Weaker currency could encourage foreign investment post-Brexit

The economic uncertainty caused by Brexit could present an opportunity for foreign investment, according to a senior manager for Tencent Europe.

Li Ma leads entertainment investment, strategic partnership and business development for Tencent in the UK. Speaking with GamesIndustry.biz at the London Game Festival this week, he said a weaker British Sterling could see more investment coming from China, Singapore, and the US despite the economic uncertainty.

"They definitely want to take these opportunities," he said. "If you look at the real estate industry, you can see a lot of Asian buyers and American buyers are buying happily into London and into the UK. That's self-explanatory with what's going on with the investment landscape.

"Don't get me wrong, with investment one of the key things -- be that for creative industry or all industry -- is about certainty. Everyone wants to wait and see for the dust to settle before doing anything. I know a lot of private equity and venture capitalists who say: 'Hey, we're on hold.' [That's] maybe not our attitude, but I think definitely this plays some role in the decision making."

"Everyone wants to wait and see for the dust to settle... [That's] maybe not our attitude, but I think definitely this plays some role in the decision making."

There is a certain amount of optimism from Ma, who believes that Britain will ultimately recover from any damage done by Brexit. Currently, one of the UK's greatest industry strengths is its ability to easily attract foreign talent, something which could be threatened by its withdrawal from the EU. However, Ma suggested that the UK is an attractive place to live, and developers that may lose their right to stay post-Brexit will "definitely come back" when the dust settles.

"I'm not a politician, but I used to study economics so my two cents is that in the short term [Brexit is] definitely damaging," Ma added. "All of the uncertainty is damaging the industry. But in the longer term... the UK can design its own policy in terms of how to attract talent."

Currently UK developers are able to receive EU funding grants from the Creative Europe, with an estimated €3.7 million available in co-financing. While they may cut off an important funding option for developers, it potentially creates an opportunity from an investment perspective to fill gaps and corner the market.

While the UK has found itself adrift over the last three years with the looming threat of Brexit and the paralysis in Westminster, the games industry has continued to thrive. A recent report from industry trade body UKIE found that the UK games market is now worth £5.7 billion; it's a mature market, but according to Ma it's missing something key.

"The ecosystem is there, but I would point out that the UK is definitely missing a component with a really sizeable gaming company as a flagship company like Supercell in Finland, or Ubisoft in France," he said. "I think the UK [often] only thinks about the UK market or European market."

Ma argues that the UK industry still has some way to go before finding its own Supercell or Ubisoft, but it is brimming with potential. However, it's not something that can necessarily be realised through foreign investment alone.

"The secret recipe to a very successful gaming company is never only by external resources. It has to already be there organically"

"The secret recipe to a very successful gaming company is never only by external resources," he said. "It has to already be there organically. If you think about Ubisoft or Supercell or CD Projekt Red in Poland, you've already got the talent there. The missing component is maybe funding, partnership and collaboration.

"But my two cents is that it's very hard to bring external resources to change your company dramatically. You can bring the company from ten to 20, but for a company to become 100 you need [the] talent, management team, and culture already there."

It's hard to say how long it will take for the UK to have its own flagship company like that. The industry is in good health, and home to companies both large and small, from Creative Assembly and Rare to Ghost Town Games and Boneloaf.

However, even with the sizable IPOs last year from Sumo Digital and Team17, there isn't a single game studio listed on the FTSE 100 or even the FTSE 250.

"All these gaming companies are relatively small," Ma added. "I think all these UK IPOs last year... [was] a huge start, but how to get customers or audience or investors to think you should be as valued as Activision or Tencent or Supercell or Ubisoft -- that's another level.

"Relatively if you look at the titles UK companies are making, there's some AA or AAA but they haven't got a very, very successful title that can be a game-changer for example, like Fortnite or Brawl Stars or The Witcher 3. You haven't got these kind of titles."

Ma noted that Sumo Digital, one of the UK's largest developers, is primarily a co-dev and work-for-hire studio. If the national games industry is going to gets its own FTSE 100 outfit, there needs to be more outfits tuned into what the next big thing is, whether that's IP development, cloud gaming, or subscription services.

"You think about how Supercell become super successful," he continued. "They were riding the wave of switching to mobile. No one at that time was thinking mobile is serious stuff. Mobile, casual games, [it was] for Tube rides or housewives who play match three.

"No, it was a massive opportunity, but only if you're the first one there can you seize the opportunities. Otherwise, the big players are already there and you no longer have that competitive advantage. That's my thinking. you have to think about what will be the next game changer to the whole industry and how you position yourself. That's the secret recipe."