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Policy Issues on the Competitiveness of the European Video Games Industry (first EGDF white paper 2005)

4. April 2012
  • This consultation paper, produced by the games industry development trade associations from across Europe, is designed to raise awareness about the industry and flag significant challenges to this important industry’s survival in the medium term.


  • In a rapidly growing industry worth nearly €19 billion globally, Europe is the second largest consumer of video games but its position as the world’s third largest producer of video games is under threat from a lacklustre European publishing sector, globalisation and non-EU government-assisted competition.


  • While games developers often create the most profitable Intellectual Property, they are often the weakest players in the games value chain, rarely sharing in the large profits of publishers due to an advance recoupment business model. Furthermore publishers increasingly require developers to produce demonstration content produced at the developer’s risk before agreeing to market and distribute the content.


  • North American and Japanese publishers dominate the global market, including Europe. An imbalance between the relative strength of Europe’s developers and relative weakness of Europe’s publishers communities is creating challenges for the future of the European industry which threatens developers’ ability to create valuable new intellectual property, share in royalty revenues, and produce content that is culturally appropriate for Europe’s many domestic markets.


  • There is a growing gap between the costs of development in  developing nations and in Europe. This gap is reinforced by government subsidies and tax advantages provided by some developed nations (Canada, Korea, Australia). This results in a “brain-drain” of development talent as well as increased consolidation pressure on an already pressurized European development market.


  • Developers struggle to raise funds for new projects, largely because Europe lacks the tax environment used elsewhere to encourage this important sector.


  • The Challenges can be summarised thus: high barriers to entry, human resource shortages, fragmented sector, rising costs, global competition, increasing power of platform holders, poor access to new technology, reduction in opportunities to create new IP, lack of market data.


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