Supercell (video game company)

Company

Supercell was part of the giant Japanese telecommunications company SoftBank, which owned 73.2% of the company. Ilkka Paananen owns 6% and Mikko Kodisoja 5.4% of the shares. The rest belong to the employees and other founders. Originally, SoftBank bought 51% of the company together with the game company GungHo for 1.1 billion euros in 2013. In the sale, all Supercell's employees sold the same amount of their shares. One condition for the sale was that the main office would stay in Finland. SoftBank and GungHo founded the Kahon 3 Inc. in Finland. The company's articles of incorporation state that the company will remain Finnish. Kahon bought Supercell, and later GungHo sold its shares to SoftBank. In May 2015, SoftBank finally bought the rest of the investors out of the company and increased its shares to 73.2%. At that time the technology magazine VentureBeat estimated the value of Supercell to be 4.9 billion euros. In March 2016, SoftBank owned over 75% of Supercell's shares. Supercell's main office is located in the former facilities of the Nokia research center in Helsinki's Ruoholahti district. The company has offices also in Tokyo, Beijing, San Francisco, and Seoul.

Business model

Supercell focuses on the development of free-to-play games that yield profits through the in-game micropayments. The company's objective is to focus on the successful games that stay popular for years. The focus has not been on revenue, but on the principle "just design something great, something that users love." Game development focuses around "cells" of five to seven people which start with idea generation and an initial review by CEO Paananen. The team subsequently develops the idea into a game, which the rest of the company's employees get to play-test, followed by play-testing in Canada's iTunes App store; if the Canada reception is good, the next step is global rollout (via iTunes). Supercell has discontinued a total of 14 game projects it did not deem promising enough, successful failures which are celebrated by employees. One of the games that was cancelled well into development was Battle Buddies which had also been rated well in the test market, but the amount of players was still too small. The final decision for cancelling a project is done by the development team themselves.

Supercell has only 180 employees, which is a relatively small amount compared to its revenue, as even the company's biggest rival King has 1,400 employees. Supercell also does not have middle management, so the organisation is flat. Even though the teams have a lot of independence and freedom, due to the lack of directors they have a lot of responsibility for their result. New employees are on a four-month probation, and the turnover rate has been great.

Development of business

In March 2012, Supercell's revenue on Apple's App Store was greater than any other developer's. From 2013 to 2015, the revenue increased by 562% and by 198% in the next annual period, which is why the company's revenue had increased into 1.5 billion euros. In 2014, the company made into the top-50 of Finland's largest companies. In 2015, the revenue increased by 36% and the profits by 60%, and the company also bought shares and options from its employees for 114 million euros. Supercell does not use tax shelters, and pays all of its taxes to Finland. In 2013, the company and its founders paid a combined 260 million as corporate and income taxes, which was 0.6 percent of Finland's tax revenue that year. In the following year, the company paid 150 million in taxes, and 176 million euros of corporate taxes in 2015.

Charity

The employees of Supercell donated 3.4 million euros to the Finnish New Children's Hospital project. It is presumably the largest charity donation done by company employees in the history of Finland. Supercell has also given donations to the American charity organisation Watsi.

The company founders Mikko Kodisoja and Ilkka Paananen have founded the ME foundation that supports different kinds of charity projects. In November 2015, the ME foundation donated 2.5 million euros to the Helsinki youth department for the support of young immigrants. Supercell also organised a fundraising that collected old computers and tablets from game companies to donate to poor families with children through the Finnish Tukikummit Foundation, a registered non-profit organisation. Supercell was also the biggest individual investor in the crowdfunding campaign for the Finnish Game Museum in 2015.

Background and founding

Before founding Supercell, two of the founders Mikko Kodisoja and Ilkka Paananen worked at the mobile game company Sumea. Kodisoja was one of the founders of Sumea in 1999, and Paananen was hired as the company's CEO in 2000. In 2003, Sumea gained 1.2 million euros of profit. In the following year, the American Digital Chocolate bought Sumea and made the company its Finnish headquarters and Paananen the European manager. With the new owner, the business activity increased, but at the same time the business culture took a more problematic direction according to Kodisoja, who was the creative director at the time. He left the company in 2010, and soon after Paananen did so as well.

At first, Paananen worked at the financier company Lifeline Ventures, but soon wanted to become an entrepreneur himself. He planned to found a game company where executives would not disturb the work of the game developers. Together, Paananen, Kodisoja, Petri Styrman, Lassi Leppinen, Visa Forstén, and Niko Derome who had known each other through work connections, founded Supercell in 2010. The company started its business in a cramped office in the Niittykumpu district of Espoo.

Kodisoja and Paananen invested 250,000 euros from their savings from their time at Sumea in the company. In addition, the Finnish funding agency for technology innovation Tekes gave them a loan of 400,000 euros. Lifeline Ventures also became an investor. In the following October, Supercell raised 750,000 euros through seed funding from for example London Venture Partners and Initial Capital. The first game Supercell started to develop was the massive multiplayer online game Gunshine that could be played on Facebook with a browser or on mobile platforms, and the game's prototype was ready in eight months. After Gunshine's completion, Accel Partners also invested 8 million euros in the company in May 2011, and shareholder Kevin Comolli became a member of Supercell's board of directors. Accel has also invested in Rovio, among others.

Change of strategies

In November 2011, Supercell abandoned Gunshine for three reasons: it did not interest players for long enough, it was too difficult to play, and the mobile version did not work as well as the browser version. At best, the game had approximately half a million players. Supercell noticed the company could not catch up to the current leader of Facebook games, the Zynga company, and decided to focus on iPad games. Another Facebook game on development was left unfinished as well. The change of direction did not drive away the investors, but the pressure to succeed became worse, and Paananen had to make more detailed reports of progress for the investors.

The company simultaneously developed five games, and the first one to be released for test market was Pets vs Orcs. It was not very successful, and another concept, Tower, was abandoned soon as well. However, in May 2012 Hay Day was published, and was quite promising in the test market. The game eventually became Supercell's first internationally released game. Hay Day was Supercell's version of Zynga's successful Facebook game FarmVille, an easy-to-play farm simulator. Supercell added to their farming simulator the ability to refine products, a production chain, and touch screen properties. The social aspect of the game was emphasised as well. The optimisation of the production chains had an important role in the game, and it could be sped up with in-game purchases. The game was published in Midsummer 2012, and it became a surprising success to the point the server capacity was not enough to support all players. There were also problems with balancing the game, as in the beginning all players had an oversupply of eggs, which made the in-game market depressed. The company solved the problem by adding more eggs as necessary ingredients in recipes. To avoid similar problems in the future, Supercell hired a data analyst who monitors the balance in the games. In four months, the game became one of the most profitable games in Apple's App Store in the US, and was one of the most profitable in the world for two and a half years. The game receives regular updates and is maintained by a team of 14 people.

Development of Clash of Clans

The employees of Supercell had a lot of experience from the video game industry. Lasse Louhento had started at Bloodhouse, and Lassi Leppinen was the chief programmer at Sumea and Digital Chocolate. Their team had spent months on a fantasy themed Facebook game when Supercell changed strategies. Leppinen and Louhento wanted to make a strategy game that would utilise a touch screen so playing would be as simple and pleasant as possible. The development of Clash of Clans took six months, and the game was released in August 2012. In three months, it became the most profitable app in the US. According to App Annie, in the years 2013 and 2014 Clash of Clans was the most profitable mobile game in the world. The eponymous battle between the clans was added to the game as late as in 2014.

In summer 2013, Supercell started marketing collaboration with the Japanese GungHo: the companies cross-marketed each other's games in their own games in their own markets. As a result, Clash of Clans became one of the most downloaded apps in Japan. GungHo's chairman of the board Taizo Son flew to Finland to thank Paananen and later introduced him to his brother Masayoshi Son, the CEO of the SoftBank Corporation. Soon, they proposed a corporate acquisition which indeed happened in October 2013. SoftBank and GungHo bought 51% of Supercell's shares for 1.1 billion euros which is the largest price for a Finnish private company in history. In six months, Supercell's value had tripled, since in spring 2013 the company had sold 16.7% of its shares for 100 million euros.

Both Clash of Clans and Hay Day were released in the summer 2012, and Supercell did not release a new game in almost two years. The designing of the third game Boom Beach started in the autumn of 2012, and it was released in 2014. The new strategy game was released to the test market at the end of 2013, after which it went through large changes. The game was very successful in the US right after its release in March, but it did not stay at the top of the download charts for very long. However, it rose to the top 30 of the most downloaded iPhone apps after Supercell started an expensive marketing campaign in December 2014. In 2015, the game surpassed Hay Day in the charts.

In March 2016, Supercell released its fourth supported game, Clash Royale, which uses similar characters from Clash of Clans. Between the releases of Boom Beach and Clash Royale, Supercell had discontinued nine game projects, two in their test release phase. One of them was Smash Land which had been developed by 4 to 5 people for 10 months.

Marketing

During Super Bowl XLIX in February 2015, Supercell spent $9 million for a 60-second runtime in front of 118.5 million viewers. According to the The Guardian, the Clash of Clans advertisement was one of the most popular advertisements of the 61 spots aired on NBC. The commercial, dubbed "Revenge", featured Liam Neeson parodying his character from the Taken film series by seeking revenge in a coffee shop for a random player destroying his village. The commercial has reached a total of 153 million views on the game's official YouTube channel so far, and it was the most watched commercial on YouTube in 2015. Despite the success of the commercial, Supercell has seen only a marginal increase in downloads following the advertisement.

Acknowledgements

In 2012, Supercell was awarded as the best Nordic start-up company and chosen as the Finnish game developer of the year. The following year, Supercell won the Finnish Teknologiakasvattaja 2013 (Technology Educator 2013) contest, and the company was chosen as the software entrepreneur of the year. In 2014, the research and consultancy agency T-Media chose Supercell as Finland's most reputable company in their Luottamus&Maine (Trust&Reputation) report.