The burgeoning gaming industry is rapidly eclipsing Hollywood in terms of hype and financial clout, and Ireland is hoping to become a significant player, writes CIARA O'BRIEN
THE GAMES INDUSTRY has changed a lot in the past 20 years. Where it was once seen as a hobby for teenage boys, the development of casual gaming and social networking has seen a massive shift in how gaming is perceived – and that is translating into a multi-billion dollar industry.
It’s a trend that can’t be ignored. The launch of major games titles now attracts a level of interest and hype previously only seen in the movie industry.
When Call of Duty: Modern Warfare 2launched in 2009, it grossed more than $300 million on its first day of sales in the US and UK. Last year, Halo: Reachraked in $200 million in its first weekend in the US and Europe – more than some of 2010's biggest film releases. Games are big business these days, and with the growth of social gaming, they're set to get bigger.
On a global scale, the past 10 years has seen the video game industry rapidly increase in size. By 2013, the market is predicted to reach $73 billion. More importantly, the increasing popularity of social gaming and online play have changed the shape of the industry. This has opened up, not just a global market for developers, but also opportunities for the industry to find new locations offering local talent and favourable tax regimes. It’s a rapidly moving marketplace and Ireland is hoping to become a significant player.
It’s not a far-fetched idea, despite the country’s size. At last November’s Web Summit in Dublin, the idea of Ireland becoming a major player in games development was discussed by experts. Former Namco executive Barry O’Neill, who now heads up venture capital fund Other Ventures, suggested at the conference that Ireland could become a centre for games development similar to Montreal if the tax regime was made more favourable to developers.
The biggest games in the world – Call of Duty, for example – use technology from an Irish company. Meanwhile, leading interactive software services provider Havok has grown from its Trinity College days, where it was established in 1998, to be part of a multinational firm. Ireland is leading the way in the games industry in some respects, and it's an advantage agencies such as Enterprise Ireland and IDA Ireland are keen to capitalise on.
Although still at a relatively early stage, the games industry in Ireland is growing rapidly. In the past eight years, the number of companies established in this area has grown significantly.
Figures from Enterprise Ireland estimate the Irish and UK market is worth almost €2 billion. A significant portion of that – almost €350 million – is accounted for by the MMO (massively multiplayer online game) gaming market. IDA Ireland estimates that roughly 2,000 people are employed at its client companies alone.
“We would see that sector growing by about 50 per cent over the next two, maybe three, years,” said Thomas McEvoy of IDA Ireland.
Ireland has been busy for some time building up its high-tech industry, with companies growing the software sector in the 1980s and the emergence of internet companies in the late 1990s. This has all helped position the economy today as a potential centre for the gaming sector.
It’s not surprising that there has been such growth here in recent years. A number of multinationals have located in Ireland, some attracted by low tax rates and the opportunity to use the country as a launchpad to get into Europe, others drawn by the availability of skilled labour.
Vivendi, Microsoft Games and Activision have all set up here, with EA a newer win for the economy. “You’ve suddenly got this ecosystem that’s quite attractive to the games industry,” said McEvoy. A rising number of indigenous firms are also growing to a stage where they can comfortably compete on a global scale.
The country has much to offer the industry and vice versa. According to Enterprise Ireland, many of the companies in Ireland’s games sector are involved in middleware or games development. But there is also the opportunity to become more involved in game design, particularly given recent changes.
“Globally, the game market is shifting significantly. There are a lot of business models coming down the track, a lot of new consumption trends, and that is what we’ve been benefiting from,” says Maeve McConnon, project manager for digital content, IDA Ireland.
“The market has changed, [it’s] a much more dynamic industry that involves huge numbers of the population. The whole move to new devices and new ways people can consume [the product] has driven new opportunities – and we seem to be rising on the wave of that.”
Havok, now owned by Intel, is one of the success stories. The Dublin-based software company's technology is used in more than 270 titles including the Assassin's Creedseries, Battlefield: Bad Company 2, Halo 3 and Half-Life 2. It has even extended its reach to the movie industry, where its technology has driven special effects in movies from The Matrixand X-Men: The Last Standto Troyand Quantum of Solace.
"When Havok started, the tech bar was very high; there wasn't a culture of companies using third-party technology alongside their own. So one of the things Havok had to pioneer in many ways was the use of middleware and third-party technology in large scale game productions," says Havok's managing director, David Coughlan.
That has since changed, with companies recognising the value of buying technology, instead of trying to create it entirely themselves.
Crucially, he says, the barriers for entry to game production have also come down significantly.
"It's once again feasible for small teams of one-to-five people to get a game, produce it and get it to market, says Coughlan. "It really comes back to the 8-bit era, with the Commodore 64, when games were written and almost published, from start to finish, by one person. All the art programming and design was done by this single person. That had escalated into cinematic titles, which had teams of 50-plus people. It's come full circle again."
"For the first time, it's a viable industry in Ireland. The reality is that, even if you had the financial backing five years ago to set up a large scale team in Ireland, there just wasn't the critical mass of product, art and programming talent in the country, and it wouldn't have been feasible to attract it all in at one go."
Jolt Online Gaming's Dylan Collins has seen the recent development in the Irish industry first-hand. Collins has an impressive pedigree:he developed Demonware, a middleware tool that Activision acquired for over $10 million in 2007. In 2009, GameStop took a major stake in his games firm, where he remains chief executive.
"We are one of the biggest online games hubs in the world. Not enough people talk about that," he says. "Ireland is the best location to service the European market for many American companies. Culturally speaking, we're very similar to the US. We speak English. It's very easy to set up a business here and we have the advantage of not requiring German or French to live in this country.
"Europe, although it is a big market, its cultural and language fragmentation is a serious challenge, particularly for US firms. So Ireland is an easy place to do business."
One area that has been identified as a real opportunity for the Irish industry is social and downloadable gaming. It's not difficult to see why. According to data supplied by Enterprise Ireland, social gaming was worth $1 billion in 2009 and is expected to grow to about $3 billion by next year.
Driving this growth is increased access to the internet – through smartphones, for example – and the explosion in social networking that has taken place in the past few years as sites such as Facebook become more advanced. Location-based services have also created a huge market for social gaming.
"The rise of social networking, [of which] social gaming is one of the fastest-growing segments, and the rise of smartphones, [with which] platforms like the iPhone and Android spell opportunity, Ireland could find itself very well placed," says a spokesman for Enterprise Ireland.
And because it's online, geography is no longer an issue.
"The games industry is a global market and it's certainly accessible from Ireland. You're not geographically restricted," says Collins. "There's nothing stopping you, if you do the right things, building global profile."
It's a market that companies such as Popcap and Zynga, both of which have Irish operations, have benefited from.
Popcap, which offers games on Facebook in addition to downloadable versions for PC and mobile platforms, has seen its operations here grow significantly in the past few years.
"In order to service the European marketplace, we decided we had to be in Europe. Obviously the linguistic talent that's here helps us serve the different European languages and offer our games in those local languages to that audience," says Popcap's general manager Paul Breslin.
The value of locating here is something firms such as Activision, EA and Microsoft have recognised too, and that drives further interest in Ireland as a location.
"It just looks like the right thing to do for anyone who's not here. You're always going to go where everyone else is," says Collins.
And the opportunities don't end there.
"In the past, most companies that came to Ireland just set up localisation or customer support teams, but now we're seeing companies set up games studios," says Breslin.
"These are highly skilled game developers, talented individuals who will really help drive the gaming industry in this country."
The general feeling is that more could be done, however, with investment and education continually cropping up as potential stumbling blocks.
Opinion is divided over the usefulness of high-tech clusters in building the games industry. The hubs are designed to help start-up companies gain access to support and expertise.
For a company such as Popcap, which came from the Digital Hub in Dublin, such centres are an attraction. The firm spent about two years in the centre before moving on.
"For us to get a foothold in Ireland, the Digital Hub was [useful. It was] where we started. So it definitely has its part to play in helping companies set up in Ireland," says Paul Breslin.
He suggested that government investment could be key to improving it further.
"I wish it had a larger part to play. I wish there was more investment from the Irish Government's perspective that would help that cluster grow more. It does suffer from a lack of funding."
However, such centres come with their own challenges.
"It's a bit of a double-edged sword. There can be a help in trying to put talented people together, but there's a real pitfall in this as well," says Havok's David Coughlan.
"There is a danger of 'group think'. And there is a danger with these initiatives whereby you're encouraging Irish companies to do business with one another, rather than taking them out into the big bad world and encouraging them to do business overseas. Because that's really where the opportunity is."
Coughlan maintains that, while clusters and hubs can yield benefits, early stage companies should be assisted in getting into international markets and encouraged to be more ambitious.
The expansion of RD tax credits into the entire gaming sector could also provide a boost to the industry. Enterprise Ireland has provided support through its internet and games competitive start fund, launched in December, the aim of which is to help get start-ups off the ground and into international markets.
One of the main challenges facing the industry here is finding the proper talent in Ireland to work in the firms. While there have been moves in recent years at third level to improve the quality of graduates on offer – through courses specifically aimed at the games industry – the lack of experienced candidates is proving an issue.
"We would love to hire people from Ireland. We can find them at a graduate level but it's becoming more and more challenging to find these individuals at a five-year plus experience level," says Breslin.
With the economic doom and gloom casting a cloud over Ireland at the moment, any positive news is welcome. The games industry, as a rapidly growing sector, could be just what Ireland needs to pull it out of the "jobless growth" cycle that is being predicted for the near future.
Popcap, for example, is looking to double the size of its operation here in the coming years. It currently employs 60 people, having started with nine people five years ago.
"More and more companies are moving into Ireland and it's a very positive area to be in at the moment," says Breslin. "I haven't heard of many games companies that aren't looking to expand."
However, you could be forgiven for being wary of the tech industry. Ireland has been burned recently by firms shutting up shop and moving to more low-cost economies, cutting hundreds of jobs – most notably Dell, which moved its operations from here to Poland.
A potential skills gap for the IT industry could also stymie attempts to build a thriving games industry here.
"The real question is: Can Ireland keep that momentum up? The reality is, if we don't see a greater quantity of Ireland's best and brightest pursue technical subjects, that skills gap will be a challenge for the games industry and, more broadly, for the technology industry in Ireland," says Coughlan.
"People recognise there's a productive, motivated, tech-savvy workforce here that's used to doing business in a way that's consistent with how western industrialised nations do business. That's got to be an initial spark for people wanting to set up here."
There are steps the economy can take. Coughlan would like to see the Government implement an education programme to help the population, particularly younger people, prepare for working in a digital age.
Measure such as extending tax credits could also encourage companies to come here, and boost the indigenous sector.
"We can make it happen by building the games industry beyond localisation and actually getting involved in building games and creating game IP here in Ireland," says Breslin.
"It is very hard to build a skilled, talented pool of individuals. It takes years to do that. That's something you can't pick up overnight and move to another country."
