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UK Capital Investment: Midlands Engine Investment Opportunities Midlands Engine Video Games 2 great.gov.uk | Midlands Gaming Collateral 2,220 The UK has over 2,220 games companies and the market for games was valued at a record £5.11bn in 2017 great.gov.uk | Midlands Gaming Collateral 3 Contents The UK Games Sector 4 The Midlands Gaming Story 6 Midlands Games Cluster 7 Case Study – AppyNation 8 Serious Games 9 Skills 10 Tax and Incentives 12 4 great.gov.uk | Midlands Gaming Collateral The UK Games Sector The UK has over 2,220 games Boxed physical copies of games companies and the market for games reversed recent trends by increasing was valued at a record £5.11bn in 2017, revenues +3.1% to £790m, driven by representing +12.4% growth on the major franchises and games sales on previous year. the new Nintendo Switch. As these sales of new games improve across both These results show strong growth digital and physical, data showed that across both the game software and pre-owned games sales declined by hardware markets, with software -15.1% to £101m. revenues up +8.3% to £3.56bn and hardware growing significantly Game developers in the UK are largely by +27.1% to another record of focused on competitive online play to £1.43bn. The analysis also includes build brands and encourage subscription an assessment of the wider spend payments. While some games will be on game-related culture, which was able to offer free downloads followed valued at £117m. by regular season passes, the majority will still need to charge upfront fees. In software, data showed digital and Most gamers are still happier paying online revenues grew by +13.4% to for games upfront and having more a record £1.6bn (incorporating full transparency over costs. While the game downloads, DLC and in-game purchase of additional content is transactions, across both PC and valuable, gamers will not want to pay console) and mobile revenues broke the extra fees for content they consider billion barrier for the first time, growing core to the gaming experience, such as +7.8% to £1.07bn. key characters. Category 2016 (£m) 2017 (£m) % Growth Digital & Online 1,408.30 1,597.00 13.40% Boxed Software 766.7 790.5 3.10% Mobile Games 995.1 1072.7 7.80% Pre-owned 119 101.1 -15.10% Game Software Total 3,289.20 3,561.20 8.30% Source: UKIE, UK Games Industry, 2018; Mintel, Video Games and Consoles, August 2018 great.gov.uk | Midlands Gaming Collateral 5 UK mobile games eSports There are 1,483 active games companies In 2016, the UK esports audience grew making mobile games in the UK. to 6.5 million people, with 3.1 million watching more than once a month. The UK has the largest mobile games The audience is expected to grow workforce in the EU, with 5,000 full- 7.5% year-on-year to reach 8 million time employees. This represents nearly people in 2019. a quarter of all 21,000 mobile game jobs across the EU. The UK esports market will see a 27.6% CAGR, reaching £8m in consumer Over 70% of UK adults (approx. 40m) ticket sales by 2021. Digital advertising own a smartphone and 59% of UK in esports will increase to £12m by households (approx. 15.9m) own a 2021, a CAGR of 46.2% presenting tablet. This represents a massive an interesting opportunity for potential customer base for mobile advertising agencies. game companies to target. To back this up, 47% of UK smartphone owners use There is also growing grassroots apps on their phones to play games – eSports scene in the UK’s universities, more that use apps for online banking with 3,000 players in the National (40%) or reading the news (33%). University Esports League, representing 110 universities. In terms of revenue per download, the UK is best positioned in western Europe The largest prize pool event held in the with a potential profit of $0.47 per UK to date was ESL One Birmingham, download. The UK is more profitable with a prize pool of $1 million, held at than Germany, United States and China. Arena Birmingham in May 2018. whilst the largest LED screen in the country is at an eSports arena in Leicester. 1,483 Active games companies making mobile games in the UK 6 great.gov.uk | Midlands Gaming Collateral The Midlands Gaming Story The Midlands is a thriving hub of In nearby Coventry, the CUE capability and development which Interactive, a spin out of the School is home to 250 of the UK’s best of Computing, Engineering and games businesses. These games Mathematics at Coventry University, is companies are creating highly skilled, an internationally recognised centre of productive jobs and opportunities excellence in the application of games throughout the region. technologies in learning, professional development and applied research. Overall the region has produced 13% of all the UK’s games and on average the The Leamington games cluster has West Midlands is home to the longest developed over more than three established video games companies decades through a distinctive focus on in the country. quality and creativity. The birthplace of Dizzy, Guitar Hero and Forza ‘Silicon Spa’ is an established games Horizon, it is an outstanding example of cluster, centred on Royal Leamington developing regional economic growth Spa and taking in Coventry and the through a local ‘smart specialisation’ towns of Warwick and Southam, with in a sector that demonstrates clear over 80 studios directly employing advantages over its competitors in some 2,500 people and supporting a international markets. wider base of contractors. Towards the east of the Midlands we see an impressive resume of games which have left a lasting impression upon an entire generation of gamers. Leicester created one of the most influential and impressive games of all time, GoldenEye 007, and it was Core Design in Derby who originated the Tomb Raider series. Heroine Lara Croft would go on to become a pop culture phenomenon in film and advertising, as well as games. The first two Tomb Raider titles, developed in the Midlands, sold more than 10 million copies on the PlayStation alone. Source: Games Industry in Coventry and Warwickshire, 2017, iNews Midlands Video Games Industry, May 2018, Warwickshire County Council great.gov.uk | Midlands Gaming Collateral 7 Midlands Games Cluster Collectively the Midlands has created over 1,400 games and 250 companies can be found in the region. In the East Midlands there are 110 active games companies have produced nearly 400 games. Just over half of the regions games are developed for IOS systems but high quality console games still account for a large proportion of production; around 40% of all games are developed for PCs or consoles. The West Midlands is home to 135 games developers and publishers who have created over 1,000 games. Over 80 of these active games companies are located in Coventry and Warwickshire where the rate of company formation is high – 50% of active businesses in the cluster have been established since 2012, and two-thirds since 2010. There is a core of medium sized companies (between 50 and 500 It is estimated that there are 3,500 employees) that ‘anchor’ the cluster: full time employees across the games Codemasters, Sega Hardlight, Ubisoft sector in the West Midlands. Leamington (previously Freestyle A high proportion of companies in Games), Playground Games (Microsoft Leamington are high-growth (hitting Xbox Studio) and Rebellion. This spread £1m turnover within 3 years of trading, of larger companies underpins the and growing at 20%+ per annum) with employment opportunity for games a significant minority turning over professionals in the region: there is a more than £5m. very high likelihood that one or more of those companies will be ‘gearing up’ for a new game at any time, smoothing out the ‘peaks and troughs’ of a hit-based business that can affect less well- established clusters, or those dependent on a single large company. Source: Games Map UK, 2019 8 great.gov.uk | Midlands Gaming Collateral Case Study – AppyNation AppyNation was founded by Andy AppyNation tests how games businesses Payne in 2011 in London as a might work together to successfully developer-led collaborative consortium exploit their own intellectual property.” of independent studios from around AppyNation was also recognised by the UK who came together with the UK Government as providing the backing of NESTA to offer foundations for growth and an alternative to the traditional development within the industry, with publisher model. former Culture Minister Ed Vaizey saying In 2015 AppyNation relocated to that such a scheme is “exactly what the Leamington Spa and focused on games industry needs to grow”. publishing their own free to play mobile and tablet games developed only by Supersonic. AppyNation is highly profitable and totally “ The UK has the world’s independent with no debt. best developer talent. Jon Kingsbury, programme director Born out of an idea shared by for the Creative Economy at NESTA developers Finblade, Proper Games, Niffler, Onteca, Supersonic and Chromativity, AppyNation gave member developers freedom over the games they choose to develop for iOS & Android whilst allowing them to maintain complete control and ownership over their IP. AppyNation and the collaboration between publisher and digital, social and independent UK developers it represented was very positively received by the games industry and already having the support of NESTA and industry associations TIGA and Ukie. Jon Kingsbury, programme director for the Creative Economy at NESTA, said in 2011: “The UK has the world’s best developer talent. great.gov.uk | Midlands Gaming Collateral 9 Serious Games Cue Interactive is a digital studio based The team of artists, programmers in Coventry, UK and is part of the local and engineers’ experiences include university.
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