With annual revenues of more than $140bn, it is not surprising that the global games industry is scattered across the world. But developers tend to cluster in centres where gamers first started to code games at an amateur level 30 years ago.
The UK has the most important games industry in Europe. More than 32 million people in the UK play games, and together spend £5.1bn ($6.5bn) every year. The main games development hubs are London, with 614 studios; Manchester with 96; Brighton with 73; and Guildford and Aldershot with 70. In the town of Leamington Spa in the Midlands, one in 15 people works in the games industry.
“Clusters have developed under a unique set of circumstances and each one is distinct from every other,” says Sam Collins, head of commercial at trade body United Kingdom Interactive Entertainment. “Manchester, for instance, is home to a large number of young, dynamic studios, often spawned from local universities. If you delve deeper into the careers of games industry workers in Leamington Spa, you will find that nearly all have worked for one of the local major games companies such as Codemasters or Blitz Games at some stage.”
Nick Gibson, a games industry specialist, adds: “The origins of the industry go back to the 1980s, with teenagers coding games in their bedrooms. This could have happened anywhere in the country. These people then started to take on employees and distribute their games. Codemasters in Leamington Spa, for example, was set up by a couple of brothers and went on to become a substantially-sized company.”
Taking on the world
The global games industry is expected to report revenues of $138bn for 2018, a figure forecast to rise to $180bn by 2021, according to research company Newzoo. Games designed for smartphones now make up 41% of the market, and are forecast to rise to 49% by 2021. Console games account for 25% of the market today, with tablets at 10%. Boxed or downloaded games for PCs stand at 21%, and PC browser games makes up 3% of the total.
China is now the biggest market globally for games and makes up about 28% of worldwide sales. The US and Canada account for 23%, Latin America 4%, Asia-Pacific overall 52%, western Europe 14.5% and eastern Europe 3%.
“The Japanese and South Korean games markets are very big as well,” says Newzoo CEO Peter Warman. “These markets are mostly served by local developers in Tokyo and Seoul, respectively. The main clusters of games developers in China are around Shenzhen and Hangzhou. Shenzhen has the head office of Tencent, one of world’s biggest games companies, and Hangzhou is home to Alibaba, the internet company. The industry has developed around these two giants.
“Shenzhen shows the importance of free-trade zones. In the 1970s, it was a town with only 30,000 inhabitants. Now it’s a city of close to 14 million people. The free-trade zone had a specific focus on technology and media. That encouraged companies such as Tencent to develop there.
“Recently, the Chinese government has made it a lot harder for foreign games developers to come into the local market. They must have a Chinese business partner to penetrate it.”
In North America, Montreal and Vancouver have emerged as two of the main clusters for developers. “The local governments offered games companies tax breaks,” says Mr Warman. “That helped. Vancouver developed more recently but has become an alternative to Seattle and San Francisco. The city has an atmosphere that is really appreciated by so-called techies and nerds. Salaries are also lower than on the west coast of the US, and that has encouraged US games developers to go there.”
Other major games industry clusters in Europe include Espoo and Helsinki in Finland, Stockholm in Sweden, Berlin and Munich in Germany, Kraków in Poland and Bucharest in Romania.
Supercell has its head office in Helsinki and has developed some of the world’s most successful recent games, including Clash of Clans and Clash Royale. In 2017, the firm made $810m profit on revenues of $2bn.
“There are some established hubs in Europe,” says Jari-Pekka Kaleva, chief operating officer at the European Games Developer Federation. “Nokia certainly played a big role in developing the mobile games space in Finland. There was a strong base there before Apple and Android came along. A lot of cool graphics come out of there. The ‘nerdy’ soft culture really helped. Business Finland, a public funding agency, provided all kinds of support and took Finnish games companies on trade missions to other Nordic countries, for example.
“Bucharest is a rising hub in eastern Europe. Many big games developers – including Ubisoft of France and Electronic Arts from the US – have outsourced studios to there. Hundreds of people now work in the industry there and a thriving games start-up scene exists.”
Mr Kaleva lists three factors that are vital for a cluster to develop: access to talent, to funding, and to neighbouring markets. The games industry in Finland had all three, hence its success.
Melbourne in Australia is also developing as a major hub. Games sales in Australia in 2017, according to the country's Interactive Games & Entertainment Association, came to A$3.23bn ($2.3bn), a 9% annual increase.
“Melbourne and the state of Victoria are leading Australia in a boom of collaboration, imagination and economic growth through the digital games sector,” says Andrew Abbott, chief executive officer at Creative Victoria, the state funding and support agency. “About 98% of digital games developed in Victoria are for a global audience. Victoria – and particularly Melbourne – has become a magnet for games developers with more than half of the country’s games companies based here. Victoria has been consistent with uninterrupted government support for games for more than 20 years, which sets it apart from other Australian states.
“The start-ups are critical. These are the companies agile enough to test and experiment with innovation and ideas. The start-ups bring product to market quicker and have the potential for high success rates.”
Serving more than 2.2 billion active gamers worldwide, the industry is set to become one of the most important globally, and cities and regions throughout world are catching on regarding how to nurture it with tax breaks and other incentives.