UK GAMES INDUSTRY GETS 35MIL FUND
Copyright 2002 www.reuters.com

[ May 23rd 2002 ]

An investment bank on Wednesday launched a $35 million fund to finance development of console and PC games in Britain and give investors a chance to join the treasure trail pioneered by cyber heroine Lara Croft. Noble Fund Managers Ltd, the investment arm of UK-based investment bank Noble Group, said the Fund4Games will work as a kind of project-based venture capital fund and back video game development throughout the UK, home of the hugely successful Tomb Raider series starring Lara Croft.

The fund, based in Edinburgh, is intended to provide the financing required by entertainment software developers, while reducing the need to tie up a publisher's funds until the game has been completed and delivered, representatives said here at the Electronic Entertainment Expo conference, the $20 billion video game industry's annual trade show. For investors, the fund offers the prospect of attractive returns from a booming industry with less risk than conventional venture investment, since payouts will be made as each game goes to market, the fund managers said.

The game fund will not invest in riskier startups looking for seed capital, but will instead seek games that can be funded for smaller stakes of between 250,000 and one million pounds ($365,600-$1.5 million) per project, they said. Game developers write the billions of lines of code that consumers see as colorful, interactive video games on personal computers and consoles. Publishers market and distribute them.

Douglas Alexander, Britain's minister for e-commerce, said the government supports the private-sector effort to fund a fast-growing industry. "The potential for this fund is considerable," he told Reuters. Alexander said the UK gaming industry has revenue of more than 1.3 billion pounds, a tally expected to grow due to the fast-paced competition between game console makers Sony Corp, Nintendo Co and Microsoft Corp. "It's very clear in terms of the contribution that the game industry is making to the British economy," Alexander said at E3 in the pavilion of the Scottish Games Alliance.

Britain is home to several top selling games, most famously the Tomb Raider series that in the past brought riches for publisher Eidos Plc Grand Theft Auto 3 and State of Emergency, both developed by Take-Two Interactive Software Inc, were also written in the UK. But despite the optimism, Europe is considered to be in a "soft" third-place market in terms of sales of video games and hardware, behind the United States and Japan.

In fact, Microsoft in April was forced to cut the price of its Xbox console by 38 percent in continental Europe, and by 34 percent in Great Britain, after only six weeks on store shelves, in a effort to spur flagging sales. Alexander said game and console sales were a matter of consumer choice, and that any change in sales trends would have no effect on the region's interest in wooing developers, who make games that sell all over the world.

The balance of major game development takes place on the West Coast of the United States and Japan. Fred Hasson, chief executive of the independent game developer organization, TIGA, said British software developers must move quickly to spur growth. "If the UK wants to stay in the game, software developers have to evolve business strategies that can help them survive," he said, noting that the one-year-old organization now has 70 members up from 10 last year.