The UK games development sector is stronger than ever, despite the collapse of three major studios, say leading experts.
Over the past month, Xbox has announced it will close Fable makers Lionhead (pictured), Sony will shut DriveClub creators Evolution, while Activision has announced redundancies at Guitar Hero developers FreeStyleGames.
I think these are three unfortunate, sad, but unconnected events,” insisted Dr Richard Wilson, CEO of development trade body TIGA.
The games development scene is looking as strong as it has ever been. Our research shows that the development workforce increased by about seven per cent in 2013, and in 2014 it went up by almost 10 per cent. We expect to have data for 2015 fairly soon, but it will be positive growth again – we won't be seeing any shrinkage.
Although these are three famous studios, at the same time you have other well-known studios that are growing. Sumo, for example, has opened a new studio in Nottingham.”
The closures of Lionhead and Evolution, and the redundancies at FreeStyle, appear particularly
galling in the face of the tax relief offered by the Government.
Wilson insists that publishers do value tax breaks ‘to varying degrees', and says that there are a lot of studios benefitting from the support.
Indeed, according to the BFI, 237 games have been approved for tax relief, which accounts for 729m in total spend.
Tax breaks help, but that's simply on the games actual cost, not the overall costs,” said Team17's head Debbie Bestwick.
Then you consider the additional cost that gets put on first party or large publisher overheads – can be as high as 50 per cent – plus the marketing spends, and all of a sudden you have a studio under risk if the game doesn't succeed.”
"The problem with experiments is that often they fail."
Jason Kingsley, Rebellion
So if Lionhead, Evolution and FreeStyle really are isolated incidents, what's gone wrong?
We have three things happening at once,” said Rebellion boss Jason Kingsley. We are at a fiscal year end with people re-evaluating business models and return on investment.
I also think some of the issues come from the free-to-play space. There are massively successful companies that have gone from zero to hero in three or four years. But there are also a lot of people who haven't, and the market is even more polarised in free-to-play than it is in the traditional games market.
I think what we're seeing is an adjustment where companies making traditional games have chucked people into free-to-play, those titles haven't quite worked out, and people are saying: ‘Let's just shut that down instead'.
My third thought is that you've got VR and updated platforms coming along... you've got a lot of hardware shifting and changing. People are wondering what is coming next and they're experimenting with hardware and business models. The problem with experiments is that – more often than not – they fail.
Jagex head Rod Cousens insists the UK is in a strong space, attracting significant inward investment. But that the development space is nonetheless challenging.
There are a number of factors - saturation of content, rising costs and so on, at a time when there is rationalisation in winning content and publishers,” he explains. If you look at the charts, particularly in a much hyped mobile space, for the most part it has been ‘owned' by the same games over the last three years.
The impact of globalisation is pronounced and companies that have recognised that, and produce compelling content, will thrive.”
He added: If you examine the music scene and movies, television and theatre, then the UK is enjoying a surge not seen in many a year and is in rude health.”
Meanwhile, Bestwick points to the fact that all three publishers made dangerous, big budget projects.
Triple-A is just so high risk and there will always be casualties if those titles don't perform commercially to the level the parent companies expect,” she said.
The bigger question is: is there room for the number of triple-A games being made?” Fighting for consumer spends has never been so difficult.”
She concludes: But I'm incredibly positive about the state of the UK games development scene, look at Team17, Rebellion, Frontier, Sumo and so on, they're all doing amazingly well. Then look at some of the new studios that have sprung up over the last couple of years and had multimillion unit success stories such as Facepunch, Chucklefish, NDemic, and young talent such as the Besige team and The Escapists. We are also starting to see the emergence of potentially world-class studios being formed by former triple-A makers, such as Playtonic and Three Fields.”