THE UK VIDEO GAMES SECTOR - a blueprint for growth - Ukie
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
THE UK VIDEO GAMES SECTOR a blueprint for growth
02/ CONTENTS THE UK VIDEO GAMES SECTOR /03
a blueprint for growth
CONTENTS Foreword..................................................................................... 03
FOREWORD The games sector is a highly dynamic,
global success story. This report by
Executive Summary.................................................................... 05
The research........................................................................... 06
Dr Jo Twist Olsberg SPI presents how, why and
Video games – a global economic and cultural story......... 07 CEO, Ukie where there is success, from the
The fast evolving UK sector.................................................. 08
Getting the support right....................................................... 10
@doctoe sector’s 1980s birth in the UK to its ever-
evolving nature today, and the creative,
The solution............................................................................ 12
innovative experiences being developed
The UK Games Sector and published by large, small, micro,
a major part of economy and culture....................................... 14
independent and individual businesses –
UK consumer market 2014.................................................... 15
Market penetration................................................................ 16
and, more importantly, why the UK should
Total UK games companies by year, 1985-2013................. 17
be leading the world in games right now.
Sales of games, video and music in the UK........................ 19 The fastest, biggest-selling entertainment product of all time
is made in Scotland. We believe many more of the almost 2,000
The UK games sector is always innovating......................... 20
games and interactive entertainment companies in the UK
Overall UK games market value........................................... 21
have the opportunity to have similar success stories. Digital
UK digital revenues: microtransactions tools, technology, distribution and creative passion have made
dominate as revenue stream................................................ 23 our sector what it is today.
Games clusters in the UK...................................................... 24
However, the games industry is still young and needs
A map of the UK games industry.......................................... 25 nurturing. If it is to continue to punch above its weight, creating
Companies by region and nation.......................................... 26 more jobs and more economic returns, we need action.
Talent....................................................................................... 28 This report makes five recommendations to government:
Games as culture................................................................... 30 1. UK and EU funding to fully and equitably recognise the
Social impact.......................................................................... 32 contribution of games, ensuring effective support alongside
Education and games development as life skills................ 32 other creative industries
The consumer is central........................................................ 34 2. Support regional growth, FDI and exports across the UK
Future trends - VR, eSports and game content.................. 35 3. Grow, attract and retain the best talent
Existing government interventions....................................... 36 4. Create the best tax environment and digital marketplace
to do business worldwide
Market failures....................................................................... 38
5. Promote games-as-culture and celebrate cutting-edge
Further steps.......................................................................... 40
UK innovation
Recommendations..................................................................... 42 These interventions will create more economic returns and
Recommendation 1................................................................ 43 a more resilient foundation that will nourish start-ups so that
Recommendation 2................................................................ 47 they can flourish and – most significantly – will enrich our
everyday cultural life, inspire new ways of understanding the
Recommendation 3................................................................ 50
world around us, or simply provide hours of entertainment.
Recommendation 4................................................................ 53
With their unique fusion of arts, creativity, passion, technology
Recommendation 5................................................................ 55
and fresh thinking, we believe games – making them, publishing
Analysis: the potential for growth............................................. 58 them, playing them, servicing them, producing and reflecting
culture through them – are the blueprint for the sort of creative,
Projected scenarios for growth of the UK’s games
innovative economy our future and present citizens deserve.
development and publishing sector..................................... 61
04/ EXECUTIVE SUMMARY THE UK VIDEO GAMES SECTOR /05
a blueprint for growth
THE UK EXECUTIVE
SUMMARY
The UK Games industry blends the
best of British creativity with leading
VIDEO GAMES technology, creating successful games
exported around the world. The sector is
a major generator of intellectual property
SECTOR and a leading example of the UK’s
growing reputation as a home for the
a blueprint
creative, high-tech, knowledge-intensive
companies that the country needs to
succeed in the 21st century. By any
for growth measure, the industry is now one of the
UK’s major creative sectors, a source of
economic growth and a mainstream part
of British culture.
This independent report will show how the UK games industry
has grown since the 1980s into a cultural and creative
colossus. It will also demonstrate how the sector leverages
this creativity through innovative, fast-evolving business
models which are leading the way in digital exploitation of
creative Intellectual Property (IP). It will suggest how support
for the industry can be unified and magnified by a set of
government and industry interventions which when combined
will boost growth, investment and high-quality, high-
productivity jobs across the country.
With the global games market expected to expand by 7.9%
annually over the next five years – adding to the 1.6 billion
people currently playing games, as well as the 1,000s making,
selling and servicing them – the opportunity is enormous.
Given the ambition of, for example, Video Games Tax Relief
(VGTR), the UK is in prime position to benefit significantly
from this. The VGTR policy aims to encourage British
innovation and video games businesses in the UK; delivering
on those ambitions by ensuring the UK remains a competitive
and attractive place to create video games could see turnover
increasing 51%.
However, there are some market failures the sector faces
which threaten the global competitiveness and standing
of the industry, as well as its potential to spill over and
transfer knowledge, skills and innovation to other creative
digital sectors. There is a major opportunity to improve this
if the government builds on the strong basis which the
VGTR intends.
06/ EXECUTIVE SUMMARY THE UK VIDEO GAMES SECTOR /07
a blueprint for growth
The research Video games – a global economic
and cultural success story
This research, commissioned by Games are global
video games trade body Ukie and There are currently an estimated 1.6 billion people
conducted by Olsberg SPI, was playing games worldwide, a market which is only set
carried out in the second quarter to grow. On conservative projections, it is estimated
of 2015. It is based on a series of that the games market will reach £82 billion by 2020.
confidential consultations with
more than 40 stakeholders from Games mean choice
across industry and government. Video games offer an extremely wide choice of
Games are In addition, it consists of a content across a large range of devices, platforms
now as much literature review of more than 60 and products. Games are played by 21 million people
a part of reports, evaluations, and policy in the UK – 44% of games players are female and
our cultural proposal documents from recent 22% in the 45-64 age group.
conversation years, relating both to the UK and
as film, music to the global games industry. Games are more than ‘just entertainment’
and TV. Games are beginning to reach beyond leisure into
education and healthcare to provide wider social
impacts and technology spill overs.
Games are the future
The scale of opportunities for both the creative
and tech sectors as a result of new technologies
is enormous – Artificial Intelligence Data Science,
emerging Virtual Reality and Augmented Reality
products are expected to be high value growth
markets in games and also apply to other sectors.
Globally the markets for eSports and games video
content are also growing.
Games are mainstream culture
Games are now part of the UK’s cultural
conversation. Games are cultural artefacts in their
own right as well as spaces where new cultural
experiences and value are produced.
08/ EXECUTIVE SUMMARY THE UK VIDEO GAMES SECTOR /09
a blueprint for growth
The fast evolving UK sector 21st Century Skills - STEAM
Games require a blend of Science,
Growing domestic
Games are growing Technology, Engineering, Art and Maths to consumer market
maintain its competitive position globally.
The UK is home to nearly 2000 The UK is the sixth
games firms ranging from Games mean jobs largest games market
new micro-studios developing across the country in the world.
games for the burgeoning Games companies generate high-quality,
high-productivity jobs, with an average GVA
mobile market, to internationally per worker in 2014 of £68,250. These jobs are
respected independent studios, increasingly spread across the UK, with 12
to large UK and international established and six emerging games clusters
across the country. The UK now boasts the
publishers. Sixty-four percent of highest number of mobile games jobs in the
all registered games companies EU, with 5000 full-time employees.
in the UK were incorporated in
the last five years, supercharged Games tax relief
by the smartphone revolution. means business
The VGTR is a major boon for the UK games
sector. In the first half of 2015, a total of 89
games received interim and final certification,
with a total budget of £348.9 million.10/ EXECUTIVE SUMMARY THE UK VIDEO GAMES SECTOR /11
a blueprint for growth
Getting the support right
• Games are a relatively new creative industry, and despite
progress over the last Parliament, public funding for the
sector is still poorly understood, coordinated and designed.
This inhibits further investment, growth and exports in one
of the UK’s fastest growing export sectors.
• 95% of UK games businesses are Small and Medium-
sized Enterprises (SMEs), with 64% of these being first
registered in the last five years – further resources are
needed to scale these businesses up and continue to
develop supportive clusters outside of London.
• The ‘war for talent’ remains a major challenge and the
UK requires skills development from school age onwards.
Failure to recruit and retain the best talent can lead to
investment locating elsewhere.
• Since 2008 the games industries of Canada, South Korea
and the Nordic countries have grown fast – clusters in
these countries all benefit from consistent support and
incentives from their national and regional governments.
• The games sector relies on innovation and creativity –
policy should encourage more risk-taking to help the UK
to continue to create cutting-edge world class interactive
entertainment.12/ EXECUTIVE SUMMARY THE UK VIDEO GAMES SECTOR /13
a blueprint for growth
The solution Support regional growth, FDI Grow, attract and retain
The extra support recommended in this and exports across the UK the best talent
Department
report would result in an extra £1 billion in Drive regional economic growth by
Department
BIS, DCMS, LEPs Support STEAM education in schools, Industry, DfE
annual turnover from the sector by 2020. developing local plans for scaling-up recognising the importance of Art as an
essential discipline at GCSE, not just
existing games clusters.
This extra support is required across the following broad areas: for the Creative Sectors, but for other
Ensure that high-speed broadband BIS, DCMS high-productivity industries including
a. better promotion and coordination as evidenced in other needs are met in games and digital design and engineering.
creative industries; economy clusters by 2020.
Fund early intervention in schools Industry,
b. support for regional growth; Officially benchmark national and BIS in games clusters through 12 Digital DfE, LEPs
regional growth in markets, international Schoolhouse hubs.
c. developing and attracting the best talent; audiences, Foreign Direct Investment
(FDI) and exports. Work with employers to ensure Industry, BIS,
d. the best competitive tax and regulatory climate;
apprenticeship levy funding is DCMS
e. better recognition of its economic and cultural Launch an outcomes-based review BIS appropriate for SMEs and fund Next Gen
of trade and investment support Skills Academy Higher Apprenticeships
value and innovation
for the games sector, considering if by and for games employers.
Introduction of the policies in this report would also open the there is a more efficient model for the
implementation of current funding. The Skills Investment Fund (SIF) DCMS
way to increased innovation with other screen industries in is working to support the industry
which the games industry is uniquely positioned. talent, SIF or an alternative should be
supported over the course of the next
This would in turn generate a mixture of soft power benefits, spending review.
export sales, and high-quality, high-productivity jobs and
Carefully consider plans regarding BIS, Home Office
opportunities for all across the UK. Tier 2 visas, avoiding the implementation
of new barriers for recruiting overseas
talent. Ensure SMEs and start-ups are not
disadvantaged by the new system.
UK and EU funding to fully Create the very best tax Promote games-as-culture
and equitably recognise the environment and digital and celebrate cutting-edge
contribution of games, ensuring marketplace to do business UK innovation
effective support alongside worldwide Department
Examine how innovation incentives can BIS, DCMS
other creative industries Department
be used in emerging High-Value
Department The VGTR has been a welcome boon for HMT, DCMS Opportunities like virtual reality or eSports,
the UK games sector, the government to allow the UK to capture the financial
Ensure all relevant public agencies have DCMS, BIS, public should make sure it remains attractive and cultural benefits these will generate.
a clear mandate to support games, new spending bodies and competitive.
talent and new ideas from the sector. Hold Games Innovation Showcases DCMS,
HM Treasury should also build on the HMT across the country, demonstrating non- Regional Creative
Bring existing agencies together to DCMS, BIS, Institute of Directors’ recent report on games applications of games tech to Agencies
identify additional investment for games public agencies SEIS and EIS, reforming the vehicle to kick-start innovation and cross-sectoral
sector skills over the period of the next make it more appropriate for the games communication.
spending review. Explore case for a sector as well as for other SMEs.
games-specific funding settlement. Create a single UK Games Archive, Industry, BBC
The UK should take an active role in BIS, DCMS, EC drawing together the various existing
The UK should work with the European DCMS, BIS, EC negotiations across the Digital Single projects into a coherent whole. This UK
Commission to help Creative Europe Market portfolio to champion the digital Games Archive should be linked to the
recognise games’ cultural role, and reform creative industries in which it leads BBC’s proposed Ideas Service.
an outdated approach to funding. the continent. The strong, competitive
market that already exists for games
UK Government to lead calls for reform BIS across the EU must be protected
of SIC system at UN and EU level to against unintended consequences from
ensure new industries such as games reforms to consumer law, copyright,
are accurately measured. geo-blocking and other areas.14/ THE UK GAMES SECTOR THE UK VIDEO GAMES SECTOR /15
a blueprint for growth
THE UK Since the early 1980s the UK games UK consumer market 2014
sector has undergone phenomenal and
GAMES rapid growth, exploding from programmer
Digital console and PC
SECTOR beginnings to become a major force in
Boxed software
Console hardware
a major part the global games market. With £3.9bn
consumer revenues in 2014, the UK is Mobile gaming
of economy estimated to be the sixth largest market, Peripherals and accessories
and culture after the US, China, Japan, South Korea Pre-owned software
and Germany.1,2 While current projections Toys
predict that China will overtake the US in
Books and magazines
revenues this year, they also show the UK
will retain its market position in 2018.3
The games industry is expected to be one of the fastest
growing segments of the global media and entertainment
sector over the next five years. Annual global revenues 2%
from games (excluding sales of game consoles and other 3%
equipment) are forecast to grow from £54.3 billion in 2014
to £73.6 billion in 20184 – an annualised growth rate of 7.9%.
Even if annual growth slowed to half that rate by 2020, the 7%
global games sector would be worth an estimated £82 billion
by 2020. 26%
The UK’s success is underlined by the fact a British-made 1%
game – Grand Theft Auto V – is the fastest and biggest-selling
entertainment product of all time. Following its release in
September 2013, this game generated an unprecedented
US$1 billion (£640m) of sales within three days; by May 2015,
it had sold more than 52 million copies worldwide.5 There
are currently an estimated 1.6 billion people playing games
worldwide, a market which is only set to grow.6
14%
This traditional strength in games has been supercharged 24%
since the turn of the decade. 64% of all registered games
companies in the UK were incorporated in the last five years,
representing an annual growth rate of 23%.7 But they are
vulnerable in a highly competitive global digital market.
23%
1
MCV and Ukie, Industry Valuation 2014.
2
Newzoo, Top 100 countries by games revenues, 2015.
3
CGA and Newzoo: US & China Battle for #1,
World’s Top Games Markets, Casual Games
Sector Report 2015.
4
Newzoo, 2014.
5
Guinness, Guinness World Records 2014.
6
Newzoo, Global Games Market Report 2015.
7
Nesta, A Map of the UK Games Industry,
September 2014.16/ THE UK GAMES SECTOR THE UK VIDEO GAMES SECTOR /17
a blueprint for growth
Spending on game software in the UK Total UK games companies by year, 1985 to 201311
(excluding spending on equipment) rose Cumulative
by 8.2% to over £2.6 billion last year.8
New companies
Overall, the sector provided annual
investment of £503 million and employed
13,700 creative staff last year,
an increase of 9.8% from 2013.9 Total
Market penetration 1900
1,861
For the UK public games offer a huge array of experiences: 1800
from easy to pick up snackable games through to immersive,
creative worlds and complex sports simulations across 1700
dedicated consoles, smart TVs, computers, tablets, mobiles
and emerging platforms, such as virtual reality. 1600
With such choice it is unsurprising that games players are
1500
drawn from a remarkably diverse demographic spectrum,
challenging commonly held perceptions of a predominantly 1400
teenage customer base.
1300
While a quarter of all UK players 1200
are 15-34 year old males, 43%
1100
of games players are female and
22% are in the 45-64 age group. 1000
900
Video games are clearly an 800
integral part of childhood – the
700
age bracket with most players
is the 6-10 year old group, where 600
83% play video games. 500
400
Games were played by 20 million 300
people (in Q1, 2015) in the UK,
with 43% of the population 200
consuming an estimated total 100
8
MCV and Ukie Industry Valuation 2014 and 2013
of 170 million hours of games
0
9
10
TIGA, Making Games in the UK Today, 2015.
ISFE/Ipsos MediaCT, GameTrack - Q1, 2015.
content per week.10
11
Nesta, 2014.
Year ’85 ’90 95 2000 2005 2010 201318/ THE UK GAMES SECTOR THE UK VIDEO GAMES SECTOR /19
a blueprint for growth
In 2013 games overtook video in Sales of games, video and music in the UK, 2012-201413
entertainment sales. Games are now the Physical
largest retail entertainment market in the
Digital
UK, representing 43% revenues of the
combined market in 2014. The segment
grew by 7.5% while video and music £3.0bn
decreased.12 This sales growth has been
+7.5%
generated over an increasingly complex
£2.4bn
range of products and platforms, and has £2.5bn
-1.4%
transitioned from boxed physical to digital £2.2bn
£2.3bn
£2.2bn £2.2bn
products, as well as a blend of both. £2.0bn
£2.0bn
£0.9bn
£1.5bn
£1.0bn
-1.6%
£1.0bn £1.0bn £1.0bn £1.0bn
£1.0bn £1.4bn
£1.6bn
£0.5bn £0.5bn
£0.5bn £1.8bn £0.6bn
£1.0bn £0.4bn £0.4bn £1.3bn £0.6bn £0.5bn £1.5bn £0.8bn £0.5bn
£0.0bn
Games Video Music Games Video Music Games Video Music
2012 2013 2014
12
Entertainment Retailers Association, Yearbook 2015.
13
Entertainment Retailers Association, Yearbook 2014.20/ THE UK GAMES SECTOR THE UK VIDEO GAMES SECTOR /21
a blueprint for growth
The UK games sector is always innovating There have also Overall UK games market value:
At the heart of the success of the sector is its constant been significant £3.944bn14
innovation. Ground-breaking video games such as the advances in how
Batman Arkham trilogy, DJ Hero, Elite, Fable, Goldeneye,
the Grand Theft Auto series, Guitar Hero Live, LittleBigPlanet, games are sold in
Monument Valley, Moshi Monsters, Populous, RuneScape, the UK and across
Tearaway, Thomas was Alone, Tomb Raider, Until Dawn and the globe. Today
Worms are the brainchildren of UK developers.
consumers benefit
from 22 digital
UK games designers have created games services £1.048bn £915m
new genres, from massively (including mobile,
Digital Console and PC Console Hardware
Up 17.6% Up 46.2%
multiplayer online games to social and cloud) (Revised 2013: £891m) (2013: £626m)
artificial life games, inspiring new in the UK, giving
Source: IHS Source: Gfk Chart-Track
industries and the next generation
of developers.
a huge range £288m £106.8m
of choice. Peripherals and Accessories Pre-owned Software
Up 4.3% Up 10.7%
(2013: £276m) (Revised 2013: £96.4m)
Source: Gfk Chart-Track Source: Kantar Worldpanel
UK also leads in the development
Boxed Software
of other genres, including real-time £23m Down 6.3%
strategy, racing and role-playing Books and Magazines
(2013: £998m)
Source: Gfk Chart-Track
games. Up 77%
(2013: £13m)
Source: Nielsen and Industry Estimates
£935m
Toys
The game-playing experience £548m Down 14%
(2013: £80m)
is also being augmented by Mobile Gaming Source: NPD
Up 21.2%
increasingly sophisticated use (Revised 2013: £452m) £69m
of Artificial Intelligence (AI) Source: IHS
and Big Data to constantly Movies and Soundtracks
improve gameplay, feedback, £5.5m Down 21.7%
(2013: £6.9m)
Events
and interactivity. Up 96.4%
Source: Official Charts
(2013: £2.8m)
Source: MCV Estimates
£5.4m
14
MCV and Ukie, Industry valuation 2014.22/ THE UK GAMES SECTOR THE UK VIDEO GAMES SECTOR /23
a blueprint for growth
The UK games sector grows with every new innovation, with UK digital revenues: microtransactions
expansion over the last 5 years supercharged by the evolution
of mobile gaming and new business models. dominate as revenue stream17
The UK now boasts the highest number of mobile games Microtransactions revenue
jobs in the EU, with 5000 full-time employees in Britain.
Full game revenue
The freemium or in-game purchasing model has allowed for
experimentation at no cost to the consumer, building ever Additional content revenue
bigger audiences - 21m European players downloaded a
freemium game in April-May 2015.15 Subscription revenue
The majority of these consumers enjoy all their games
at no cost: one of the market leading companies found
that only 4% of their monthly unique users made in-app
purchases.16 With a thirst for even bigger audiences and
markets, European developers generate more than two thirds
of their revenues outside of the EU in the USA, China and
Japan. Last year six out of 10 apps in the iOS and Google Play
stores were made by companies headquartered in Europe.
£1,000m
£883.5 £908.7
The UK also has a world- £900m
class reputation for its robust, £775.6
advanced middleware and other £800m
technologies and techniques, such £700m £609.7
as motion capture and motion
controls. In addition to the talent £600m
brought to the industry by an £500m
international workforce, games
£400m
companies boast internal research
and development programmes £300m £384.3
that ensure technological £200m
excellence that is transferable to
other sectors. The games sector £100m
has also been at the forefront of 0
the developments in data sciences Year 2010 2011 2012 2013 2014
and cloud-based applications,
which are often leveraged to
break ground in other high-impact
sectors.
15
Deloitte Mobile games in Europe - Innovation in
European Digital Economy 2015.
16
ibid. The average expenditure of paying users
across the market is £3/month.
17
SuperData Research digital revenues.24/ THE UK GAMES SECTOR THE UK VIDEO GAMES SECTOR /25
a blueprint for growth
Games clusters in the UK A map of the UK games industry21
The games sector creates jobs and
opportunities across the country.
Overall there are nearly 2000
video game companies in the UK,
of which 95% are micro or small
businesses.18 Among the 18 areas
with a critical mass of more than 20
games companies, 12 have been
Nesta’s 2014 identified as having the highest
analysis showed levels of games concentration (by Dundee
that there are employment or company number): Edinburgh
significant Brighton, Cambridge, Cardiff,
levels of co- Guildford and Aldershot, Edinburgh,
location between Dundee, Liverpool, London,
games and other Manchester, Oxford, Sheffield Manchester
and Rotherham, and Warwick and
creative sectors, Stratford-upon-Avon. While there Liverpool Sheffield and
making it clear is a strong concentration of games
Rotherham
that the sector in London and the South East, the
Warwick and
Stratford-upon-Avon
has become an Midlands, North of England and Cambridge
integral part of Scotland have a higher presence of Oxford
the UK’s wider video games companies than other London
creative economy creative industries,19 with 70.2% Cardiff Brighton
of games companies based Guildford and
outside London .20 Aldershot
18
Nesta, 2014.
19
ibid.
20
Nesta, 2014.
21
Nesta, 2014.26/ THE UK GAMES SECTOR THE UK VIDEO GAMES SECTOR /27
a blueprint for growth
Companies by region and nation Distribution of video games companies
by region/nation (percentage of total)22
The UK is a leading investment South of London
destination for overseas games England 29.8%
companies.
South East
18.2%
Recent examples of overseas investment include Warner
Bros’ acquisition of Rocksteady (the developers of the South West
Batman Arkham series) and TT Games (who developed the 6.6%
LEGO series).
The UK is also home to the European head offices of several
Midlands East
international games publishers such as Konami, Microsoft 7.9%
and Rockstar (Take Two) – as well as Sony PlayStation.
Consultations suggest that these firms are typically located in West Midlands
the UK to take advantage of the large local market for games 7.7%
combined with Britain’s access to the Single Market. Other
attractors include the presence of an established advertising East
Midlands
sector in the UK, and the UK’s generally supportive 4.5%
business climate. It remains the case that the UK faces stiff
competition from start-up friendly locations such as Berlin,
North of North West
Scandinavia and North America for a variety of reasons. 8.8%
England
The local support offered by Local Enterprise Partnerships
(LEPs) and councils - often crucial in these competitor Yorkshire and
markets - can however be varied and hard to access for many the Humber
5.6%
micro studios in particular.
North
East
2.6%
Rest of UK Scotland
5%
Wales Number of games companies
2% 25 566
Northern Ireland
1.3%
22
Nesta, 2014.28/ THE UK GAMES SECTOR THE UK VIDEO GAMES SECTOR /29
a blueprint for growth
Talent Preliminary estimates of the economic
UK games firms employ a highly skilled workforce that contribution of the games sector value chain
possesses leading technical and creative expertise. in the UK, 2014 (2013 figures in parentheses)27
According to Creative Skillset, 86% of games sector workers
possess at least a degree: this compares to 32% for the
whole UK population. Additionally 27% possess a post-
graduate qualification.23 Employment costs account for over
75% of the games development sector’s GVA.24
In labour productivity, games
is second only to the television
programing and broadcast sector;25
in 2013, GVA per worker in the
games sector was £63,910.
This figure was approximately
£9,000 higher than the third
highest industry, sound recording
and music publishing, and more
than double many other creative
industries, such as film production
and distribution, performing arts,
and design.26
Development† Publishing†† Retail†††
This workforce is a benefit not only to games companies, but
to other sectors of the UK economy that rely on technical and 10,300 FTEs 3,400 FTEs 5,100 FTEs
creative talent to drive innovation. Workers in this sector are (9,400 FTEs) (3,100 FTEs) (6,000 FTEs)
increasingly sought-after by other games companies in the
GVA: £700m GVA: £235m GVA: £151m
UK and abroad, representing a ‘war for talent’. Development
(£639m) (£211m) (£177m)
and therefore studio investment decisions are made on where
the best talent and teams are, which makes the recruitment
and retention of the best a top priority. Increasingly other
sectors, including fintech, and other territories such as North 18,800 FTEs (18,500 FTEs)
America are providing a harder ‘pull’ for the best staff.
23
Creative Skillset, Workforce Survey, 2015.
GVA: £1,085m (£1,027m)
24
ONS (2014), “Annual Business Survey – 2013
Provisional Results: Standard Extracts”,
13 November 2014. Data for SIC 62.01/1 Ready-
made interactive leisure and entertainment soft †
Source: TIGA and Games Investor Consulting
ware development has been used as a proxy for
the whole game development sector.
††
Assumes a growth rate of 10% in accordance
25
Olsberg•SPI analysis of Creative Industries with growth in the development sub-sector
Economic Estimates 2014. †††
Includes physical boxed software, digital console
26
Olsberg•SPI analysis of Creative Industries and PC mobile gaming, and sales of pre-owned software
Economic Estimates 2014.
27
Olsberg•SPI estimates.30/ THE UK GAMES SECTOR THE UK VIDEO GAMES SECTOR /31
a blueprint for growth
Games as culture
In addition to their own inherent cultural and artistic Minecraft
value, games are also a part of the broader national (and
Representing something of a blank
international) cultural conversation. Indeed, some games have
canvas on which to frame other
gone beyond being cultural artefacts, becoming platforms
creations, Minecraft has proven
and communities where new cultural content is created.
particularly adept in fulfilling this
In 2008, the National Media Museum (Bradford), Bath Spa cultural role. Recently, this has
University and Nottingham Trent University joined forces to included projects to help children
create the National Videogame Archive. This was followed in explore different cultures – through
March 2015 by the launch of the National Videogame Arcade. the recreation in the software of
Modelled on the BFI, the National Videogame Arcade is key religious sites – and of the
designed to give the general public a deeper understanding creation and meaning of artworks,
and appreciation of games through an assortment of education though the Tate gallery’s Tate
programmes, an in-house archive and research tools, and Worlds project.
public events. The British Library has also begun the process
of archiving videogame websites to preserve gaming culture
for future generations.32/ THE UK GAMES SECTOR THE UK VIDEO GAMES SECTOR /33
a blueprint for growth
Social impact
As the UK games industry has grown it has established its own Case-study:
corporate social responsibility and charitable initiatives. The Digital Schoolhouse
games industry charity GamesAid maintains a £1.7m fund to
invest in charitable projects for disadvantaged children. The London programme
War Child initiative for Syrian refugees HELP: Real War is Not a The Digital Schoolhouse model,
Game, to be released on Steam in 2016, is a collection of digital funded by the Mayor of London and
games developed at the UK’s top studios and represents a Ukie, addresses teacher subject
transition from the eponymous charity music compilation specialism shortages with the new
album 20 years ago to today’s ‘game album’. Participating computing curriculum introduced
studios include A Brave Plan, Bossa Studios, Carbon Games, in 2014. It currently works with
Curve Digital, Hardlight, Sports Interactive, and Torn Banner. games companies, schools and
Special Effect, based in Oxfordshire, uses interactive universities to develop programming
technology to enhance the quality of life of people with all and computational thinking into
kinds of physical disability needs, including stroke and road computing lessons using a Science,
traffic accident patients, individuals with life-limiting conditions Technology, Engineering, Arts and
and injured soldiers returning from overseas. Maths (STEAM) approach. Over
Other initiatives, such as the Video Games Ambassadors, 2014-15 5,576 primary school pupils
part of the STEMnet Ambassadors network, pitch games participated and 600 teachers were
professionals into schools and key consumer events across supported through 192 enrichment
the country to talk about careers. days using materials mapped to
the new curriculum. Teachers were
Education and games development trained in new subject knowledge and
pedagogy by Queen Mary University
as life skills of London and Kings College, London.
Games companies are at the forefront of edtech innovation Partnerships have been established
in the classroom. British interactive learning software is with games industry partners such
distributed around the world, and the UK showcase event as Disney, Kuato Studios, Playniac,
at BETT. Key examples include Moshi Monsters, a globally Code Kingdoms and Video Games
successful online game made by British entertainment Ambassadors to use games products
company Mind Candy, and games made by Yellow House to explain computing concepts in
English, which help teach English as a foreign language to new ways. Specific work with edtech
very young children. Indeed, with guidance, most mainstream firms such as 3Doodler, Apps for
games can be used for learning purposes in the classroom. Good, Cannybots and Tech Will Save
The skills in developing games are also a fusion between team Us is allowing the development of
work, art, design, engineering, science and programming. new technologies and methodologies
The Next Gen. report in 2011 identified a major deficit in the within education, such as: using
UK education system, which was failing to adequately train embedding 3D technologies; using
the next generation of talent for a truly creative, diverse digital Arduino’s and Raspberry Pi’s;
economy, and worked with the government to develop the and exploring cross-collaboration
new Computing curriculum in 2014.28 Games companies work between them.
directly in schools with start-ups such as Code Kingdoms and
projects like Digital Schoolhouse, mapping games products to
the new curriculum, and working with digital learning initiatives
to develop new teacher pedagogy.
28
Nesta, Next Gen. Transforming the UK into the
world’s leading talent hub for the video games
and visual effects industries, 2011.34/ THE UK GAMES SECTOR THE UK VIDEO GAMES SECTOR /35
a blueprint for growth
The consumer is central Future trends – VR, eSports
As an industry so dependent on a dynamic and constant and game content The demand for games
relationship with customers, the UK and European video While the growth potential of emerging
video content is growing
games industries have developed practices and policies technologies are, by their nature, unknowable, rapidly in popularity
which have precluded the necessity of regulations which are
seen in other entertainment industries. The Pan-European
the current opportunities in Virtual Reality through platforms such
and Augmented Reality are vast if they are
Games Information (PEGI) ratings system is an example embraced by the mainstream customer.
as Twitch and YouTube.
of this, with the sector having developed a model for age
Oculus Rift is one of many virtual reality
The global games video
classification of video games which is much clearer and more
detailed than its film or TV equivalent. This model works on headsets in an increasingly competitive content market is worth
a pan-European approach, ensuring comparability between market. VR and AR are going to be powerful £2.5bn in 2015. The
drivers in PC and console growth, requiring
products from one country to the next. It also led on the
better hardware to deliver new experiences.
majority of the revenue is
development of technical parental controls on games devices
Games have to make it easier to protect minors. Digi-Capital has forecast that augmented and located in North America
made the virtual reality will be worth £97 billion globally (39%, £963m) and Europe
by 2020, with AR predicted to reach 4 times
transition to The sector has also worked with what VR will. The creation of games entails
(30%, £737m) mainly
authorities at the national and advertising revenue and
digital very well, the development of software and hardware
technologies that can be applied in other sponsorship and from
and other sectors European level in areas such as fields – from medicine through design and
consumer protection and child direct sources like paid
look to games education. Many of the recent advances in
subscriptions.30
safety. In all such areas, industry virtual reality and motion control technologies
as being more action innovated in advance of
have originated in the games sector.
comfortable in government intervention, with
Meanwhile, the demand from games players
the digital era the sector either working with
to celebrate games as part of their everyday
culture is increasing. The way audiences
Fiona Clark- the authorities or operating on engage with games, their makers, and other
players is evolving, with eSports (tournaments
Hackston, its own initiative, to the benefit played by teams of professional highly
BSAC of the consumer. This industry- trained ‘cyberathletes’) being a fast-emerging
led development has now been trend, having already become mainstream
in countries such as Germany, South Korea
adopted globally, with IARC and the USA. This is exemplified by the recent
becoming a one-stop ratings shop International DOTA 2 Championships, which
which has been adopted into were held over six days in a 17,000-seat arena
in Seattle, for which tickets sold out within
stores such as Google Play. five minutes of going on sale, with a record-
breaking prize pot, mostly crowdfunded.
More than 20-million viewers watched the
tournament online and thousands more filled
the Seattle Center. In 2013 the US began
granting visas to eSports players, just as they
do professional athletes.29
29
The Daily Dot, First ‘Star Craft 2’ player officially
recognised as an athlete by U.S. government,
11 Dec. 2013.
30
SuperData Research, July 2015.36/ THE UK GAMES SECTOR THE UK VIDEO GAMES SECTOR /37
a blueprint for growth
Existing government interventions Many advances in games hardware and
With this story of UK and global growth the games industry
software that could benefit other sectors of In the first half of 2015,
the UK’s knowledge-based economy can
is currently supported by two specific initiatives as well as a only come through experimentation. In a
a total of 89 games
range of other measures designed to support the creative and globally competitive sector such as the games received tax relief
tech sectors generally. This backing is important not least due
to the existence of incentives, public support and/or tax breaks
sector, small games companies have very certification - 40 final
few resources available to devote to such
in competitor countries such as USA, Canada, Germany, South experimentation, let alone to complex funding
certification and 49
Korea and Japan. application processes. Smaller scale but active interim certification,
intervention to stimulate start-ups is available meaning the games have
The primary mechanism is the through the newly-extended Prototype Fund,
not yet been completed.
which provides grants of up to £25,000 for
VGTR introduced in 2014 enabling small companies for the development of Between them, these
companies to be eligible for a games or other forms of interactive digital 89 games have a total
payable tax credit worth 25% of content. The Prototype Fund goes some way
budget of £346.8 million,
to making experimentation more viable for
qualifying development costs. VGTR small companies, and initial evidence suggests of which £290 million is
builds on the successful model that it is having success in helping companies being spent in the UK
of the film tax relief which can be develop technologies, content and IP for use
or EEA.
outside their original games-based application.
claimed on production expenditure
The original Abertay University-based
in the UK, and the new High-End TV programme gave finance and business
and animation tax reliefs. development support to over 70 of the UK’s
game development companies between 2010
and 2014, with nearly 400 applications assessed
along the way. Many of those supported were
The first year of its operation saw in the start-up / micro studio category vital
positive impacts, with the sector to building the critical mass needed to create
seeing over 4% growth in high- original games IP in the UK. The Video Games
Prototype Fund has been renewed with a
productivity development jobs £4m investment announced in the July 2015
during 2014, contributing to an Budget, following a track record of significant
overall 5.6% increase to £1.1 billion additionality in the pilot programme.
in GVA. The first year certification Games companies also benefit from a range
of measures open to other tech and creative
numbers compare favourably to sectors, ranging from R&D credits and
the anticipated number of projects Enterprise Investment Scheme (EIS) through to
when the relief was announced.31 Skills Investment Fund (SIF) support. However,
in comparison the relatively recent growth
of the games sector has meant that public
interventions to support the industry
lag behind other industries, particularly film,
and consultees noted that these do not
address specific market failures identified
by the industry.
31
The pre-incentive projection anticipated £10m
incentive spend in the first year and £35m in the
second, but did not convert this into an anticipated
number of projects.38/ THE UK GAMES SECTOR THE UK VIDEO GAMES SECTOR /39
a blueprint for growth
Market failures Externalities occur when market value Coordination failure refers to a situation
does not fully reflect the benefits or costs where a lack of coordinated decision-making
that a good generates for society, resulting amongst economic actors – including firms –
This research has identified a in over – or under-supply. In the games means that the level of output diverges from
range of market failures which sector, these include a variety of issues, such the socially optimal level. Within the games
as the supply of culturally relevant games, sector, coordinated industry development –
affect the UK games sector; these experimentation and technology spill overs, the ways in which firms access knowledge,
primarily fall into five categories: skilled labour, and archival assets. talent, finance and consumers – is the
Externalities, Asymmetric Like other forms of media, games provide biggest challenge. In other, similar sectors,
this is solved through mechanisms such
Information, Coordination Failure, their creators with a way of making a cultural
as trade shows, arranged by an impartial
contribution, though there has historically
Additionality, and Equity. These been an under-supply of culturally British coordinating body.
broadly correlate with the Green games. Spill overs, meanwhile, occur when Additionality is not traditionally a market
Book categories of market failure, software or hardware benefits enter other failure, but offers a rationale for intervention
sectors, generating wider and transferable where any economic activity generated is
allowing government intervention. benefits, which the games sector has additional, and not merely displaced from
particular strengths in. another part of the UK. This is of particular
Skilled labour is a particular challenge for interest when we note that in recent years
games, given that development requires a many British games entrepreneurs and highly
highly-skilled labour force, and tends to be experienced creative leaders have left for
labour-intensive. The games sector has a other jurisdictions, such as Canada, as these
mobile labour force as their skills are in high have offered a more competitive market.
demand in other sectors and internationally As the film industry shows though, increasing
– this tends to result in a shortfall. Finally, competitiveness can result in major boosts
archival assets act to preserve British to inward investment. Export benefits through
culture, making knowledge available for the supporting access to markets such as China
development of future games, providing an – improving the UK’s balance of payments
option for future usage, and preserving a position – can also be generated.
store of value for future generations. Though also not a traditional market failure,
Markets operate most efficiently when buyers equity also presents a basis for government
and sellers have equal levels of information. intervention, fixing inequalities across the
Asymmetric information therefore leads population which are inconsistent with
to inefficient allocation of resources in the government policy or the preferences of
economy. In the games sector, this has led to society. Gender, diversity, and disability
financing challenges, as investors struggle to are particular issues in many creative
properly analyse risk in a business or project industries, and form a key reason for
plan. This represents a mixture of the talent- intervention.00 Similarly, regional equity –
driven nature of games companies – which ensuring the redistribution of economic
increases risk – financiers’ lack of knowledge growth outside London and the South East
of the sector, and games’ companies creative – and intergenerational equity – ensuring
focus, which can often lead to challenges in well-paying jobs for young people from all
communicating with the financial community. backgrounds – are of particular importance.40/ THE UK GAMES SECTOR THE UK VIDEO GAMES SECTOR /41
a blueprint for growth
Further steps 1.Better promotion and
coordination knowledge, talent, The games industry
To support the UK games industry today is represented
financing and access to markets can all
reaching its full commercial and be pooled between companies to shared to government more
cultural potential, targeted government benefit. Models for this exist in other
effectively than it
interventions in the following areas creative and technology industries.
ever has been before
were identified as industry needs: 2.Regional growth thanks to the primarily through the
strongly regional nature of the games
industry, further growth is likely to address
Creative Industries
the government’s concerns over regional Council and its work
equity. It will also produce a high proportion on access to finance,
of graduate jobs and skilled apprenticeships
across the country.
IP, skills, infrastructure
and international trade.
3.Talent as a high-knowledge, high- However, the following
creativity industry, recruiting and retaining
the best talent is fundamental. Continuing
five recommendations
talent shortages are having an impact on and actions for
current and potential growth. government, public
agencies and industry
4.Regulation and incentives
will significantly boost
should support ‘additionality’
the global nature of the games industry the industry in its
means that intervention to support ambitions to grow
growth will most likely generate additional even faster and be
economic activity, rather than take from
elsewhere in the economy, through exports, even more competitive
inward investment, and repatriation of UK- internationally.
bred games companies. Conversely new
requirements which increase regulatory
burdens on the creative and tech sectors
could restrict growth and additionality.
5.Recognition understanding the
potential for growth in new technologies
will accelerate the commercial growth
of domestic companies and increase
the likelihood of spill overs. Greater
contribution of games to British culture will
support long-term talent development as
well as a range of new opportunities for the
sector as a whole.42/ RECOMMENDATIONS THE UK VIDEO GAMES SECTOR /43
a blueprint for growth
RECOMMENDATIONS Recommendation 1
UK and EU funding to recognise the
contribution and modern nature of games,
ensuring effective support alongside other
creative industries
With the VGTR now in place the UK government will be keen to ensure that the
new policy is as effective as possible.
An important element of this is the availability and design of public funding
support. Where support already exists for games our research identified a lack
of coordination amongst agencies, coupled with low industry awareness of what
is available. Consultees believe that reform and consolidation of funding is vital
We will look at to unlock the full cultural and commercial benefits offered by the introduction
of VGTR.
the wider support Support funding - the film model
for games as an National and regional bodies, led by the BFI, provide support to the film sector
to tackle cultural and economic market failures through a diverse series of
important part of programmes. These include:
British culture, • BFI Film Fund (£26m) for development, production,
distribution and export
including the • BFI support for film abroad (£1.5m)
role of the BFI, • BFI/Creative England Film Business Support scheme (£2m)
to improve growth and sustainability
the Arts Council, • BFI Creative Clusters Challenge Fund (£250k) to strengthen
Creative England regional hubs
• BFI support for production of micro-budget films,
and other bodies e.g. Triangle, iFeatures, and Microwave
• Creative England’s Innovation and Creative Hubs
Ed Vaizey, - supporting regional development
Develop:Brighton • Ffilm Cymru development and production funding
• Wales Screen Commission and Welsh Government incentives
speech 2015 • NI Screen incentives
• Creative Scotland’s new £1.75 million Production Growth Fund32
• Screen Yorkshire’s Yorkshire Content Fund - leveraged £30m
investment with ERDF funding
The success of the UK film sector in attracting inward investment, growing domestic
talent, and expanding its global cultural and economic reach, has been accelerated
over the last decade by combining an effective tax relief system with this wider
array of support functions. Consultees to this research felt that to see the full
impact government intends from VGTR, equivalent support functions and funding,
appropriate to the games industry should be put in place.
It is recommended that the games industry be given access to the same industrial
and cultural funds – including National Lottery money – that other creative sectors
receive. Funding to improve investor readiness and commercial management,
support cultural production, improve access to markets, foster regional hubs,
develop talent, grow awareness among investors, and other functions, will unlock
the full long-term cultural and commercial potential of the UK games industry.
32
Creative Scotland, “Growing film and TV production
in Scotland”, retrieved from website 15 Oct. 2015.44/ RECOMMENDATIONS THE UK VIDEO GAMES SECTOR /45
a blueprint for growth
This support would not only reflect the audience value of the games sector, but European funding
also be a foundation for the emergence of new products, innovation and culture. European funding has also played an important support role for the creative
Of central importance is ensuring that existing agencies are clearly empowered to industries. In particular, the MEDIA strand of Creative Europe offers funding to
support games, invested in doing so, and their efforts coordinated. Government support distribution, audience development, access to new markets, cooperation
funding for this should be additional to existing funding for the creative sector. projects, international coproduction, and support for festivals, amongst others.
These totalled €27.9 million (£19.7m) in 2014, but have yet to be accessed
ACTION: Ensure all relevant public agencies have a clear sufficiently, if at all, by the games industry, and in many cases have clearly not
mandate to support games, new talent and new ideas from been designed with the games industry in mind.
the sector. Rather than access to these broader funding streams, games companies have
been restricted to a single production support fund with a total of €2.5m (£2m)
While such support currently exists, in this research it proved impossible to
across all member states - just 1.2% of Creative Europe’s total annual budget.
determine the exact volume of funding to which games companies in the UK
This fund is only open to an outdated notion of ‘narrative’ games – excluding a
can have access. This reflects the plethora of small, disparate, and often badly-
majority of innovative and culturally valuable European games.
tailored funds to which games companies currently, in theory, have access to. This
underlines the need for greater coordination as well as better data. Reforming these structures to make them comparable in scale and scope to
those offered for other sectors, and more reflective of the true cultural nature
The 2014 Nesta Working together of games, would be a major boon for the games sector in the UK and Europe,
map found Many agencies are already experimenting with support for games. Arts Council
England are opening some cultural funding to games. The British Council
underpinning growth.
that two thirds provide assistance to the UK’s arts community through a range of projects
and programmes, including showcasing the UK’s artists and brands, building
ACTION: The UK should work with the European Commission
to help Creative Europe recognise games’ cultural role, and
of UK games opportunities for collaboration and exchange, and supporting artists to visit other reform an outdated approaches to funding.
companies are countries for research or development. They are actively looking into how this can
be extended into the games sector. Getting the data right
not captured An effective strategy will bring this existing work together and coordinate it to An accurate understanding of the current size and status of the industry is
by official amplify its effects, ensuring also that application processes are streamlined.
This will help identify where further interventions can have most impact, targeted
needed, so that progress against this report’s proposals can be benchmarked.
It is particularly crucial that the government’s own estimates are dependable as
SIC codes.33 to avoid duplication of effort. This would also significantly improve industry
awareness and understanding of what is available.
they will be the basis on which policy decisions are made. This was demonstrated
in Scotland, where a 2012 report valued the sector at zero, despite the presence
By providing such support the full impact of VGTR can be unlocked, offering start- of a key cluster in Dundee.34
ups in particular opportunities to grow, learn and connect with wider networks, The official statistics do not properly represent the games industry.
and emerging talent can be encouraged to stay in the UK. Initially, this model In particular, there is a weakness in the Standard Industrial Classification (SIC)
should be adopted through the opening-up of existing funding providers, though code system. There are two codes representing the core of the games industry:
the impact and efficiencies of a games-specific Lottery and public funder should one for games publishing and one for games development. The latter however is
be investigated. a sub-code, included within a general ‘computer programming activities’ code.35
ACTION: Bring existing agencies together to identify This makes it impossible to accurately measure the whole size of the industry,
additional investment for games sector over the period of particularly with so many new companies forming in the tech sector. As a result,
DCMS’ annual economic estimates do not directly address the games industry.
the next spending review. Explore case for a games-specific
The two games SIC codes are included as part of the “IT, software and computer
funding settlement.
services” sub-sector, and games are only discussed directly in a separate annex.
33
Nesta, 2014.
34
DC Research, Economic Contribution Study, June 2012.
35
This report presents the latest information available,
including primary research from Olsberg•SPI.You can also read
