Media & Tech Tuesday - Game On

The global video games market is huge, forecast to generate $66bn of revenue in 2013.  In the UK, video game sales this year are expected to outstrip sales of both video and music combined, according to the Entertainment Retailers Association.  And the run up to Christmas is going to be transformational.

On the hardware side, you have Nintendo’s DS2 entry-level handheld games console being released in mid-October, followed by the seismic shift of the next-generation console releases from Microsoft (Xbox One) and Sony (PS4) hitting shelves at the end of November.  On the software side, we’ve just seen Grand Theft Auto V’s phenomenally successful launch last week (it reportedly took just three days to reach the $1bn sales mark), and there is a host of blockbuster releases, such as FIFA 14, Battlefield 4 and Call of Duty: Ghosts following rapidly behind.  Put these all together and you have the makings of the most exciting period in recent history of the games business.

UK representation

Like the music industry, the UK actually punches well above its weight in the fiercely competitive global video games marketplace.  Employing almost 10,000 highly skilled developers, we have a long heritage of creating some of the most successful and influential games of the past couple of decades – titles such as GTA, Tomb Raider, Moshi Monsters and Total War are all the product of British talent.

And while some sectors of the economy struggle, trends for the video games industry are encouraging.  In the past 18 months, 113 new game studios have opened in the UK (many focused on mobile gaming), taking to total to over 500.  While the majority of studios are centred around London (it has 111), Scotland also has a strong games scene with 73 studios.  We have even seen a successful recent IPO – Frontier Developments listed in July and now has a market cap of c.£40m.

So what next?

There are three key trends impacting the industry at the moment:
• Studios are tending to focus on either big-budget blockbusters (think GTA V with its £170m development and marketing budget) or casual / mobile games which may be free, fremium or ad-supported, and developed on a tight budget (over 75% of UK studios are developing games for iOS and Android platforms);
• Digital distribution continues to grow, with sales of physical format games shrinking from 74% of total sales in 2011 to 65% in 2012, and it won’t be long before digital sales account for the majority; and
• The Xbox One and PS4 will provide a boost to sales and offer an excellent opportunity for developers to create new IP; indeed, Sony is focusing heavily on indie developers to fill content gaps on the PS4 between major releases.

However, as a salutary tale that not all is roses, longstanding Britsoft studio Blitz Games recently closed with 200 jobs lost as it struggled to shift its business model away from the ‘hit or bust’ nature of big-budget console games to the faster moving mobile and social gaming space.

But for the industry as a whole, as an avid gamer, I can’t wait to see what’s coming next.

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