The UK video gaming industry is experiencing a surge in growth, driven by a combination of factors that are reshaping the landscape. The industry's rapid expansion is not just about revenue; it's a cultural shift that's redefining entertainment. Here's a deep dive into the key drivers and the future of this dynamic sector.
The Pandemic Effect
The global video game industry witnessed a significant boom during the Covid-19 pandemic, as millions of people worldwide were confined to their homes. This period of isolation sparked a renewed interest in gaming, with mobile gaming taking center stage. The ease of access, coupled with the abundance of free time, led to a surge in players, including those who hadn't previously engaged with video games.
John Stewart, Director of Consumer at HSBC Innovation Banking, highlights the impact of this shift: "Mobile gaming has seen a big boom. Everyone has a phone and it’s so easy to connect to. That’s been a huge driver in how people can access gaming."
However, the post-pandemic era has seen a stabilization in growth, as the industry adapts to a new normal. Stewart explains, "The plateau wasn’t necessarily a reduction in growth but more of a stabilisation and a reflection of what stage the consumer was at."
The Rise of Community and Identity
The gaming industry is no longer just about the gameplay itself. Consumers are increasingly seeking community, identity, and a sense of belonging. This shift is evident in the growing number of gamers in the UK, with half of the population now identifying as gamers, totaling around 35.6 million people. This makes the UK the largest gamer base in Europe, according to community insight platform Levellr's CEO, Tom Gayner.
Maria Sayans, CEO of games studio Ustwo Games, notes, "Consumers are not just looking for great gameplay anymore. They want community, identity, and belonging."
This trend is reflected in the government's initiatives, such as the Creative Industries Sector Plan, which aims to increase investment in the creative industries, including games, from £17 billion to £31 billion by 2035. The plan also includes a new £30 million Games Growth Package to support studios, talent, and investment.
Investment and Tax Relief
The UK government's recognition of the industry's importance is evident in its efforts to attract investment. Effective from January 2024, video game companies can claim a taxable credit of 34% of qualifying expenditure, provided they pass a British Film Institute cultural test and have at least 10% of core costs incurred in the UK. Sayans suggests increasing this tax relief to 53%, arguing that it would benefit both investors and publishers.
Michael French, Head of London Games Festival, acknowledges the importance of government support, "There are many governments who are realizing the importance of video games for both the culture and the economics of the 21st century and are investing significantly."
The Role of AI and Community Engagement
Artificial Intelligence (AI) is playing a pivotal role in the industry's evolution. AI enables smaller scaleups to rethink their growth strategies, offering alternatives to traditional hiring practices. Sayans emphasizes, "AI is allowing us to think outside of the models of how you structure teams and develop products."
Community engagement is also a key differentiator for publishers. Gayner predicts, "Over the next five years, we expect the winners to be the publishers who treat community as a strategic asset from day one, not a marketing afterthought."
Skills and Future Challenges
Despite the industry's growth, there are challenges to address. French highlights the need for improved skills training, particularly in transitioning from startups to larger companies. He says, "There's a whole conflation of things that come under skills; tuition fees, the quality of courses where we can train people that aren't in further education to get into games."
The industry's future success hinges on its ability to keep users engaged for longer periods. Stewart suggests, "The companies that succeed and grow the most over the next five years will be the ones that can keep users engaged for longer, using subscription models and in-game purchases."
In conclusion, the UK video gaming industry is at a pivotal moment, driven by a combination of technological advancements, cultural shifts, and government support. The industry's future lies in embracing community, innovation, and a thoughtful approach to engagement, ensuring its position as a leading player in the global entertainment sector.
