British Video Game Sector Reboots - InformationWeek

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British Video Game Sector Reboots

After four years of low scores, the games creation business is regaining strength thanks in part to lure of possible tax relief.

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Videogames -- one of the strongholds of British tech until recent years -- seems to have found a hidden health pack in 2012 and rejoined the battle.

According to Tiga, the non-profit trade association representing the country's games industry, after years of decline the sector grew 4% last year. Investment by studios in games production climbed from 2011's £411 million ($622 million) to £427 million ($646 million), while the number of studios based in the country rose from 329 to 448, equaling a rise in creative content development and programming staff to 9,224 from 8,888. Employment indirectly supported by studios also rose, from 16,250 to 16,864.

As a whole, the sector accounted for £947 million ($1.4 billion) of the country's gross domestic product, compared to £912 million ($1.38 billion) the year before. The industry boasts that its renewed success translates to direct and indirect tax revenues climbing £376 million ($569 million) to £400 million ($605 million).

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"Recovery in the U.K. games development sector has taken off. Employment, investment and start-ups are up [and] the games development industry is growing again, said Tiga CEO Richard Wilson.

Tiga says the return to growth after several years of decline is due to the increasing prevalence of mobile and tablet devices, which have created a growing market for games, while the closure of big console-based studios has been followed by an explosion of small start-ups.

The body also says government attempts to help encourage growth are helping, too. The Games Tax Relief program to encourage U.K. game developers was supposed to start in April, but the European Commission says it needs more time to study its implications and it's now uncertain when it will kick in. Nevertheless, Tiga says the lure of the program is already starting to have positive effects, leading to investment in the U.K. games industry by major international games companies such as Activision Blizzard (The Blast Furnace), Gree (Gree UK), Konami (PES Productions) and Microsoft (Lift) in British studios.

Local games developers agree the tide is turning after a tough few years. "Mobile and Internet-based gaming provide opportunities for growth," said Jason Kingsley, creative director at Rebellion. "We have access to a highly skilled and creative workforce and Games Tax Relief will give a further boost to employment and investment. The U.K. has everything to play for."

The turnaround might be coming just in time. Once, the U.K. had the world's third largest game developer community, just behind the U.S. and Japan, but the sector claims it's seen talent lured abroad, while competing nations such as Canada, France and South Korea have been benefiting from their own versions of games tax relief. Developer headcount and investment levels remain below the 2008 peak and Tiga says 21% of startups set up two years ago have already gone under.

"Our challenge now is to help build sustainable independent games development and digital publishing businesses," said Tiga CEO Wilson.

Still, the climate for British games creation continues to improve. For example, in March as part of the annual budget process, the government injected £25 million ($38 million) into "creative industries," which identified British videogaming's strength as an area that will be one of the beneficiaries. The money included a special fund of £15 million ($23 million) for a competition to encourage more digital content creation.

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