Growing the Icelandic games industry beyond CCP Games

As a small country with a population of around 350,000, Icelanders like to joke that everyone is practically related, but that is certainly the case in the local gaming industry thanks to CCP Games.

Celebrating its 25th anniversary in June, CCP Games has been Iceland’s biggest success story, not only for its persistent space-based MMO Eve Online, but also for laying the groundwork for other game companies to emerge over the years. years. In fact, former students are still founding new studios; Parity Games, for example, is led by CEO and co-founder Maria Gudmundsdottir, who worked at CCP for 12 years.

However, there was a long time when CCP was the only game developer in Iceland. Having been with the company for more than two decades, CEO Hilmar Pétursson points to the 2008 global economic and banking crisis as a moment of opportunity.

Hilmar Petursson, CCP

“There were a lot of game companies that started in Iceland because a lot of intellectual capital was freed up,” he explains. “The banking system lost engineers and marketing people. As developers, they’re always scouring the Earth for engineers; it’s a lot that goes into their actual creation.”

Shortly after, in 2009, the Icelandic Games Industry (IGI) was founded: a formal association established to establish a future vision for growing the industry operating under the Federation of Icelandic Industries, which at the time of its founding was made up of ten companies. Today, Iceland has 24 active companies employing around 500 people.

These numbers may seem modest at first glance, but when the nation’s small population is taken into account, that’s a significant proportion of Icelanders working in the games industry per capita; compared to Iceland’s Nordic brethren, that’s higher than Norway and almost on par with Denmark. .

More importantly, it is a workforce that is experiencing significant investment. Just like during the banking crisis, despite the pandemic, Icelandic gaming companies received a record investment of $48 million in 2021. For comparison, 2020 was only $13 million, though still a significant increase from to 2019’s $3 million figure, with the record expected to be broken again this year.

This new surge in investment may be due in part to the buzz of the tech and gaming sector into the metaverse, an area in which Icelandic companies are specialists, including CCP. About half of the initial employees at the Eve studio came from the Icelandic company OZ Interactive, which was responsible for building OZ Virtual, a 3D world viewer compatible with Virtual Reality Modeling Language (VRML), a first step toward building of the metaverse.

“In Iceland, people are more generalists than specialists, so the respect for specialization is not very high”

Hilmar Petursson, CCP

This is the direction Direct Games CEO Thorgeir Odinsson has taken for his company, which began as a breakout from CCP’s Shanghai office by developing a number of XR projects, including Ready Player One: Oasis.

“We’ve had aspirations to do the metaverse for a long time,” explains Odinsson. “We have proprietary technology that is persistent in massively multiplayer worlds and cross-talk from different route servers. We jumped on the Web3 bandwagon last year, and now we’re building a Web3 MMO.”

But while MMOs and metaverses are the big headlines, including Mainframe Industries developing the world’s first cloud-native MMO, while Klang Games is developing a player-created online sandbox universe, there’s also a breadth in the projects that each company is looking for. For example, Parity Games’ first game, Island of Winds, is a single-player story-based adventure PC game set in 17th-century Iceland that seeks to capture the country’s authentic geography and culture.

If there is a common thread, Pétursson believes it is in the construction of the world. “You can see that every Icelandic company is building a world, and it manifests itself in different companies doing different things, from single player to Web3 MMO to EVE Online forever. You can trace that lineage back to the Icelandic sagas written in the 1200s. Especially if you read the Snorra Edda, it reads like a game design script. So we’ve been in the narrative world-building business for a thousand years.”

While the gaming industry in general is still dealing with issues and scandals related to inequality, bullying, crisis, and other toxic cultures, the Icelandic gaming industry also prides itself on being progressive on issues of equality. Last year, all of the country’s gaming companies, the Icelandic Esports Association, and grassroots organization Game Makers Iceland even came together to sign an agreement to commit to fostering a positive culture.

It is a reflection that Iceland is historically one of the most equal nations in the world, specifically in terms of gender, as the first country in the world to elect a female president, while also being named the most gender equal country in the world. World Economic Forum. Global Gender Gap Report 2022 for the 12th consecutive year. The studios similarly adopt a flat, Nordic-style hierarchical structure, which essentially means, as Parity Games’ Gudmundsdottir puts it: “Everyone’s a game designer.”

“In Iceland, people are more generalists than specialists, so the respect for specialization is not very high,” adds Pétursson. “Even if some people are appointed as game designers, we may think, ‘Oh, it can’t be that hard.’ That’s obviously an attitude that has good and bad things, but here we are, with the investment per capita and the number of employees higher.”

“There’s a concern when you’re trying to do something niche, but after working at CCP and the role models there, you just don’t give up.”

Maria Guðmundsdóttir, Parity Games

If there’s one problem Iceland’s gaming industry has, it’s that regardless of its highly educated and ICT-savvy workforce, there just aren’t that many people in Iceland. This means relying on importing experts from around the world or investing in technology such as procedural generation or machine learning to achieve great results for teams that are mostly no larger than 10 people (with the exception of CCP, which still employs about half of the game developers in the country).

It’s also about spurring interest from abroad, hence the London event that attended in September to meet the Icelandic games industry, organized in collaboration with the Icelandic ambassador, Sturla Sigurjónsson, as well as Business Iceland and CCP. And the hope is that the event was the first of many.

Adds Odinsson: “The new frontier we are facing now is talent acquisition. We are pushing for changes both to the incentive for talent to move to Iceland and to streamline the application process. Due to the small size of Iceland We’re two phone calls away from the president or any ministry. So if you have a good case, it’s really easy to push for positive change.”

But by wanting to bring more people to Iceland, does that mean we will see incentives for international companies to set up shop in the country? Anecdotally, this has mainly been the case for Icelanders who have worked for a company abroad who decide to return.

“There’s a tech company called Desana, which has a sizable office in Iceland run by someone who used to work at CCP,” says Pétursson. “He used to work for them in San Fransisco, but he was moving back home and they said, ‘Don’t go, we’ll open an office for you!'”

Thorgeir Odinsson, Games Directors

Odinsson adds that the limited bureaucracy, fair labor laws that benefit both parties, not to mention Iceland’s reputation as a safe and stable nation, make it an attractive place for someone to set up a studio. However, the biggest trend is for corporations like Tencent to invest in Icelandic companies, which can also amount to acquisitions.

Given the rapid pace of acquisitions in recent years, it’s a trend that Icelandic developers have little anxiety about, even though the broader industry and consumers may wearily watch the consolidation of the games industry as a whole. This is not too surprising, given that CCP itself had been acquired in 2018 by South Korean studio Pearl Abyss, which Pétursson believes helped create a precedent of an exit story for investors.

“Start-ups have a much clearer path to an outcome,” he explains. “Whether they want to sell or not doesn’t really matter, but mentally, investors want to get out at some point, and the more exit stories you have, the more it helps everyone else build more rail.”

Maria Guðmundsdóttir, Parity Games

He continues: “Companies are also much more sophisticated, both in their investments and their acquisitions. In particular, Asian investors and strategists have been quite clever in the way they have organized these things where style is very practical. and conservative. what you’re buying rather than a US-focused approach to integration and strategic synergies. I think you could talk to all the companies that have been acquired in recent times and they’ve generally been positive.”

After overcoming the previous recession and thus looking set to continue to grow this year and next as well, the outlook looks optimistic for the Icelandic gaming industry. Even Gudmundsdottir, whose studio has yet to publish a game since its founding in 2017 and is arguably chasing an outlier with its single-player adventure game, is undeterred.

“We’re not worried because the talent is still there. It’s not going away,” he says. “There’s a concern when you’re trying to do something niche, but it’s in our culture to not give up. After working at CCP and the role models there, you just don’t give up. You could do it in a smaller scope or in a way different, but you follow your idea to the end.

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