100 million individuals play Candy that Sweden’s financial world has ever Finnish mobile giant releases games in Crush Saga daily, and the studio has witnessed, and during a three-month collaboration with talented developers, several new titles in progress. DICE period the share price increased by an example being Raketspel’s Word have advertised two new games that 400 percent. The main reason was the Monsters. are currently under production. One transition from commissioned is the eagerly awaited sequel to the production for foreign publishers to Minecraft has had spectacular success cult classic Mirror’s Edge and the other self-publishing through digital on stationary gaming consoles (Xbox a new issue of the series Star Wars distribution. In June 2012 Starbreeze 360 and Playstation 3). Since the Battlefront. Battlefront was one of the acquired Overkill Software, whose game was released for physical most sold Star Wars games ever and technology and games became the distribution, its success has continued was literally inspired by the Battlefield core of this turnaround. and the game has continually games. When DICE now have appeared on charts all over the world. assumed responsibility for the game, In September 2014 Starbreeze In September 2014 Minecraft was also we have come full circle. That the announced that they had acquired the released on the new generation con- owner, Electronic Arts, allows DICE to American company Geminose, on the soles and Playstation 4. Si- be responsible for Star Wars, a back of which they will open an office multaneously, Mojang have increased gigantic brand in itself, says a lot in the US. the investment in licensed Lego, and about the studio’s abilities.

Smash Hit, Mediocre Stick It to the Man!, Zoink

13 | Game Developer Index 2014 Few people in Sweden are unfamiliar Studios will put the finishing touches to Services such as Kickstarter and with FEO Media’s quiz game Quiz- the AAA game Mad Max in 2015 and Indiegogo, which let anyone co- Clash. In Germany, where it goes by are simultaneously working on their finance for example game projects, the name Quizduell, the concept has first mobile game. continue to be a topic. The fact is that been adapted for a TV show. Quiz- Sweden is one of the world’s most Clash is one of the biggest quiz games Machinegames released their first active countries in terms of crowd in the world, with over 30 game – Wolfenstein: The New Order funding, and this is not in percentage million users. Another great success – in May 2014. A new installment of terms but in actual spending. that has also had TV spinoffs is the the classic game series, that is often Kickstarter published statistics in 2014 word puzzle game Ruzzle by MAG described as the most influential in that showed Sweden in seventh place, Interactive. Ruzzle was released in the genre. The game has been well- with $7.15 million, ahead of 2012 with minimum marketing budget received by critics and was the second countries like Japan, the Netherlands but despite this reached the Top 10 biggest game launch in the UK in and Singapore. The majority of charts in 148 countries. Today, the 2014. It has also been included in the financing still comes from the US, game has been downloaded over 50 top charts of gaming stores around the however, with funding of $336 million. million times. MAG Interactive have world and in the digital marketplace created further games in the Ruzzle Steam. The technical evolution continues series, among others Ruzzle hand-in-hand with the games industry. Adventure. Paradox Interactive have signed The Swedish Home Electronics trade an agreement with the renowned association estimates that around Star Stable Entertainment’s online American game developer Obsidian 250,000 tablets were sold in Sweden horse game Star Stable has, since its to release the studio’s next title, the in December 2013. This is an increase launch in the US, over 3 million role-playing game Pillars of Eternity. of 50 percent compared to the same players in more than 180 countries. The game was created after a very period in 2012. It will be interesting to Image & Form’s platform adventure successful Kickstarter campaign and take not of the new developers yet to SteamWorld Dig received brilliant is a spiritual successor to some of the publish their annual accounts. Among reviews and has been released in more most acclaimed games of all time, the these are Simogo, as a newly listed or less all formats: PC, Xbox One, PS4 so-called Infinity Engine series named company, A Sweet Studio and Mobile and U. Hansoft opened an office after the games’ graphics engine, with Pie. in San Francisco in May 2014; the many of the original creators involved company gains ever more users for ca- in the project. It is sensational that As a crowning glory, Sweden was sual, Facebook and mobile games and a game that a few years ago would voted Europe’s foremost game also has a subsidiary in Japan. Coffee have gone to the major publishers is development nation by the Games Stain Studios attracted a lot of attention now released by a Swedish company, Developers Conference (European around the world when they released and a sign of the influence that State of the Industry Survey). The result the somewhat unexpected title Goat Paradox Interactive has gained among is based on a survey among European Simulator. The game is the result of a the world’s game developers. game developers. so called game jam (playful and time limited game dev event). Avalanche

Escape Dead Island (in development), Fatshark

Game Developer Index 2014 | 14 Runemaster (in development), Paradox Interactive

was snapped up by Facebook for $2 in history. Unlike the PC and mobile INVEST IN GAMES billion. Samsung and Sony, among market, these consoles benefit from a AND GAMING others, are rumored to be working on strong position both physically and The games industry is exciting because similar concepts. digitally. This is exemplified not least it includes many different niches and by sales of Minecraft and Payday cultural expressions. E-Sport is bigger 2 which have been fantastic, both than ever and the potential almost NORDIC GAME SALES online and on disc. Another factor that At the beginning of 2014, The limitless. The total annual prize pool strengthens physical sales is the action Swedish Games Industry published the has increased from $0.6 million in figures that have become popular annual report on Nordic game sales 1999 to $14.8 million in 2013, and it game accessories e.g. Activision’s (Nordic Game Sales 2013). New in is obvious that this is only the Skylanders, Disney Infinity and this year’s report, is the first estimate beginning, something that both Google ’s Amiibo. Physical sales are, of the digital market. Not surprisingly and Amazon have realized. The after all, still the single largest sales with digital sales included it resulted companies both courted the video channel. in the strongest year ever for Nordic network Twitch, known to be a video game sales, with earnings close to EUR service similar to YouTube but focusing 1 billion. The digital market share in on streaming of live material, Sweden is 65 percent, an unusually GLOBALLY particularly e-sport. In the end, high number compared with the digital The market survey company DFC Amazon bought the company at a share in the US which is estimated at Intelligence had to increase their five- price of $970 million. 53 percent (ESA Essential Facts 2014) year forecast for the global gaming As the digital share grows other parts industry for the second time in June Oculus Rift is an accessory akin to of the market are re-physicalized. The 2014. Overall, the industry is expect- glasses that has been developed to new generation of HD consoles have ed to grow from $64 billion to $100 make virtual reality gaming possible. been very successful the world over, billion by 2018, excluding revenues It has meant a renaissance for the especially PlayStation 4, whose launch from hardware. The reason is an slumbering Virtual Reality scene and became the biggest console launch industry growing in all segments,

15 | Game Developer Index 2014 Star Wars Battlefront (in development), DICE

including the physical distribution. The can be seen as a signal of focusing on new games in the existing titles when new console launches are successful, emerging markets. growth has started to diminish. but growth is primarily anticipated in mobile games and within the BRIC Access to statistics for sales of high Micro transactions have played an im- countries. Market share is predicted to performance computer components is portant role in revitalizing markets that be relatively even between PC, console limited, but there is no doubt that have been strongly affected by piracy. and mobile platforms. Mobile games gamers represent a large proportion of The freedom of the payment system has are expected to grow from revenues the hardware trade. been both criticized and lauded, but it of $10 billion in 2013 to $29 billion is obvious that markets such as China in 2018, approximately 30 percent of PwC estimates the global mobile game and are favored by the model. the estimated total. Despite significant turnover to have increased by $15 Russia is expected to overtake growth, the games market for mobile billion globally by 2018 (Global Germany to become the world’s operating systems is likely to remain Entertainment and Media Outlook seventh largest online games market in over-saturated and difficult to 2014-2018), with the US, Japan and 2018. penetrate. China as the driving markets. The increased interest in smartphones The challenge for the console market and tablets is one of the reasons why will be to expand beyond the core mobile games are so successful. users, as Wii managed in the last generation. At the same time, Social games are expected to PlayStation 4 has shown that the stagnate, but remain at a high level. complete opposite attitude can work There is a big interest for the games well, as the console was chiefly but it has proven difficult to monetize marketed to already initiated gamers. them and the target groups. The same The console market has been relatively goes for many casual games for small-scale in the BRIC countries, but cellphones. A challenge is to pinpoint Sony establishing a factory in Brazil the right time to launch and market

Game Developer Index 2014 | 16 must be improved upon. Access to fixed quickly. Dark clouds on the THREATS capital is a fateful subject for new horizon at the time of writing are EU’s Among the threats to and risks of the establishments in many sectors, and VAT directives for digital services, positive evolution of Swedish game video games are no different. It is a which come into force 1 January developers are access to capital and well-known fact that access to capital 2015, and the debate regarding in- human resources. The biggest in Sweden is limited, particularly for app purchases and possible competitors are in countries like the investments between EUR 0,5-5 consequences in the form of new US, Canada, the UK and Finland. million. Access to competence is regulations. Many of these countries have another factor that can hamper the generous subsidies, such as tax continued growth of Swedish game As is obvious most of the threats are breaks, “soft” loans for start-ups and developers. Here, further focus on either of a political nature, or various cash subsidies, aiming to give education and research is needed, but easily remedied by political measures domestic companies an advantage also shorter processing times for work resulting in increased employment and in the international competition. In permits. Long-term, the industry would bigger tax revenues. The companies comparison, bids to make Swedish like to see more investments in pro- are successful but with political intent game companies competitive are very gramming and arts in schools. Finally, the achievements can be bigger and limited. This results in less foreign ven- the digital evolution is longer lasting. ture capital than for example in challenging many established Finland. Digital competition issues, structures, with the double VAT on apps such as different types of infringement in 2011 still fresh in the memory. This (data, copyright and trademark) and type of bureaucratic “bugs” can legal rights in the digital marketplaces appear unexpectedly, and must be

Goat Simulator, Coffee Stain Studios

17 | Game Developer Index 2014 companies active in Sweden but In the instances where annual reports CONCLUSION registered in other countries. This have been unavailable, last year’s The growth of the Swedish games results in a grey area and key figures figures for profit/loss, revenues and export is driven by a growing demand such as revenue and employment are number of employees have been used. from large parts of the world, not least in reality slightly higher than those These companies are: 12 O’Clock because new target groups have come stated in this report. The strength of the Studios, AE Interactive Studios, Defold, about where previously little demand method is that the data is audited and Imagination Studios, Mindshed, Pieces existed. This development shows no published by the authorities. Interactive and Spelkultur i Malmö. signs of subsiding in the near future and the Swedish companies are Examples of developers that are not The annual reports are in SEK, but for keeping up with competition on the included in the report because of their translation purposes the currency has global market superbly. Overall, this corporate form, is Simogo, a studio been converted into Euro. One Euro results in the necessary conditions for that has released Year Walk and a was considered to be worth 8,7 continued growth. number of other commercial and Swedish Krona (SEK), as this was the critically acclaimed hits; Dennaton approximate average exchange rate METHODOLOGY Games, the studio behind Hotline during 2013. This exchange rate was This report is a summary of annual Miami; and Hörberg Productions only used for 2013, however. there- reports from the industry register of the which developed Gunman Clive. fore, numbers and the original percen- Swedish Companies Registration tual growth by SEK may not Office, from companies with game There is also a problem with non- correspond when using Euro. development or specialized game related parent companies, more subcontracting as a major part of their precisely when a company’s game operations. Not included are game development operation is reported in companies focusing on poker, the parent company, which means it gambling or casino games. The cannot correctly be identified for the method has several flaws: corporate Game Developer Index. A problem forms other than limited companies fall shared by the majority of industry outside the scope of the data, as do organizations.

Swedish Games Industry is a partnership Jacob Kroon Dataspelsbranschen Swedish Games Industry between ANGI (Association for the Nordic Games Communication/Analysis Klara norra kyrkog 31, Box 22307 Industry) and Spelplan-ASGD. For more [email protected] SE-104 22 Stockholm information, please visit: www.dataspelsbranschen.se

www.swedishgamesindustry.com. Per Strömbäck www.angi-nordic.com Spokesperson [email protected]

Game Developer Index 2014 | 18