A Vested InterestIn Commercial, Education, finance, Running A Business
UK game developers have never had greater opportunity to raise investment and create their own IP, with support such as tax breaks, R&D tax credits, SEIS and EIS tax relief, training and employment funding from Creative Skillset. Combine this with the massive growth in the number of developers and we start to see a climate that supports games companies and helps them grow.
According to Tiga’s recent Source of Funding report (http://www.tiga.org/repository/documents/editorfiles/onlinesubscribers/tiga_sources_of_finance_document.pdf) 76% of UK developers will be claiming tax breaks in the next year, indicating that the majority of studios are creating their own games.
There are investment funds out there, both equity and project based, however a lot of developers are not successful in raising this finance. We also haven’t seen many more funding opportunities open up recently, certainly not as many or as quickly as many hoped after the tax breaks announcements.
Tiga’s report states that only 13% of developers have received funding from investment funds, and only 13% from project financing (defined as equity/debt finance for a specific project). According to the report, the majority of developers still rely on work for hire or publishers, and far more funding was received from public funding organisations and equity from individuals such as angels or family, than investment funds and project financing put together. Interestingly, not only did many developers who applied for funding from investment funds or project financing not succeed in raising it, a high percentage of developers haven’t even attempted to raise funding from those sources in the first place.
Given how hit driven and unpredictable games are and how people outside the industry don’t understand how games are made and released, investments into games are high risk and a daunting prospect for investment funds, even for those already investing in other entertainment industries such as film. This is something that needs addressing. Encouraging more investors to move into the games space, and quickly, is crucial to the future of our industry.
There is a second aspect to consider however, and that is the games companies themselves. As the recent Making Games in the UK Today 2014 report shows, most of the studios in the UK are now micro studios and the majority of those are trying to focus on making their own games.
So why are so many these companies not getting investment? I would argue that perhaps it is because we have created a culture where developers think more about making games, than about the business of games. This makes them hesitant to seek funding because it’s perceived as a scary and complex task, and makes them hard to invest in if they do.
We need to look at why this has happened, and what we need to do to change this culture, through the way we support pre-startups and startups across the UK.
Stop separating the making from the business
I often notice a separation in the way developers treat the business aspects of game development, and the creative process itself. If you are making something to sell to someone, the business is intrinsically linked to the thing you are making and needs to be recognized as part of the same process.
The games industry has had an interesting history, with the creative process often separated from the business by a developer-publisher divide that first appeared in the early 80′s.
This divide no longer exists for many developers, but its legacy has created a situation where some developers appear to believe they are still separate and that they aren’t good at or won’t enjoy it. Perhaps this is because historically, successful business is handled by non-developers (publishers), and developers perceive these people as different to them, with different skills and motivations, because that’s what we’ve seen in the past.
That’s not the case in a lot of industries, and doesn’t need to be in ours. However often creativity and business or money are perceived as mutually exclusive, or at best that a focus on money compromises the creative process. This doesn’t need to be the case, as many creative people and products in our industry testify. We need to have a holistic view of making games that by its nature includes business in everything we do.
Understand what ‘business’ is
Stop worrying about whether you are good at finance, or know how to do sales. Don’t get scared off by all the business books and terms that you hear, that make you think you don’t know anything about business.
Take a step back for a moment and really think about why you are making what you making. Once you have answered this, then you know your business and many of the practical things that need doing become simpler and a whole lot more interesting. Good business people aren’t necessarily geniuses with spreadsheets and financial forecasting. You need someone in your team to who can do those things (and you can outsource elements of it too), but everyone running a company should be business focused, which means understanding what they are trying to achieve, why and how. Business is as much (or more) about how you think, as what you do.
If all of the directors of a studio think in a business way (which, frankly, is their legal responsibility as a director), then hiring or outsourcing elements of the practical tasks such as finance, business development, PR or HR, becomes a lot easier, and will get much better results because the directors know what they want those people to achieve and can delegate more effectively. The directors don’t need to be experts in those areas – that’s why they bring in others who are – but understanding what you are trying to get out of that process, and knowing who to hire or outsource to, is key. There are many people out there who can come in on a temporary or longer term basis to help businesses, consultants, freelancers, industry veterans, who can really help to boost the business. But if the directors don’t know what they are trying to achieve, then their impact is often limited.
Change the way students are taught
Taking the longer view, we need to encourage universities to put a business slant on the way they approach their courses. It’s not just about having business modules, although that is crucial and it’s great to see more universities now doing this, but it’s also about a holistic approach, a way of thinking that should run inherently through everything that students do. Students do need to learn the practical aspects of business, but most important is that whatever they create, they think about why they are creating it, and how it is relevant to the market.
To make this work, modules should include criteria to require the student to explain why they have made what they have made, rather than just how they made it. They should be required to learn about the industry, and place their work within the context of that. University is a great time to take risks and experiment, and that should be encouraged, but understanding future developments in the market, and experimenting on those should be encouraged.
This will help post graduates starting a studio straight from university because they will be much better equipped to do so. Secondly with the new micro studio trends in the industry, there are more jobs in smaller studios than large ones, so the majority of post graduates will likely be joining a small team and will be a more valuable employee with this knowledge.
If you really care about making your own games, then you care about business. If you think you don’t, then you don’t really understand business…. because if you boil it down to its core elements, it’s about asking ‘why’. Business actually means making something that people want to play, and being able to continue making more games. What developer doesn’t want that?
This article was first published on the gamesindustry.biz website on 30th September 2014.