We all know the story of how self-taught entrepreneurs created new British industries in the 19th century – shipbuilding in Glasgow, textile machinery in Lancashire, for example – which, for a time, ruled the world. Then they were overtaken by better-organised competitors elsewhere, which were supported by institutions for research, education and knowledge transfer. Is something similar about to happen to our computer games industry?
Computer games are one of the fastest-growing high-tech sectors in the world. From scratch, Britain has developed a leading position in two decades, and accounts for 71 per cent of European investment in the production of computer and video games. British-developed games take about 12 per cent of the US market and a quarter of the European.
The UK ranks second only to Japan in writing computer games software. A single creation of the UK industry – Lara Croft – earned more overseas for the UK than the Spice Girls, who in turn earned more in their peak year than some manufacturing industries.
You will not hear much debate about this success. In Britain, the word “industry” is synonymous with decline and failure. An industry is not counted as “real” unless it is under threat: cars, shipbuilding, coalmining and agriculture. The computer games industry has the added disadvantage of being populated largely by young people, who make ephemeral products from assets that are largely intangible and intellectual. This is an industry that the men in grey suits at the CBI and the Institute of Directors would not recognise.
It has grown without most of the factors conventionally thought of as necessary for success in high-tech fields. There was no state-led “industrial policy” for the games industry (apart from the involvement of Scottish Enterprise). There were no tax breaks for research and development. Venture capitalists, so vital in the success of high-tech clust- ers such as Silicon Valley, have played a peripheral role. Although education is supposed to be central to future economic success, you will not find computer games featured in the national curriculum. The industry was not the product of inward investment by foreign multinationals, nor have small companies been spun out of established media groups such as Pearson or Granada.
The entire industry has been created by young, seat-of-the-pants entrepreneurs – the likes of Jez San at Argonaut, Peter Molyneux at Lionhead, Chris van der Kuyl at VIS Interactive and many more. They had neither MBAs nor consultants. They made it up as they went along, exploiting an opportunity that their elders and betters could not see because they were so far removed from young consumers.
San, for example, started as a games developer while still at school. He spent almost two years in his bedroom designing his first hit game, Starglider. When he was barely more than a teenager, Nintendo flew him to Tokyo to sign a development deal. San went on to create Argonaut, now a listed company, and then ARC, which designs chips for games consoles.
As kids, these entrepreneurs learnt how to programme games by using crude early computers, such as the Spectrum and Commodore. They were largely self-taught, and their industry was in essence a cottage industry. But entrepreneurs are not purely individualistic. Businesses that were run as one-man bands generally failed. The secret of British success in computer games is that gaming spawned a community – introverted and geeky, yet creative – in which ideas and tips were rapidly shared, spreading knowledge. Games magazines helped to create that community, as did coding competitions.
The leaders in the games industry have all shown enormous persistence, often with little external support from investors, bankers or shareholders. Van der Kuyl had to buy his business back from investors to take it into the games market. Entrepreneurship is not a sprint; most businesses took several years of hard work. All successful games entrepreneurs had an international outlook from the outset. Even if they are running relatively small businesses, they have to sell their products to international companies, such as Sony, which have global distribution platforms.
Computer games form an expanding market. In the UK, we already spend more on them than on visits to the cinema. And they are no longer played solely on computers. They are also played on digital TV sets and will soon be delivered to the high-bandwidth mobile telephones that will be launched in the next few years. Datamonitor, the information consultancy, predicts that the numbers playing games online, and through digital TV, in Europe and the US will rise from 13 million in 2001 to more than 111 million in 2005, with revenues rising from $174m to $5.6bn.
British prospects are bright. We have a critical mass of games developers, a strong community of knowledge and an educated, innovative market of users. Our developers have a distinctive style. John Sutherland from the University of Abertay Dundee, which set up the first university course for computer games developers (Bradford, Salford, Teesside and Middlesex have followed), says: “We are eccentric, creative and less conformist than other European countries. The Japanese and Americans produce a more limited range of styles of combat, war and sports games. Only the British develop all sorts of games.”
But the danger is that, as more sophisticated technologies emerge, the home-grown, DIY British industry, which thrived when computer games were in their infancy, will be outgunned by better-funded competitors. Developers will need deeper pockets to make more complex games. An industry that has relied on self-taught programmers will require more formal training and education to develop deeper technical skills.
Britain’s strength in developing games belies its weakness in marketing and publishing them, where US companies such as Electronic Arts, and French companies such as Infogrammes and Havas International (part of the Vivendi Universal media group) dominate. Games development is a hit-and-miss, fashion-driven, volatile business. Britain’s small companies could prove highly vulnerable.
The computer games industry was initially sustained by entrepreneurial enthusiasm. In future, it will need stronger institutions to support it. It will need closer links with education. It will need access to better tools for financing growth: there is a yawning gap between the low-level self-financing that will allow a company to grow to 10-20 people and venture capital that will take it to higher levels.
Perhaps the most critical issue is the telecommunications infrastructure. As more computer games, especially multi-player games, are delivered online, the price and bandwidth of telecoms will become vital to the industry. Computer games producers are innovative when they work closely with innovative young customers. In the industry’s early days, those kids played with quite primitive computers bought from shops such as Laskys. In future, consumer innovation will take place online. A country with a poor broadband telecommunications infrastructure – the UK currently ranks 22nd in the OECD – is unlikely to generate innovative usage among consumers.
As van der Kuyl puts it: “In the knowledge economy, the only piece of infrastructure that really matters is tele-communications. And, right now, it’s crap because it is too expensive. The online gaming community is big and would be bigger. Unless we can sort it out, we’re stuffed.”
In other words, unless policy-makers, investors and educators act now, Britain will throw away another world-class industry, just as it has done so often before.
The authors’ Surfing the Long Wave: knowledge entrepreneurship in Britain will be published by Demos on 19 July. To order a copy, call 020 7401 5330