The Playing for Keeps report is a wide-ranging research project initiated by UKTI, DTI (now BERR) and Tiga, and conducted by Games Investor Consulting, which looks at the state of play for games development in the UK and how it compares to the rest of the world.
The aim was to build on Tiga’s initial work and deliver detailed evidence-based research into the current and future states of the UK games industry with a focus on the creation of new games intellectual property, the ability of new companies to start up in the UK and the barriers to inward investment by overseas companies into the UK.
The report comprises a broad range of research areas including detailed comparative profiles of the USA, Canada, France, Australia, Singapore, Korea as well as the UK.
UKTI will be publishing part of the research alongside two seminars set to take place on October 24th: an invitation-only session on Games Production and Globalisation, chaired by UKTI minister Digby Jones, and a session on Creating and Exploiting Games IP with the Culture Minister Margaret Hodge.
The following is a highly abridged version of parts of the report, with data from early 2007.
Note: All $ figures given are in USD
UK GAMES DEVELOPMENT INDUSTRY: THE FACTS
Number of independent developers: 160 (45 per cent fall since 2000), of which 11 developers in the UK have over 100 permanent staff. Studio numbers are now stable. Additionally, there are over 90 outsourcing companies.
Number of publishers: 70, including only two indigenous publishers of international scale. Many global publishers site their European headquarters in the UK, and many retain large studios.
Development expenditure: $730m in 2006, but heavily influenced by the strength of Sterling.
New IP generation and ownership: The UK is a world class hub for experienced development talent. The number of original UK IPs (particularly from independents) on current generation platforms reaching the market is falling as development costs rise.
Non-government funding: Medium.
Many games companies have limited access to external funding. Most funding available in the UK at present is trade capital from global publishers. The UK is second only to the US in number of indigenous companies acquired, but has few large-scale purchasers. The UK has seen numerous small rounds of private financing but many have failed to deliver value to their investors. Of 15 companies that listed between 1996 to 2006, seven went bust or left the games market, five were sold for low valuations, and only two remain listed, one of which has now entered disposal talks. The UK wins less global games capital than other territories, largely missing the recent bubble in online and mobile investment. Few private equity funds invest in games production, and there is little assistance for games start-ups.
National government assistance: Low.
The UK government provides no games-specific tax support or investment incentives. This is in keeping with UK government policy of providing no sector specific support for any industry, although film and television remain exceptions, with film being governed by strict EU-approved cultural tests. If government changed its position to make an exception for games, any games-specific state aid over €100,000 per project would need to be negotiated with the EC (France is currently negotiating with the EC to introduce a culturally-excepted games tax credit). UKTI provides assistance for trade missions to and from the UK, and runs the Computer Games Strategy Group to coordinate work across departments.
The games sector is the joint responsibility of BERR and DCMS and is being considered as part of their forthcoming Green Paper on the Creative Economy. Most government support is via generic business support measures, the most meaningful of which is R&D tax credits which (due to current definitions of what constitutes research and development expenditure) return 5% of total development expenditure on average, Other generic investment incentives and grant schemes have low or no impact on games companies.
Local-level assistance: Low-Medium.
The majority of games-specific funding that has taken place in the UK comes from predominantly European-funded Regional Development Agencies or Regional Screen Agencies, but coverage is inconsistent with games companies’ locations. Most schemes provide tiny amounts, but a few (EM Media, Screen Yorkshire, Wales’ Creative IP Fund, Northern Ireland’s Broadband Content Initiative, and Scotland’s ITI) cover larger scale games or games technology development. Some regions offer networking and support schemes for their local games clusters.
Education: 46 universities offer 81 games-specific courses. So far, 4 courses have been accredited by Skillset, the national media training body, to formalise the quality of such courses.
Graduates: 1,200 students graduated from games-specific courses in 2006, which will rise to 1,400 in 2007 and 1,700 in 2008. On average, between 25 to 30 per cent of these graduates successfully find work in games companies. Between 2002 and 2006, applicants for valued mathematics and computer sciences degree courses fell by 23 per cent.
Number of industry jobs (development staff in publisher and independent studios only): 8,000 permanent staff plus 700 freelancers, with 3,850 in independent and 4,150 in publisher studios. The total number of development staff in the industry has been growing since 2004. Publisher studios’ headcounts have grown the fastest during this period, both through acquisition of large studios but also through organic growth. Although some graduate programmes exist, the UK lags other territories in university-to-industry linkages. The exception is Abertay University’s Dare to be Digital competition, in which games prototypes are created in collaboration with industry.
Recruitment climate: Many studios find it hard to recruit, and larger studios attract the lion’s share of new talent. Little historic brain-drain impact was found, and the UK is a magnet for development talent in Europe. However, the threat to the UK talent pool of a brain drain to lower-cost, high subsidy territories such as Québéc is increasing.
Dominant skill sets: Strong in technical and creative skill sets such as design, gameplay, programming, physics, artificial intelligence, outsourcing management and animation on most platforms but under-represented in skills in MMOGs and other online games and communities.
LESSONS LEARNT FROM KEY UK IPs
Playing for Keeps also looks at ten leading UK-originated games IPs and reaches the following conclusions:
- The best UK games are cultural artefacts which, like their peers in any UK media, wed strong characterisation, design, humour and creative flair with technical ability to succeed on the world stage.
- However, many UK games IPs (and their founding companies) were acquired by global companies for tiny sums compared to subsequent sales.
- The ownership of successful IP is a critical driver for the financial performance and value of any games company while its failure can lead to acquisitions with low valuations.
- Small teams in experienced UK companies have often created the most innovative and successful games.
- Many of key UK IPs have succeeded by mining niche games genres or by building and responding to a loyal audience base, with the result in ‘long tail’ sales.
- Development technology that speeds (or slows) development underpins the success (or failure) of many of the UK’s best games IPs.
The 10 IPs considered were:
Rollercoaster Tycoon (Created: 1999, Developer: Chris Sawyer)
Driver (Created: 1999, Developer: Reflections)
Grand Theft Auto (Created: 1997, Developer: DMA Design (until 2002); Rockstar North)
Burnout (Created: 2001, Developer: EA Criterion)
Tomb Raider (Created: 1996, Developer: Core Design (until 2004); Crystal Dynamics)
Worms (Created: 1994, Developer: Team 17)
Championship Manager (Created: 1992, Developer: Sports Interactive (until 2004); Beautiful Game Studios)
Black & White (Created: 2001, Developer: Lionhead)
Elite (Created: 1984, Developer: David Braben and Ian Bell)
Runescape (Created: 2001, Developer: Jagex)