Dr Richard Wilson, the CEO of TIGA, has issued a year-end statement in which he sums up the state of gaming in 2011.

By December 23, 2011 TIGA News


The UK
government has been urged to help nurture the videogames industry over the next
12 months to enable the sector to fulfil its potential. Dr Richard Wilson, the
CEO of TIGA, has issued a year-end statement in which he sums up the state of
gaming in 2011.



As we reflect on 2011, the key economic lesson is clear: the UK economy
is weak and needs to be rebalanced away from an over-dependence on financial
services and public sector employment towards those sectors where we have a
competitive advantage – including the video games development sector.

 

The Chancellor’s Autumn statement confirmed the
severity of the challenge facing the UK. Economic growth is flat and
disappointing. Unemployment, including youth unemployment, is rising.
Productivity is weak. Borrowing is higher.

 

Yet there are shafts of light in between the
clouds. The UK is fortunate to have economic sectors with real growth
potential: high technology businesses; higher education; and creative
industries, including the video games sector.

 

The UK video games sector is precisely the kind of sector that
politicians need to support as part of a strategy to get the economy growing
again. 95 per cent of UK games development studios are small or medium-sized
enterprises. UK game developers are highly skilled. On average, UK developers
require 72 per cent of their staff to be qualified to degree level or the
vocational equivalent.

The UK game development sector is R&D intensive. Two
fifths of UK game developers have a budget dedicated to R&D. UK game
developers spend on average 20 per cent of turnover on R&D. UK game
developers are export focused. 95 per cent of UK game businesses export at
least some of their games/services to overseas markets. 80 per cent of the
development workforce is employed outside of London, so the sector can play a
part in rebalancing the economy away from London.

 

However, it is imperative that we act fast in order to nurture a
competitive games industry in this country. If 2011 has taught us anything, it
is that government subsidies abroad are having a major impact on the UK video
games development sector. Companies in countries such as Canada can provide
more lucrative salaries and they can spend more on producing games. Canadian
studies, on average, are receiving government support worth 23 per cent of
their turnover.

 

Against this background, some big UK games studios closed during 2011.
Bizarre Creations in Speke near Liverpool closed in February after 17 years,
with the loss of 200 jobs. Black Rock in Brighton closed in July and
Codemasters closed a studio in Guildford in September. At the same time, we
have continued to see a “brain drain” of talent moving overseas from the United
Kingdom. A survey carried out by TIGA showed a disturbing trend with 18 per
cent of companies reporting employees leaving videogame companies in the UK to
work abroad. Meanwhile Square Enix, which publishes the Lara Croft series,
chose to open a new studio in Canada rather than Britain.

 

Yet from the
ashes of Bizarre Creations, new developers have emerged, for example, Lucid
Games and Hogrocket. This is a trend that we have seen throughout 2011. Big
studio closures have been followed by new start-ups. However, these are
vulnerable and are typically short of finance.

 

In March I submitted a petition to Number 10 Downing Street, calling on
the Government to introduce Games Tax Relief in the Budget to enable the new
wave of start-up studios and more established development businesses to prosper
and to grow. That did not happen but we did welcome the news that research and
development tax credits would be made more generous – something that TIGA had
campaigned for. This was a victory for the videogame industry and will also
help other high technology businesses.

 

More needs to be done. In September, we drew attention to the need for
more people with science, technology, engineering and maths skills. The
Confederation of British Industry predicts that, by 2014, the UK will need an
extra 730,000 people with such qualifications compared to 2007. Such people are
crucial to the health of the gaming industry in the UK. To ignore the
videogames industry would be to do it a major disservice. This is, after all,
the sector which has continued to be popular among consumers. Call of Duty:
Modern Warfare 3 sold more than 6.5 million copies on launch day in the US and
UK in November. It grossed $400 million in the US and UK alone.

 

In the weeks leading to Christmas, retailers took in more than £73.9m
from games sales with industry magazine MCV saying there were 2,978,493 titles
sold. That was slightly down on 2010 but it shows a massive appetite for gaming
in Britain.

 

It is important that, during 2012, we encourage developers to take
control and that we reward them. It is crucial that we look at those firms
which have already taken steps into self-employment and give them the access to
capital so that they can grow. Investment is needed in areas including Dundee, Brighton,
Liverpool, Newcastle and Leamington Spa. Each of these city regions boasts
clusters of videogame developers with great potential. They are potential catalysts
for urban economic growth.

 

Indeed Scotland,
which suffered a major blow in 2010 when Realtime Worlds in Dundee closed, has
hit back. It was heartening to see Dundee hosting Scotland's largest videogames
festival for three days at Caird Hall in August. It was also good to see John
Swinney, Scotland's Cabinet Secretary for Finance and Sustainable Growth,
writing to the Chancellor George Osborne in March calling for a tax break for
games production to enable Scotland to compete internationally.

 

With greater
investment in our home-grown industry, our economy would benefit immeasurably.
It is why TIGA calls for widespread UK funding and it is why we asked the
Scottish government to consider establishing a Creative Content Fund to boost
the industry north of the border. Investment that can stimulate the creation of
fresh intellectual property is important if the UK is going to fulfil its
potential.

 

The UK video
games development sector has such promise. The Pickford Brothers self-published
their first smartphone game, Magnetic Billiards, and achieved rave reviews.
Eutechnyx has been expanding, opening a new London publishing office to support
the release of Auto Club Revolution, its free-to-play online game. The founder
of Revolution Software, Charles Cecil, who has been revamping his company’s
existing IP was awarded an MBE. And Leamington Spa-based Blitz Games Studios
has cemented its position as a top developer of titles for Microsoft’s Kinect
system.

 

A well-targeted tax break for games production, a Creative Content
Fund, improved Small Firms R&D tax credits and tax relief on training would
give a major boost to the engine of job creation and innovation in the games
industry – small studios. TIGA will be pressing policy makers to adopt these
measures in 2012.

 

We can learn much from 2011. When big companies close, small ones
emerge. When tax reliefs are offered, industries grow. When a team has the
money to pull out all of the stops on a game, rewards can often follow. It is forecast
that 2012 will be a tough year for the economy but with government investment,
the video gaming sector will grow. TIGA’s aim is to make the UK the best place
in the world to do games business. We intend to persuade politicians and to
work with them to make this vision a reality.

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