How much does it cost to set up a game development business?
The UK is a world leader in games. Many of the world’s best selling titles come from British studios - and it is estimated that there are more than 2,000 companies engaged in game creation. Gaming is such an important sector to the UK economy that it even has a special tax concession, Video Games Tax Relief (VGTR), for qualifying businesses.
Setting up a business to create games offers exciting opportunities if you have the right combination of technical knowledge, a creative flair and an entrepreneurial approach. But the biggest challenge of all will be getting the finance you need - because, despite the large profits to be made in the sector, you will need sympathetic lenders able to offer innovative funding solutions that can help you get through months or even years of development time.
“Your games business brings in no income until your games find players. You need to pay staff and suppliers during the development stages - which can last for months until your first title is ready to ship.”
The funding you need
You can, of course, create a game on your laptop yourself, with the only costs being your own time, and many of the top development studios started in this way.
But running a business, where you employ specialist artists, animators and coders, will demand a more organised approach, and a substantial budget. To understand the costs involved, you need to break them down.
You need funding to allow you to:
- Employ staff
- Provide working capital until you start to make a profit
- Acquire premises
- Acquire equipment
- Deal with tax
- Employing staff
You may have ambitions to become a major games developer, but you are unlikely to produce something on the scale of GTA V as your first project. You will probably plan your first titles with a development time of a few months, but you will need to pay your team during this time.
While you may be able to recruit a passionate and dedicated team of like-minded gamers who can help turn your dream into a reality, people with the high level of skills you need will not be cheap.
You will need to look at spending at least £25,000 a year as a minimum for each person you employ. This could mean £150,000 or more in salary costs alone for your first year - remember that you will need to pay yourself a living wage as well as your staff. You will need to pay considerably more as your business grows, and you need to build a larger team to cope with the workload and the deadlines.
“You need to work with a team that believes in your vision and love what they are doing - but the people that will do that will still need to eat - so you will need to pay them what they deserve - or they will be taking their talents elsewhere.”
Make sure your team fits in with your company culture and can adapt as your business changes. Ensuring that you’ve got the necessary talent in place to grow your company is essential, just like any other start-up.
Funding for premises
Your studio is likely to need premises from quite early on. You will need space for each developer and you may also need a meeting space. A tech hub may be able to provide a suitable environment for your fledgeling business - but even a serviced office or studio suite will require an upfront payment.
You may not need a prestige suite, but a comfortable working environment can be essential for creative people - and you will want privacy. You can afford to have your great ideas leaked before release. Your own studio complex might be ideal, but you will also have additional costs, including power and business rates to budget for.
The cost of renting a suitable space will depend on where you are located in the country. Expect to spend upwards of £25,000 a year, and potentially much more in centres like London or Manchester.
Funding your equipment
Investing in equipment can make your team more productive and help increase the quality of your finished game. You will need purpose-built workstations with multiple monitors. You may also need additional equipment such as production quality microphones - as well as conventional office equipment, from seating to a kettle.
There will also be substantial costs for software tools such as Autodesk, Maya, Unreal Engine 4 and Visual Studio. Some of these may be available as freeware, but the most up-to-date version is always the best and, if you are making commercial products, you might need to pay to use them.
Expect to pay a minimum of £5000 for each team member - although remember that by using Asset Finance - Hire Purchase and Leasing - you can make virtually any type of equipment you need affordable by spreading the cost.
“You need the latest kit. If you find that you are spending ten minutes rendering a key scene, you are never going to meet your deadlines - and your team will not put up with the frustration.”
On top of salaries, rent and equipment, your business will need working capital. You may not need to buy in anything until you are ready to ship, but the costs of simply running your business, from utilities to business rates, will all need to be covered.
A minimum of £1000 a month is likely to be needed.
Finding the funding you need
Lenders usually require an established trading history and record of profits when they are considering funding for conventional businesses. Despite the known potential of the games business, many are unwilling to support the sector - especially if yours is a start-up.
Funding for your first few months can often be provided by publishers, clients and the business angel network. There are also specialist private equity funds with a strong focus on the gaming industry. At Rangewell, we work with businesses just like yours to help with finance for gaming. We understand your start-up and the potential it offers, as well as the unique challenges you face.
We can use the expertise we have built up to help you find the most appropriate and affordable financial solutions you need to make your business work, whether you are looking to fund your start-up costs, capital expenses, working capital or growth.
We can also help you find Alternative Funding, using new loan providers and styles of funding, and know the lenders who can offer the most competitive rates for the sector.
So, whether you have a straightforward finance need or require a complicated ‘Jigsaw’ funding plan made up of a combination of products, we can work with you to find the answers.