After three years of decline, the UK games industry has bucked economic trends and entered a period of growth according to a new report from trade body, Tiga.
Based on a survey of developers conducted by Games Investor Consulting, the sector grew by four per cent in 2012, with the number of development studios rising from 329 to 448 between 2011 and 2012. The number of creative staff working directly on game development has increased as well, from 8,888 to 9,224. Tiga has calculated that the industry's annual contribution to UK Gross Domestic Product is now £947m, up from £912m two years ago.
"The increasing prevalence of mobile and tablet devices have created a growing market for games: studios are setting up to meet this demand," said Tiga CEO Richard Wilson. "The closure of big console-based studios has been followed by an explosion of small start-up companies."
Wilson also believes that the government's decision to provide the sector with creative industry tax breaks is already having a positive effect on inward investment, despite the fact that developers are unable to apply until next month. Since the announcement, Activision Blizzard has founded a mobile studio, The Blast Furnace, in Leeds, while Japanese social gaming giant Gree has opened a UK office. Furthermore, Konami has set up PES Productions in London to work on its long-running football series, and Microsoft has started the digital-only studio Lift in London. "Jobs and investment in the games industry are set grow further once Games Tax Relief comes into effect from April 2013," said Wilson.
Last year, the University of Abertay set up a prototype fund for start-up games studios, and director of business development Paul Durrant believes Tiga's findings are reflected in the level of interest he has received. "We've seen over 300 applications come in – not all of those are from different companies, but there has been a large number of studios applying to us. Out of those we've funded 63 so far. We've got an interesting situation where a lot very experienced staff who've worked for big name console developers have for various reasons gone into start ups and I'm sure that's swelling numbers. Many of those are chasing the Holy Grail of direct-to-consumer opportunities through social, mobile and casual games."
Indeed, the British industry has seen a major shift in development behaviours as larger developers have closed, often spawning several smaller studios in their passing. When veteran Liverpool studio Bizarre Creations was shut by its publisher Activision in 2011, at least two studios – Hogrocket and Lucid Games – were formed by ex-staff: both of those started out with iOS projects. The closure of Black Rock in Brighton again spawned at least four new developers: Shortround Games, West Pier, Boss Alien and Roundcube, and again, a majority have concentrated on the iOS market.
The big question is over how sustainable the growth is if it is reliant on the smartphone sector. New studios going in to Apple and Android development are entering an incredibly competitive market, where hundreds of new game titles are released every week. Only a tiny percentage will ever see the sort of financial rewards enjoyed by developers of titles like Angry Birds and Temple Run. The Tiga report concedes that 21% of the UK studios started up in 2010 have since gone under.
Frank Arnot was the studio director at successful Dundee developer 4J Studios, before leaving last year to set up Stormcloud Games. He recognises that, while the Tiga report is positive, it hints at an industry saturated with start-ups. "There are a lot of talented people deciding to get back to the simpler days of smaller teams and smaller projects," he says. "We're all vulnerable. Finding work-for-hire is a challenge because there are a lot of people doing great stuff. But we really wanted to explore our own IP and it's difficult to do that in the console space."
Stormcloud's answer has been to seek out an unconventional licensing arrangement. The company's first project is Paper Zoo, an iOS game in which players craft cute origami animals and then care for them. Through enterprise agency Scottish Development International, the team managed to get in touch with Japanese origami expert, Fumiaki Shingu, and will release the game as Mr Shingu's Paper Zoo, reflecting the hugely successful Nintendo title, Dr Kawashima's Brain Training. "His website has 10 million visitors a year - we hope that will give us a bit of traction to get us started," says Arnot.
Elsewhere, game development graduates who go on to set up their own studios are finding the transition into a business environment difficult. "As a gamer, the Tiga report has made me happier," says Sophia George, the creative director at Swallowtail Games, which won a Bafta for its debut iOS title Tick Tock Toys. "It's great that we've had some growth in the UK, it might mean more ambitious projects. But as an indie it doesn't mean that much to me.
"I'm talking to investors now and it's terrifying. We're speaking to people about contract work, about studio space... it's all a bit up in the air. I've been at university for four years and it was really focused on creativity and innovation, but we didn't learn that much about business – it's all really new to me. I'm worried about taking loans – if I can't pay it back, I'm screwed. I've got to be so careful. I know a lot of young studios in the same situation and we're just not sure who to turn to for advice."
Both Tiga and fellow trade body UKIE are looking to set up programmes to help small studios. "Our top priority is to assist developers and digital publishers to build sustainable businesses and so we intend to provide events and best practice information on these vital commercial skills," says Wilson.
However, in a crowded and highly competitive market, it's inevitable that many of these studios will fail. So is the optimism of Tiga's report misplaced? "I think there will be quite a lot of churn," says Durrant. "However, it's very similar to the classic innovation funnel: from a UK perspective, we need to have high numbers of start-ups to get a small number of successes. And if there are closures, I think that would be a temporary blip before those more successful studios began to grow and acquire staff.
"But yes, there's a huge fragility to a lot of these companies - a shortage of working capital is prevalent and everything depends on getting some success with their first IP. Some of the teams coming into this sector from console development have lived in a very different world, where the publisher picks up the marketing tab. They're having to learn by the seat of their pants."
The Tiga report, 'Making Games in the UK Today. A Census of the UK Developer and Digital Publishing Sector', is due to be published in March.
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