Supercell CEO Criticizes Industry's Reliance on Acquisitions Over Innovation

The mobile gaming industry is facing a wave of criticism from one of its pioneers. Ilkka Paananen, the co-founder and chief executive of Supercell, has expressed deep concerns over the trend of companies prioritizing acquisitions over innovation. In an interview with the Financial Times, Paananen highlighted the stagnation within the mobile gaming sector since 2021, contrasting it with the growth observed in other entertainment industries such as books, music, and television. He argued that some companies are adopting a short-sighted strategy by purchasing successful new titles instead of investing in the development of original games. This stance reflects Supercell's commitment to innovation, which has been instrumental in shaping the free-to-play mobile gaming market.

Paananen's critique stems from Supercell's own history of success and selective approach to game development. The Finnish studio has consistently aimed for high-quality releases, often opting to discontinue projects that do not meet their rigorous standards. Despite this cautious approach, Supercell has achieved remarkable financial milestones, reporting record underlying revenues of €2.8 billion in 2023, marking a 77% increase from the previous year. However, the company has only launched one new game, Squad Busters, in the past six years, underscoring the challenges in creating fresh content.

The mobile gaming landscape has seen significant consolidation in recent years. Major players like Take-Two Interactive and Activision Blizzard have made substantial acquisitions, while Tencent and Playtika have also expanded through purchases of smaller studios. Supercell itself has not been immune to this trend, acquiring UK-based Space Ape in 2023. Yet, Paananen emphasized that the industry must reassess its priorities, questioning why it has struggled to deliver innovative experiences to players. He called for greater risk-taking and investment in new ideas.

In response to these challenges, Supercell has restructured its development teams, moving away from small, autonomous "cells" to larger groups for established titles. This shift aims to enhance the quality and longevity of their games. Despite the industry-wide layoffs, Supercell increased its workforce by nearly a third last year, reaching 686 employees. Paananen stressed the importance of taking risks and fostering innovation, urging the industry to reflect on its practices and strive for more groundbreaking creations. The company's financial performance, including a second-highest annual earnings before interest, tax, depreciation, and amortization (EBITDA) of €876 million, underscores its commitment to this vision.

Ultimately, Paananen's comments serve as a call to action for the mobile gaming sector. By highlighting the need for innovation and risk-taking, he challenges both established giants and emerging players to rethink their strategies. As Supercell continues to push boundaries, the future of mobile gaming may depend on whether the industry can embrace creativity and break free from the cycle of acquisitions.