We explore how developers and publishers are proving their resilience in uncertain times.
Saying that 2020 has been a tough year shouldn’t be a controversial statement to anyone. Every corner of the UK has been impacted by the coronavirus pandemic to one extent or another, with our work and social habits changing drastically.
In the video games industry, this had a positive yet deeply complex impact; spending and engagement metrics flew up, while other supplementary business segments like events, retail and media faced new struggles.
Amid this, Brexit discourse fell from prominence in the news cycle. But as the December 31 deadline approaches -- after which the transition period will end -- that familiar creeping uncertainty has returned to many within the UK games industry. With the possibility of a no deal Brexit still a very real one, games businesses are having to prepare for changes without knowing what they will be, or how exactly their business will be affected.
Despite these many uncertainties, it is not all doom and gloom. According to data from industry trade association UKIE, the UK games industry has “proven resilient in the face of the COVID-19 pandemic.” A July report found the industry remained at 80% productivity following the introduction of lockdown, with 49% of companies reporting an increase of revenue.
This boom is supported by data from games and esports analytics firm Newzoo, which increased its 2020 UK games revenue estimate by 11.4% in the latest projection figures. While many complex challenges have arisen from Brexit and COVID-19, understanding them can help prepare a business move forward in these uncertain times.
As of 2018, around 35% of the 12,000-strong British games industry workers were from EU countries. Following a recent announcement by home secretary Priti Patel that the government would be ending freedom of movement on January 1, 2021, Brexit is likely to present some serious barriers when it comes to UK firms acquiring European talent. Furthermore, many European citizens working and living in the UK are not yet guaranteed the right to remain for work. This is an issue which industry union Game Workers Unite UK has been tackling, working directly with those affected to help ensure their right to stay and work in the UK.
This could be further complicated, notes GWU UK vice secretary Declan Peach, with the addition of changeover laws relating to labour, which could cause challenges for the “foreseeable future.”
“Much of the UK's existing legal framework on labour is based on the EU's, and we anticipate having to adapt to changes as they happen,” he says.
As UKIE CEO Dr Jo Twist puts it, a no deal Brexit would be “undesirable for the UK games industry.” It would “risk causing significant disruption to data flows, potentially cause issues for international staff and risk longer term investor confidence in the UK sector,” she adds.
Brexit also presents a number of other legal and regulatory hurdles, along with potentially reducing the amount of funding available to UK developers unless the British government agrees to match what the EU currently provides.
Jas Purewal, digital entertainment lawyer at Purewal & Partners notes: “As the industry associations and others have argued, there is considerable uncertainty on access to talent, freedom of movement, data sharing, consumer rights, VAT and wider trading arrangements between UK games businesses and their single largest and closest market. That’s excluding the impact that may be felt from Brexit within the UK economy itself.”
Despite these potential complications and the current uncertainty, Purewal suggests that the industry could benefit from Brexit in principle. This might include “more advantageous trading arrangements, or a change to the UK state aid regime meaning boosts to Video Games Tax Relief and other benefits to UK games businesses.”
The strange coalescence of Brexit and COVID-19 may seem like unfortunate timing for the industry, but the changing work habits adopted to tackle the pandemic could prove a valuable development when it comes to accessing European talent. Developers both large and small have found the transition to long-term remote working relatively painless. The industry’s natural compatibility with remote working should help alleviate concerns about bringing in remote team members, thereby making it easier to access European talent despite Brexit.
“We're very fortunate to be a technology-driven company in an industry where remote working is possible,” says Daniel Griffiths, head of global communications at Improbable, a London-based gaming tech firm with around 300 employees. “There are some things that are harder to do remotely than in a shared space, but in general we haven't seen significant interruptions in our ability to make games and develop our technology for multiplayer game development and other applications.
“In the longer term, [we] would expect the industry to be looking more closely at how we use offices and the ways we work. A greater focus on and acceptance of remote working could, for example, open up new opportunities for people outside traditional gaming hubs to work in the industry.”
Studios of different sizes obviously have different experiences with the shift to remote working, and the current arrangements will not suit everyone. But despite the recent announcement of a 90% effective COVID-19 vaccine, it will likely be many months before life returns to normal. Until then, it’s important to take care of staff who are working from home in these difficult circumstances.
“One thing we do have to take into consideration is the mental space people are in during all of this,” says Silver Rain Games founder Abubakar Salim. “So we have to be aware of how people are feeling during all of this and making sure we keep checking in… [But] at the end of the day, games is a technology-led industry, and as long as technology stays strong and becomes a lot more user friendly, we should be able to create and work wherever we are.”
Even so, game companies -- especially larger ones -- need to consider how and when they bring people back into the office, with GWU advice being not to force your employees to return.
“The union is strongly of the opinion that as many workers as possible be allowed to work remotely. Section 44 of the Employment Rights Act 1996 protects workers who do not wish to go to a workplace that they have reasonable belief is unsafe – such as the threat of catching a potentially deadly disease – and we have been engaged in arguing this case for our members where needed.”
Most importantly though, companies considering return to work options need to follow government guidelines on creating a COVID-safe environment and listen to the science.
“A manager should be able to look at a given workplace and answer the question: ‘Is there significant ventilation, space, and equipment that I would feel safe working here?’” Peach continues. “If the answer is no, then I would reevaluate asking your staff to return to the office.”
This adaptability, combined with increased revenue and engagement during lockdown, may be why many in the games industry are confident about its ability to weather the pandemic. How this will change as the situation develops, and the economic fallout begins to intensify, is another great uncertainty however.
“There are concerns that while people are at home and looking for entertainment now as redundancies increase, players might choose to explore their unplayed back catalogue rather than buying new games,” says Tony Gowland, founder of Edinburgh-based developer Ant Workshop. “The landscape of selling indie games changes pretty regularly anyway, so I think we’re quite used to having to adapt how we price, advertise, and sell our games.”
While some game companies have been forced to delay projects after the shift to remote work impacted efficiency, there are also certain financial concerns. According to figures from UKIE, 56% of game companies have reported difficulty accessing investment as a result of COVID-19, and 67% expect that future publishing deals will be negatively impacted by the current circumstances.
This is one reason the trade association is calling for an expansion to the UK Games Fund, to help overcome the immediate deficit, while also providing secure funding options for the development of future properties and long term growth.
Events remain an integral part of the games industry, especially in B2B, where the loss of physical events has disrupted the investment pipeline. For Ant Workshop, which relies heavily on work for hire projects such as developing console ports of PC games, physical events play an important role in securing contracts.
“For us, consumer shows are always good from a B2B perspective for scouting the floor and seeing if there are any promising titles we’d like to work on that haven’t got their console plans organised,” says Gowland. “And there are just the opportunities you find out about from bumping into someone you see maybe two or three times a year and catching up with what they’re working on.
“We’ve tried a B2B digital event and it was okay, but often it’s just been easier to use our contacts and email people directly to organise meetings, rather than enter into the ‘speed dating’ pitching systems.
“I think a number of events companies haven’t got their pricing sorted out in a way that makes sense for companies of our [small] size as well; they’re struggling to figure out what value they are really adding in the digital space, while still trying to charge physical event prices to cover their own overheads – which is understandable for them, but really doesn’t work for us.”
Digital events are more accessible though, not requiring travel or accommodation expenses for attendees, which is an undeniably positive aspect. But we’ve also seen changing attitudes towards physical events within the industry in recent years, as large companies like Sony and Nintendo have stepped back from the traditional format of E3. We looked at the impact of E3’s cancellation earlier this year.
For some companies like indie publisher No More Robots, the loss of physical events hasn’t proven an issue.
“At the end of last year, I decided that No More Robots was not doing any travelling in 2020,” says founder and CEO Mike Rose. “Shows had become such a time sink for us in the previous year, and I felt like it was time we could have spent doing actual useful things for our games... Not doing physical shows, if anything, has been a good thing for us, and allowed us to power through and have an incredible year.”
It’s important to recognise that this recent industry boom (or in some segments, bust) is directly tied to the pandemic. Game companies are currently reaping the benefits of our new normal under coronavirus, but it is ultimately a temporary arrangement. Of course, even with an effective vaccine, “normal” could still be a long way away. Until then, the industry’s ability to adapt thus far can help prepare it for what lies ahead.
As Splash Damage CFO Ben Hopkinson points out: “I think you need only look at the record figures that games are pulling in these days to see the resilience of the industry.”