Development, video games

When clusters implode – why games development clusters survive or fail

October 2010

When big studios like Realtime Worlds suddenly switch their lights off, the industry collectively shudders, blusters about probable cause, crosses itself and gets back to business. Post-mortems range from the uninformed (failure of business model – patently wrong as many similar companies would kill for APB’s ARPPUs), personalised (it’s always Management’s fault) to astute (most AAA MMOGs with console production values fail), pragmatic (quality dampened retail performance killing funding) or unvarnished (APB was heavily over-engineered compared to direct competitors). But why do some clusters collapse where others survive, what’s the long term impact of losing that many staff on Dundee, and what are the prospects for those let go?

At the heart of the industry’s biggest clusters – Seattle, Montreal, Vancouver and San Francisco – are giant studios training talent in the latest development technology and processes. Since most of these powerhouses are publisher-owned or are publishers in their own right, they typically have the scale and resources that most indies lack to attract talent from afar, which in turn attracts other companies. Eventually some staff spin out, either individually or as start-ups, diversifying the cluster. The locale often provides start-ups with seasoned Non-Execs to add strategic clout, reassure investors and eventually, sometimes, broker sales. When acquired, these studios close the virtuous circle by delivering cutting edge creativity and technology back into publisher studios, whose innovation is commonly evolutionary not revolutionary.

Our industry needs the balance and interplay between publishers and independents. They provide services, a talent pool and business opportunities to each other, as well as trigger subtler interactions between creative business people. Many clusters have grown and benefitted from cross-fertilisation from adjacent industries, most notably film in Vancouver, and Silicon Valley in San Francisco. London now has numerous games companies from new media agency-land, making it the UK’s largest cluster by number of studios and headcount.

Large publisher studios in your cluster are the best defence against shocks like Realtime Worlds, whose demise robbed Dundee of over 60% of its full time staff. Many of these newly-available top-flight developers are being scooped up by other studios but the UK overall is still losing headcount. Dundee itself now has under 160 development staff in full time roles in twenty-odd small-to-medium sized companies, which no longer enjoy spill-overs from a well-funded giant studio.

There’s no doubt that the cluster would be in much deeper trouble without Abertay, which provides a degree of safe haven during storms, housing developers and providing funding and staff. Dundee’s local funding environment, while better than most due to local benefactors and the new prototype fund, isn’t quite at the level to trigger multiple new start-ups. Finance is the other key to many clusters’ success. This financing is not universally sourced from public bodies. Canada may pump-prime to attract global publisher studios but the privately funded clusters of Los Angeles, Hamburg and San Francisco arguably create more long-term value by incubating indigenous studios. San Francisco’s games headcount is rocketing as social gaming companies tap a thriving venture capital scene entranced by a booming market, as well recruit from the Valley’s considerable talent pool.

Whether clusters and newly redundant staff bounce back from such redundancy shocks is driven too by timing. During the last collapse in developer numbers in the early-mid 2000s, many staff, with fewer jobs to go around, left the UK or the industry altogether. 3-4 years ago, studios were growing but faced recruitment shortages, so many released staff were absorbed by companies relieved to find experienced people. Since 2008, UK-based studios have tightened their belts, shedding nearly 9% of the UK’s full-time developer headcount.

What about these new routes to markets with lower barriers to entry? Let’s not overstate it: perhaps 10% of UK staff made redundant since 2008 went on to found companies. But, since then we’ve tracked well over one hundred start-up studios in the UK, whose fate correlates strongly with platform choice. iPhone companies have mostly struggled while browser game studios have thrived. The North East lost many start-ups which almost exclusively chose iPhone, but failed to find a market. Start-ups in the South East have tended towards Flash and Facebook, with a greater proportion surviving, so far.

After the RTW recruitment auction, a minority may leave gaming, but in a global industry with a highly mobile workforce, many will use this as the opportunity to work for overseas games companies. Data is hard to gather, but TIGA’s late 2009 survey found that half of studios’ lost jobs went overseas, 72% of them to Canada. Perhaps globalisation, which has killed many UK outsourcing companies’ businesses in recent years, can rescue such staff. Why wouldn’t a newly redundant but experienced developer facing bleak prospects in the UK head to San Francisco where cash-rich social games companies are growing faster than they can find office space for and are crying out for talent? I’m as unhappy with the UK’s decline as anyone but recognise that looking out for number one may mean looking overseas.

What will happen to Dundee? Dundee may be down but it’s not out. Local studios like Proper Games, Tag, Dynamo and Digital Goldfish are still going strong, and with Rockstar down the road, Scotland is still a top games development destination.


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