SpawnPoint - Where Game Begins

NESTA report

NEW REPORT PREDICTS SLUMP IN GLOBAL RANKING FOR UK GAMES SECTOR

NESTA calls for immediate government and industry action to rescue games sector

The UK computer games development sector is at risk of losing its competitive edge and being overtaken by Korea, Canada and China in 2009 due to a severe skills shortage, funding crisis and the industry’s poor record for online development, according to a new report released by NESTA (National Endowment for Science, Technology and the Arts) today.

The report, Raise the Game, looks at the competitiveness of the UK’s games development sector and the impact that government support in other countries is having on retaining UK talent in an industry that has a projected global turnover of £46 billion in 2010. Video games sales are expected to overtake music and DVD sales in the UK; and currently generate a global annual growth rate of 11.4%.

The report concludes the UK games development sector will slip to 5th position in the global rankings in 2009 – a further slip from 3rd position in 2007.

“UK videogames producers are recognised to be amongst the most innovative in the world. Our recommendations offer ways that the Government can boost the power of this sector so that we maintain our strong global position” said Jonathan Kestenbaum, Chief Executive of NESTA.

The report details a lack of global scale publishers, limited access to finance and skill shortages as the key factors constraining the UK capacity to generate new games ideas and innovative genres.

Ian Livingstone, creative director at Eidos and ‘father’ of Lara Croft commented on the report findings, “Despite the creative and technical talent that exists in the UK, in the last six years half of the independent development studios have closed or have been bought by foreign companies who see greater value in our studios and intellectual property than we do ourselves. The UK is becoming a work-for-hire nation and this trend seems certain to continue unless government takes action. Cash tills at games stores might be ringing loudly but not through sales of games developed in the UK.”

The report also identifies increased competition from countries, such as Canada, where developers receive government support through generous tax breaks which make it increasingly attractive for studios and developers to relocate there.

“The generous tax breaks on offer from other countries are resulting in a mass exodus of some of the best talent in the UK. In order to put a halt to this, the UK needs to wake up to the value in this sector and beat these foreign incentives with our own supportive measures,” said Jonathan Kestenbaum.

NESTA has proposed a number of solutions to halt the projected decline in the UK games sector in the coming years which include:

1. A simplified R&D tax credit system: The current system does not provide games developers with the intended support and a simpler model, similar to the tax breaks offered to film investment, is needed.
2. Develop and retain skills: The UK suffers a major skills shortage in games development. The current specialist courses are not producing sufficient talent, with only 18% of specialist games course graduates actually ending up working in the industry.
3. Support for Intellectual Property development: Currently most Games SMEs are doing too much work for hire and not developing their own IP, which is stunting UK innovation in the sector. Addressing this through public development grants and support incentives will be the key to developing sustainable business.
4. Increase presence in online: The world of online and serious gaming is booming, however the UK’s presence in this space is low and industry action to increase the UK’s presence is needed.
5. Combat foreign competition: Competition from other countries in the form of generous production tax credits is stripping the UK of talent and tilting the playing field against UK studios. The jury is still out on whether the UK should introduce its own production tax credit, but the UK must wake up to the value of this sector to the economy and match foreign incentives with its own supportive measures.

“The UK must not fall under the false assumption that our games sector is alive and healthy based on the success of one blockbuster video game – namely Grand Auto Theft IV – when behind the gloss the reality is increasingly about studio closures, relocations and workforce downsizing.”

The report is available online at www.nesta.org.uk/raise-the-game-report