- Small businesses in the gaming sector succumbing under pressure
Gamescom was supposed to be the grand introduction: Leading German studio Suspicious Games' chief, Dennis Quaisser, intended to unveil his "Project Owl", an action-packed PC game with mythical creatures and character arcs. His team invested three years into its creation, with the Bavarian Film and Television Fund providing approximately 100,000 euros in financial support.
However, a harsh revelation followed: "The money was depleted, and a market launch was not imminent," Quaisser, then 33, recalls. "Orders from other studios for various projects also failed to sustain us." In the spring, the studio shuttered its operations. This Wednesday, the globe's largest video game trade event, Gamescom, unfolds in Cologne - sans Suspicious Games.
Small studios struggle
The studio's closure wasn't an isolated incident: Munich's Mimimi released "Shadow Gambit: The Cursed Crew" and later discontinued it - claiming it to be their final project. Flying Sheep from Cologne, Piranha Bytes from Essen, and Threaks from Hamburg also faced declining fortunes. "The good times are over," grieved Threaks, an award-winning studio founded in 2009. After the Corona boom, demand ebbed, and higher interest rates and personnel expenditures deterred investors.
Slowing industry growth
Game industry statistics illustrate a deceleration in growth. In 2021, the number of German game companies surged by 20 percent to 749, followed by a 15 percent increase to 908 in 2023, and a modest 4 percent rise to 948 mid-2024. Employee numbers in development studios and publishers rose to 12,408 in Germany, an increase of 3.5 percent from the year prior and 7 percent in 2023.
The smaller studios, however, seem to be exhausting their resources. Larger companies experience setbacks but less significantly than the indie studios.
In essence, the industry continues to thrive: Emerging technological opportunities and burgeoning demand mean plenty of gaming on consoles, PCs, and smartphones. The Corona years served as a digital gaming stimulus package, with people having more time at home to spend on entertainment. Incomes from games and hardware boosted 32 percent in 2020 and 17 percent in 2021, but growth tapered off, and losses ensued by the first half of 2024, with revenues falling 8 percent.
A minor German presence in the gaming business
Germany's developer sector earns a minuscule slice of the billion-dollar pie, with around 5 percent of the revenue attributed to German-developed games. Major corporations like Ubisoft ("Anno 1800") hold the lion's share, as international corporations with strong German branches. Only a handful of larger, domestically-owned studios exist, such as Crytek from Frankfurt with the shooter game "Hunt: Showdown 1896". Plenty of smaller studios populate the landscape.
Foreign-owned studios fare better
Deck 13 from Frankfurt boasts 90 employees. CEO Lars Janssen highlights that their French parent company, PullUp Entertainment, supports their funding for projects worth millions. They do not contemplate redundancies but instead plan a moderate expansion. Janssen adds that, considering current market trends, they are exercising caution.
While Deck 13 enjoys a relatively strong position due to its French ownership, smaller independent studios grapple with financial constraints. Dennis Quaisser, former Suspicious Games head, admits that the predicted consolidation of the market after the Corona peak had been a foreseeable development. "We hoped to weather the storm when things took a downturn - regrettably, that hope did not materialize," says Quaisser, a staff member of Pixel Maniacs now.
The Game association voices concern over this dynamic. The association criticizes the unfavorable business conditions in other countries like France and Canada. The Federal Ministry of Economics imposed a halt on funding applications in May 2023 and only allows new submissions to commence from 2025.
Fifty million euros in federal funding is allocated for 2024. However, all this funding will be directed towards projects submitted before May 2023 and will be distributed gradually over several years.
A Federal Ministry of Economics spokesperson views the continuous expansion in the number of game companies and employees in Germany as a positive development. By 2025, 50 million euros in federal funding will be made available again. "Under the current economic climate, this is an achievement and a vital signal towards the games industry," they assert. The Game association calls for more substantial funding. Federal Minister of Economics Robert Habeck (Greens) is expected to attend this year's Gamescom as a guest; he also visited the event last year.
In late November 2022, the German Bundestag's Budget Committee unexpectedly approved a total of 100 million euros for Claudia Roth (Greens), the Federal Commissioner for Culture, over three years. However, the initial installment of 33.3 million euros for 2024 remains undelivered. A Federal Commissioner for Culture spokesperson is involved in discussions with the Federal Ministry of Economics regarding the funding implementation. "The details involved are intricate."
Despite the financial support from the Bavarian Film and Television Fund, Suspicious Games faced difficulties in launching their PC game 'Project Owl' due to depleted funds and a lack of immediate market launch opportunities. Even after Gamescom, the closure of Suspicious Games was not an isolated incident, as several other smaller studios, like Mimimi and Threaks, also faced financial challenges.
