Mobile gaming is killing the traditional PC and game console markets. Traditional industry giants are scrambling to adapt to the new paradigm while a whole new industry blooms under their noses. And the new talent is coming from some unexpected places.
Meet the ruling class
The largest game revenue haul on Apple (NASDAQ:AAPL) iOS devices in March came from relative newcomer Supercell's Clash of Clans and Hay Day apps, according to app popularity tracker App Annie. Angry Birds developer Rovio ruled the monthly download chart in the Google (NASDAQ:GOOGL) Play app store for Android systems -- and ranked second on the iOS download list. Mini-game and camera app maker Fingersoft came in fourth among Android downloads.
What do these game publishers have in common? Well, they're obviously red-hot, they were all founded in the past 10 years (and some much later than that) -- and they're all from Finland.
That's hardly the first country that rolls off the tongue when you're looking for dominant gaming businesses. With just 5.4 million citizens, Finland is about the size of Minnesota. Yet this tiny nation crushed all comers in the mobile download and revenue sweepstakes, save for all-American veteran Electronic Arts, which snagged the crown in the iOS app volume race. The revenue charts for Android games are swamped with Japanese and South Korean publishers, thanks to the local tendency to love gambling-style entertainment. Locally produced Android handsets seem to be the preferred platform for this experience, short of old-school pachinko machines.
What's the secret sauce?
Can we pin this fantastic performance on the fact that Finnish company Nokia (NYSE:NOK) ruled the mobile world in the first decade of widespread cell-phone use? While Nokia clearly raised local interest in all things mobile and digital, I think the real reasons run far deeper. It's the story of a well-governed nation that created the right environment for innovation and creativity. The sometimes unfortunate geographical situation, where southerly capital Helsinki sits on about the same latitude as Anchorage, Alaska, also seems to help in a strange manner.
In a 2010 study, Newsweek rated Finland as the best country to live in. Quality of life and political freedom played a part, but Finland's educational system was judged the best on the planet. It wasn't even a close race, as second-place performer Canada's score came in 5% lower. (The United States -- 26th place, 15% behind Finland.)
I find it telling that Fingersoft and Rovio were founded by kids fresh out of Finnish universities. Supercell founder Ilkka Paananen ran a couple of less successful gaming studios before starting Supercell, but got started in the industry while still a student. The leaders and chief developers in all three companies remain Finnish, so it's not as if the industry (nor Nokia) acted as a magnet for overseas talent.
And don't forget that the Linux operating system, which happens to form the base for Android phones and a myriad other gadgets, was a hobby project for Finnish computer-science student Linus Torvalds. And Linux was born in 1991, just months after Nokia had decided to sell off its rubber, cable, and consumer electronics divisions to double down on mobility.
It's hard to call the burgeoning Finnish game industry a direct byproduct of Nokia, even if the company definitely had a hand in motivating local kids to pursue that field. Rather, it's the logical conclusion when you install a brilliant educational system, step back, and watch where a generation of well-rounded and highly educated kids decide to go next.
And I suppose it doesn't hurt to have all these long, dark winters to fill with entertainment. Paananen told Gamasutra that those dark months bred a tradition of strong storytelling, and game design is just the next step in that evolution. "This kind of creativity has been in our culture for a very long time," he said. "It's a combination of that, plus the engineering talent, which I think makes the games industry so great here." And there you have it.
The circle of life takes another turn
Ironically, the same smartphone trends that are elevating this new class of Finnish businesses is also killing the old king. Apple started a wholesale revolution with the first iPhone, paving the way for Android to popularize smartphones. Apple's iOS remains the master of mobile profits even as Google's bevy of allies dominates sales volumes. That one-two punch is destroying Nokia, which got on the smartphone train a day late and a dollar short. Looking at smartphone top-seller charts today, Nokia's products are nowhere to be found. If the former global giant goes belly-up, it will most definitely release a plethora of engineering talent into the Finnish job market -- where they can start something fresh or join the rising mobile-game army.
The Motley Fool recommends and owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.