The UK video games industry directly contributes £1.3bn to the UK economy (as measured by gross value added, “GVA”). Years of industry growth – often unrecognised in SW1 - has been catalysed by life in lockdown. But success has brought scrutiny and with it, questions of how this growing sector should be regulated.
A+ for “levelling-up”?
Few industries represent this Government’s economic vision quite as well as the video games industry. Let’s start with the Conservatives’ stated first principle: “levelling up”. Economic output per employee in the games industry is £83,000, compared with a UK average of £62,444, making the industry a shining light amidst the perennial productivity crisis. What’s more, 55% of game development jobs are based outside of London and the South East – bucking the trend for other parts of the creative industries.
Places like Leamington Spa and Crewe all contribute heavily to the national video games industry. Scotland too has a healthy video games sector. Grand Theft Auto V, developed by Rockstar North, was reported in 2018 to be the highest grossing game in history at $6 billion, more than any film has made in the 21st Century. Dundee’s economy in particular has benefited hugely from major games companies including Rockstar and 4J Studios. And whilst the city may be anything but a Conservative stronghold, Dundee’s success in knitting together its universities (many of whom provide games-specific degrees), games companies and wider cultural institutions may provide a model for prosperity elsewhere.
The geographical dispersion of the industry has been mapped by Nesta and UKIE, one of the two major games industry groups, in response to challenges around the classification of gaming jobs through SIC codes. This interactive map provides a snapshot of where games companies are located and indicates that whilst London holds a strong centre of gravity, the games industry is more regionally diverse than the film industry.
It is important to drill down below these regional statistics and Leamington ‘Silicon Spa’ is an example worth unpacking. The town supports 75% of the West Midlands’ games industry jobs and 25% of the region’s gaming firms. Clusters like Leamington drive innovation and knowledge transfer between firms in the sector, with major players like Ubisoft and Codemasters based in close proximity to emerging companies. Proximity to other creative businesses is a key driver of these “games hubs”, a 2014 Nesta report noted, aiding talent recruitment and knowledge spillover. By incubating incipient video games clusters and creating more success stories like Leamington and Dundee, the Government could translate “levelling-up” from abstraction into reality.
The games industry also ticks plenty of boxes for the Government’s stance on immigration and education. Video games jobs are typically high-skill, with 81% of workers in the video games industry educated to degree-level. Notably, nearly half of these degrees are in STEM or games-specific qualifications, arguably sitting well with the Conservatives’ new energy for “value for money” degrees.
But companies still struggle to recruit those with the right skills. Data from Screenskills show that the games industry is second only to video-fx employers when it comes to reported recruitment difficulties in the screen industry. Employers can now, however, wave the “best and brightest” flag of the new points-based immigration system. Concerned by the fact that 19% of games workers are from the EU/EEA, the games industry successfully swayed the Migration Advisory Committee to expand the Shortage Occupation List to reflect the needs of games developers.
Next level: lockdown and Brexit
COVID-19 has been a perfect incubator for the video games sector – thriving where other parts of the creative industries have run aground. The profile of esports has risen considerably, despite the absence of live-audience events, with Premier League stars competing in FIFA games broadcast on Sky Sports; Frontier Developments (a British video games developer) saw its share price increase by 153% between 16th March and 16th September; and active monthly users on Twitch (a video live streaming platform owned by Amazon) increased by 79% between March and May.
At least superficially, more time at home in front of our phones and consoles has ultimately been good for the industry’s profile and profitability. Whilst social distancing measures have necessitated a £1.6bn government support package for the arts sector, 45% of games companies reported increased revenue since the start of the pandemic, and just 17% of firms say they relied on the furlough scheme. The industry even collaborated with government to use geotargeting technology in games to disseminate “stay home” messaging and tackle loneliness through the #playaparttogether initiative. And with coronavirus restrictions continuing to ramp up, cloud-based gaming – doing away with expensive hardware – could well accelerate growth in new markets through the launch of Netflix-style gaming platforms; Amazon’s Luna+ was launched in late-September.
Brexit could also conceivably be a success story for video games. Certainly fears remain over stifled investment and recruitment, but there are positives. For one, the Government has committed to the continuation of the Video Games Tax Relief (VGTR) irrespective of the outcome of a trade deal. This tax – mirrored across the creative industries – has seen HMRC pay out £444 million to support video game development since its introduction in 2014.
Should Britain get its way on state aid, sectors like the games industry could stand to benefit. Both behind the scenes and in public the government has spoken of making post-Brexit Britain a digital superpower, driven by high-productivity, export-orientated firms based across the regions. Might the UK games industry – which generates 63% of its turnover from overseas – be held up as a shining example of this? Whilst current EU regulations do not prevent the UK from introducing a VGTR increase or German-style games development fund, Brexit does arguably give greater political salience to such policies, as politicians look to point to examples of what “global Britain” might look like.
Tough times ahead
The above paints a rosy picture for the UK games industry. But challenges are emerging – including questions around how to regulate the more harmful aspects of the video games industry.
Last year’s DCMS Select Committee Report on immersive and addictive technologies has been a major thorn in the industry’s side. Red flagging the continued prevalence of loot boxes in games, (which skyrocketed as early as 2012-2014), the report also raised concerns about the industry’s complicity in developing an ‘attention economy’. Unlike video games of the past, today users’ data can be fed back to companies to help design games and even modify a players’ experience to ensure they play for longer. For many players, this means a better user experience. For others, data-driven gaming is a potential pathway to harmful, addictive behaviours.
The Government responded to the report in June this year and an inquiry into loot boxes in games has recently been announced. DCMS has said a new duty of care would be introduced for user-generated content and the Government would explore a co-investment model for research on harms. That research is in its infancy. And experts are keen to stress that the industry sits on the necessary data needed to better understand gaming harms and disorders. For example, the Committee’s report stated that whilst games companies collect data about how long users play for, the industry was “wilfully obtuse in answering our questions about typical patterns of play”, eroding the Committee’s ability to say what “normal” gaming habits look like. As trivial as it may seem, defining what “normal” gaming habits constitute – and revaluating them as gaming technology develops – will be a crucial question for government, industry and experts to hammer out as the sector grows.
Single player or multiplayer regulation?
Inevitably, this leads to the tricky question of regulation. Games themselves do have legally enforceable ratings (PEGI), administered by the VSC Rating Board. But the industry does not have a regulator. Instead, it is self-regulatory, promoting positive gaming habits – which the majority of players have – through parental controls, screen limits and education. If industry malpractices are identified, they are investigated by various bodies including the Advertising Standards Authority (ASA), the Gambling Commission (GC) and the Competition and Markets Authority (CMA). The latter, for example, is currently investigating the subscription services used by Microsoft, Sony and Nintendo, over concerns about loyalty-penalties incurred by auto-renewals. Ofcom also now entering the fray, with the Government expanding the communications watchdog’s brief to introduce a statutory duty of care online.
Does this “multiplayer” regulatory framework involving Ofcom, the ASA, CMA and GC work satisfactorily? Some critics have argued no. Legitimate concerns have been raised by MPs that Ofcom won’t get the powers it needs to protect gamers online. Academic experts also say the games industry needs an evolving code of practice, administered by a single regulator, one capable of keeping up to speed with the rapid developments the industry is experiencing.
In a world where cloud-based gaming, virtual/augmented reality experiences and artificial intelligence all loom large on the horizon, it seems dismissive to say that the policymakers should not, at the bare minimum, at least review the success and failures of the existing regulatory framework and whether it adequately protects consumers and sets the highest standards. In the wake of the DCMS Select Committee report and the pandemic’s impact on industry growth, that call grows stronger still. A single regulator could include an expert advisory panel to develop a code of practice, monitor data from games developers, and empower industry to stamp out bad practices.
So if the industry is to demonstrate its very significant value as a high-skill, high-GVA sector with global influence, a conversation on its post-COVID regulatory future may be becoming unavoidable.