Gaming industry starts fightback with move to lucrative new areas

By DOMINIC JEFF
Published on Monday 23 January 2012 00:00

LACK of investment has taken its toll on the UK games industry – of which Dundee is a leading centre – with nearly 200 firms failing in the last three years.

However, Scotland is thought to be “ahead of the curve” in developing a new wave of simpler games aimed at mobile devices and social networking sites, which could be highly lucrative for small companies that develop popular applications.

Figures published today by Tiga, the trade association representing the sector, show that while 216 new UK games companies appeared between 2008 and 2011, there were also 197 closures.

Richard Wilson, chief executive of Tiga, said: “Despite an almost record number of start-up studios, the industry’s potential is being held back by limited access to both private and public finance.”

He said British developers were missing out on investment from global publishers and venture capital in part because the UK did not offer tax breaks on games production, unlike some other countries.

Gaining access to debt, bonds and equity finance is also difficult because of the high levels of uncertainty about consumer demand and the intangible nature of IP in the games sector, Tiga said.

Today’s report also reveals that the UK’s share of global investment in the games industry declined from 10 per cent in the middle of the last decade to 3.5 per cent now.

Wilson said: “In contrast to the film industry, which benefits both from a tax credit and from lottery funding, there is negligible public financial support available for video games development.”

Tiga is calling on the UK government to consider a tax break for games production, which it says would improve the availability of finance for the sector and enable it to compete on a level playing field with overseas competitors.

Canada in particular has introduced tax breaks for games developers and has marketed itself to the industry as a place to do business. And the Irish government recently launched a €10 million (£8.8m) international start-up fund to encourage entrepreneurs to launch companies in the country, which is expected to focus on sectors including the internet, video games and cloud computing.

However, a Westminster parliamentary committee which looked into the issue concluded last year there was no evidence the lack of tax breaks was harming the UK games industry.

Brian Baglow, a Scotland-based games industry consultant, said the changing nature of the industry meant that tax breaks were becoming less relevant.

He said that large companies employing hundreds of people have to spend several years to develop games for leading platforms such as the Xbox. They need development budgets of millions of pounds and are vulnerable to the cyclical changes in the industry as new consoles hit the market and others wane in popularity.

In 2010, Dundee-based Realtime Worlds collapsed after spending £60 million over five years to create APB, an online game which flopped.

But Baglow said many of the staff from Realtime and other fallen giants had stayed in the area, joining small firms or starting their own businesses. Many are developing games for “non-dedicated” platforms such as mobile phones or websites such as Facebook and Google Plus.

These games tend to be simpler than the blockbusters developed for dedicated gaming devices, and are much quicker and cheaper to design and sell to a wider audience.

Firms are also allowed to keep the lucrative intellectual property rights, Baglow said, whereas previously much of the work was on contract to large games firms.

“It’s a whole new world,” he said. “The opportunities are huge and Scotland is well ahead of the curve.”

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Brian Baglow

Monday, January 23, 2012 at 10:34 PM

Hi Alistair, I really don't know where to begin with your comment. Where did you look? And how? Try typing 'scottish' and 'games' into Google. Or, to save time, try www.scottishgames.net, which has all of the news, updates and releases from the whole industry here in Scotland. All of the company's DO have web sites. Again, if you type their names into a search engine, you will find them. Who was the representative of the industry? What did you ask himher? Sorry for being a little skeptical, but even with the fairly reticent nature of the various developers hereabouts, it's very difficult indeed not to find anything...

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JohnNSutherland

Monday, January 23, 2012 at 09:11 PM

Alistair, Contact me for lots of contacts in Scottish games. We have some places to look. I've taught and developed for 25 years. Have a surf on over to TuDocs dot co dot uk. Dr J.

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AlastairMcIntyre

Monday, January 23, 2012 at 03:34 PM

Well I do look for Scottish games for my web site and social networking site but have to confess I've never seen any information on Scottish games or information on any companies in Scotland that create them. After some serious research to try and find a few I did manage to find an email address for someone that is meant to represent the industry and so emiled him to find out more about what was on offer. Received nothing back. So if the Scottish Games industry wants to be so secrative about what they are doing then that may well be the problem. It's quite possible they all have web sites but I can't find them.

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