Executive Summary: The Association for UK Interactive Entertainment (UKIE) is the trade association that represents a wide range of businesses and organisations involved in the video games industry. UKIE exists to ensure that our members have the right economic, political and social environment needed for this expanding industry to continue to thrive. UKIE s membership includes games publishers, developers and the academic institutions that support the industry. We represent the majority of the UK video games industry: in 2009 UKIE members were responsible for 99% of the games sold as physical products in the UK and UKIE is the only trade body in the UK to represent all the major console manufacturers (Nintendo, Microsoft and Sony). UKIE welcomes the opportunity to comment on the proposals for the creation of a network of elite technology and innovation centres in the UK and we believe there is an overwhelming case for the inclusion of video games and interactive entertainment to be the main focus of at least one of these centres. The video game and interactive entertainment industry epitomises technological development and innovation and is central to rebalancing and growing the UK economy. In 2009 the UK was the largest games market in Europe, the Middle East and Africa and the third in the world after the US and Japan. 1 The UK Games sector is projected to grow 7.5% between 2009 and 2012. 2 UK sales of video games in 2010 totalled over 1.53bn buoyed by record breaking releases such as Call of Duty: Black Ops, recording a staggering 2m units sold in the UK over its first 5 days and generating an estimated 81.9m. 3 Ours is clearly a burgeoning and increasingly popular industry, with the potential to continue generating millions of pounds for the UK economy. The UK has the largest developer base in Europe and is the location of the European headquarters for many multinational games companies, including Sony Computer Entertainment, Microsoft and Activision (all of whom are UKIE members). The UK is home to a number of video games clusters, including Dundee, Brighton, Guildford, London, Midlands (Warwickshire) and the North East (Newcastle). The link between creative clusters and innovation was the subject of a recent NESTA report 4 and it is clear that the video games industry provides many opportunities in locations around the country for collaboration between business, academia and researchers. However, UKIE is mindful of the Prime Minister s proposals to develop East London Tech City (already home to successful video games developers such as Sports Interactive) and of proposals for the Olympic Media Centre. UKIE would welcome the opportunity to explore the development of a technology and innovation centre that could capitalise on and bring together existing proposals for East London. UKIE notes the proposed categories for the technology and innovation centres. Video games and interactive entertainment does not sit obviously in any of these categories, which is a matter of concern. We trust that the ICT category proposed for the centres can be broadened out significantly to ensure that our industry receives representation; after all, ours is a highly innovative industry that is reaching new levels of demand from consumers and represents a real opportunity for the UK to rebalance the economy and continue to achieve global success. 1 Creative Industries Technology Strategy 2009-2012, Technology Strategy Board (2009) 2 Ibid. 3 UKIE/GFK-Chart Track (as of 7/12/2010) 4 NESTA, Creative Clusters and innovation (2010) 1
The case for a video games centre: Technology and innovation in the video games industry UKIE was delighted by the Prime Minister's announcement to establish a network of elite technology and innovation centers in the UK. As the UK's fastest growing creative industry, the video games and interactive entertainment industry is at the forefront of technology and innovation, and welcomes the Government's commitment to long term investment in this important area. The creation of video games and interactive entertainment involves intensive research activity. The games development industry is estimated to invest 14% of its turnover in R&D, equating to around 90million in 2008. 5 For some companies R&D spend makes up three quarters of their development budget. Technological innovation is a key feature of our industry, evidenced most recently with the launch of Microsoft s Kinect and Sony s Playstation Move, which move beyond the traditional handheld console and use sensors to detect body movement for game play. Whilst this technology was not developed in the UK it demonstrates the potential our industry provides an elite technology and innovation centre would provide finance, infrastructure and talent to ensure future innovation takes place in the UK. And the UK clearly has the talent to match this innovation: UKIE s Motion Control Report, compiled by GFK Chart-Track, shows that since launch, nearly half of all Kinect software unit sales in the UK are UK developed games. The top title by far on Kinect is UK-developed Kinect Sports. Similarly, the UK is the number two developer for the Move, accounting for 30% of all Move software unit sales in the UK since launch. Innovative content is already being created in the UK, and an elite TIC would allow us to develop the technology alongside this. We are already seeing moves towards this. For example the charity, Special Effect, based in Charlbury in Oxfordshire, utilises eye tracking and brain scanning technology to allow disabled individuals to enjoy game play. UK R&D potential exists in the video games industry and whilst excellent work is being undertaken, an elite TIC will help us reach our potential. And of course R&D plays a major part in the development of original IP, which the UK video games industry has always been very strong in when it comes to content. For example, Football Manager, one of the best selling PC franchises ever, was developed in the UK by Sports Interactive. The online game, Runescape, developed by Jagex Game Studio, is the world s most popular multiplayer online game. Jagex is one of the largest video games companies in the UK and the 22 nd fastest growing high-tech company in the country. 6 The technological advances that come about as a result of video games and interactive entertainment R&D investment can be transferred to firms in other sectors in the form of spillover effects. Technologies initially developed by video games companies are being applied in areas as diverse as training, visualisation and simulation. 7 For example, medical imaging requires the same high-speed processing that interactive entertainment software uses to create 3D images in real time. It may take over five minutes to process an image using traditional processors, but the CELL processor (found in the Sony Playstation 3) can 5 Oxford Economics, Economic Contribution of the UK Games Development Industry (2008) 6 Sunday Times Tech Track 100 7 NESTA, The Innovation Game (2010) 2
process the same image in seconds 8. Increased speed and efficiency resulting from interactive technology also speeds up hospital processes and lessens discomfort for patients. 9 The Armed Forces also make use of interactive technology for training purposes, for example the Dismounted Close Combat Trainer. An elite TIC would allow further technological advances to be made, with resultant beneficial spill over effects. Access to global markets As noted above, the video games and interactive entertainment industry epitomises technological innovation and strengths in R&D. The UK clearly has world-leading research capabilities and the ability to exploit the technology and embed the activity in the UK. The video games and interactive entertainment industry will also provide a centre with access to global markets, predicted to be worth billions of pounds per annum. Last year, 2010, in the UK alone, total sales of console videogame software amounted to 1.45bn and records were broken when Call of Duty: Black Ops grossed more than 113.8 million in its first week of sales, the biggest grossing week of all time for video games software. Overall, the total gross revenue generated in the UK during the 52 weeks of 2010 from the sale of all entertainment software, console hardware and console/pc gaming accessories, was 2.875 billion. This equated to 93.6 million units sold all-told in the UK. UK revenue for Social Network Gaming in 2010 was close to $60m ( 37 million). 10 As recently as 2008 the UK s video games industry was the third largest development territory in the world after the USA and Japan. It generated 2 billion in turnover, contributed 1 billion to GDP and employed 10,000 people in development activities. 11 The video games and interactive entertainment industry will continue to grow. This is recognised by the Technology Strategy Board which projected UK games sector growth of 7.5% between 2009 and 2012. Global revenues from software sales are reportedly $50 billion per annum (over 30 billion) and are expected to rise to $87 billion ( 54 billion) by 2014. 12 PricewaterhouseCoopers projects the sector will grow at an average annual rate of 10.6% between 2010 and 2014 faster than film, music and TV. However, the UK s position as a global video games development hub is under threat, as generous public susbidies in other countries, cheaper labour markets, a high skill base and difficulties accessing finance in the UK make global territories more attractive destinations for video games companies. With a government committement to the sector and with a bespoke technology and innovation centre, the video games and interactive entertainment industry can start to regain some of its lost ground, attracting and anchoring knowledge intensive activities in the UK and creating significant growth in the medium to long term. Video games and interactive entertainment is now a ubiquitous leisure activity and clearly an area for rapid growth going forward, as new and innovative business models emerge alongside technological innovation and new ways of delivering content to consumers. One in three people describe themselves as gamers and the take up of games console play has 8 Cell is a microprocessor architecture jointly developed by Sony Computer Entertainment, IBM, and Toshiba. 9 Oxford Economics, Economic Contribution of the UK Games Development Industry (2008) 10 IHS Screen Digest 11 NESTA, Raise the Game (London, 2008); Oxford Economics, The Economic Contribution of the Games Development Industry (2008) 12 Next Gen: Transforming the UK into the world s leading talent hub for the video games and visual 3
increased to over 50% in the last year; half of all UK households contain at least one video games console. 13 Prototype funding The prospectus sets out the intention for technology and innovation centers to focus on precommercial development. Pre-commercial development or prototype funding is something UKIE has called on the Government to make available to our industry, and is part of UKIE s wider access to finance agenda for the video games industry. The Government was instrumental in supporting the prototype lab and centre of excellence at Abertay University in Dundee, which allows small games developers across the UK to apply for grants of up to 25,000 to support the development of fully-working prototypes. Similarly the University of Glamorgan, Cardiff Schools of Creative and Cultural Industries and Swansea Metropolitan University are establishing a DigiLab, to facilitate knowledge transfer between welsh academic centres of excellence to the computer games industry and animation companies in the region. The DigiLab will support companies that hold creative IP to exploit that resource through identifying new routes to market and/or developing their capacity and capabilities. Both of these prototyping schemes seek to address problems many small businesses have in accessing finance, providing them with resource and capability to bring their product to the first stage of development. The DigiLab in Wales has also identified another issue of interest: companies often lack the expertise in video games content creation, despite having the IP to exploit/develop. The aim is to stimulate new product development of games content within existing media companies in Wales. UKIE therefore welcomes the technology and innovation centres' focus on prototype funding. A bespoke video games and interactive entertainment centre would build on these examples of best practice, and continue the excellent prototyping work that will ensure the UK remains a world-class centre of technology and innovation in a global video games market worth billions of pounds (see below). UKIE currently has 10 academic members (out of a total membership of nearly 70 companies) and would welcome the opportunity to use the technology and innovation centres as a hotbed for collaboration. UKIE is also happy to facilitate links between Abertay s Centre of Excellence and Glamorgan s DigiLab, both of which are UKIE members. Technology innovation centres will work in partnership with universities and businesses UKIE welcomes the centres proposed focus on ensuring strong links between business and universities. These links are vital to our industry, and have been the subject of recent recommendations from both the Scottish Affairs Committee and the Livingstone-Hope Review into the video games and visual effects industries. 14 The Scottish Affairs Committee recommended that the Government outline how it will work with universities and the industry to ensure talented video games graduates remain in the UK. 15 By ensuring close links between universities and business, technology and innovation centres will hopefully provide a route into the industry for talented graduates, particularly in STEM subjects. The need for STEM graduates in the industry has also been highlighted in the Livingstone-Hope 13 Ofcom; Interactive Software Federation Europe 14 Next Gen: Transforming the UK into the world s leading talent hub for the video games and visual 15 Second Report from the Scottish Affairs Committee: Video Games Industry in Scotland: Session 2010-11 4
Review, which sets out a number of recommendations for ensuring a talent pipeline of highly skilled graduates, from primary school age right through to entrance into the job market. 16 As detailed above, innovative new ways of facilitating prototyping work is being carried out by UKIE s academic members. We would welcome the opportunity to broaden out this programme through a technology and innovation centre, and ensure that there are strong links between business and universities. Existing programmes UKIE is aware of a number of existing programmes that would complement the centres, including Knowledge Transfer Networks and Partnerships. However, these programs are rarely used in the video games and interactive entertainment industry and are poorly signposted. UKIE would like to see greater efforts to engage the video games and interactive entertainment industry in these programmes. A video games and interactive entertainment centre would be the perfect forum to ensure maximum leverage is gained from these important programmes. 16 Next Gen: Transforming the UK into the world s leading talent hub for the video games and visual 5