Continuing our exclusive extract of the Government's Playing for Keeps report. Early in 2007, 15 of the UKâ??s most prominent independent developers, publisher studios and publisher head offices were interviewed about the UK as a market for games development. Here is what they saidâ?¦Royalties are rare for independent studio respondents. Only 12% of their revenues derive from royalty overages. Most revenues come from advances for licence work deals.
Nearly 90% of independents will self-fund part of a new game’s development, and all independents view owning technology IP as critical for increasing production efficiency and winning licence work contracts.
All respondents agreed that publishers will not distribute new original IP without controlling or owning its rights, and most agreed that publishers invest less time, effort and money in new independent IP.
60% of respondents are using, or are planning to find, project financing for new IP
75% of independent studio respondents plan to go direct to consumer via Xbox Live Arcade (or similar).
The best commercial models according to those surveyed are variable rate royalties, royalties at publisher break even or partial self-funding because they deliver the fastest recoupment.
R&D tax credits were the most frequently accessed source of external finance (after publisher funding for games development).
Opinions were split about how difficult it was to recruit in the UK, but nearly half of respondents have links to universities.
There was strong agreement that independents struggle to get new original IP distributed. Many think new platforms open opportunities for new original IP, but a sizeable number of respondents think new UK IP is shrinking. Most think this situation will persist for the next 5 years.
87% of respondents think that the UK government should introduce tax breaks for games production similar to those available for film production to counter the threat of subsidies from competitor markets. Prototype funding was another popular measure suggested by respondents.
All respondents were aware of the Canadian incentives. 40% have set up or acquired studios in markets where such incentives are offered, half of those in Canada. 47% of respondents thought that Canada had already drained talent from the UK.
Nearly three quarters of respondents thought that incentives offered overseas destroyed the level playing field, and made the UK less competitive. 40% thought UK companies would slow or stop their growth in the UK, with a knock on impact on creating new original IP.
40% of respondents thought that digital distribution of games would transform the industry.