AESVI Research maps out a nascent, but growing Italian industry

METHOD This survey was carried out by a research group from Milan University and commissioned by AESVI with the aim of monitoring the status of the videogame industry in Italy compared with previous periods and in particular to the studies published in 2011 and in 2014. The research was carried out by submitting questionnaires, mainly to subjects with managerial responsibilities in companies and to individual developers, in the case of emerging businesses that are not yet established as companies. The questionnaire was published online at the end of July 2016. More than 120 videogame developing studios took part in the survey, around 20% more than in 2014.

FACTS & FIGURES

Trading status Most of the videogame developing studios operating in Italy are limited companies (55%). However, the sector is also made up of a significant percentage of self-employed professionals (40%). Over 20% of studios are registered as innovative start-ups, not a small number compared to the high number of limited companies in the sample and considering the requirements needed to register as such.

Organization Around half of the sample (47%) have a company structure consisting of one to five regular employees. Whereas 42% of videogame developing studios have more than five employees. The latest analyses of occupation in the field- which due to its peculiar nature and reduced size of the businesses involved cannot be analysed solely on the basis of the figure of the "employee" - has been more finely tuned since that of 2014. It has been possible to ascertain that the number of people that work in this field today (just over 1000) is higher than expected by almost 50% of the estimate forecast by the previous survey (700 people). With reference to 2014, one may also notice a higher degree of organization within developing studios, with roles being distributed among several people and the division of professionals into three main skilled areas: management, technical skills and artistic skills. Only one out of five studios may be defined a "one-man company, where one individual covers all areas of production.

Age Italian game developers are getting younger and younger. The average age of those working in fields connected to videogame development, both in companies and as self-employed professionals, is 33 against the 35 years of age of the previous survey. The highest concentration of employees falls into the 26 to 40 age group which makes up almost two thirds of the whole sample. A young age may be also ascertained in the companies of the sector. 62% of businesses have been established for less than 3 years, against 45% in the previous survey.

Education and training The most widespread level of education is, as before, a high school diploma (40%). However, the number of those with a higher education specialization is also high, with over a third of the subjects, 31%, holding a masters degree, a research doctorate or a second level degree (laurea magistrale). Therefore, in most cases skills are acquired through practising the profession. It is more than likely that the level of education of subjects will increase in the next few years as a result of many new specialist courses in videogame developing that universities and private schools have promoted.

Turnover The turnover generated from videogame developing studios is in 30% of cases between 10,000 and 100,000 euro. In 44% percent of cases the turnover does not exceed 10,000 euro, thus confirming that most of the sample analysed is made up of self-employed businesses. Only around a quarter of the cases considered falls within the categories of higher turnover (from 100,000 to 5 million euro), with a higher concentration in the 100,000 to 250,000 euro range (15%). Compared to the previous survey, the percentage of businesses with high turnover (over one million euro) has remained almost unchanged (5%). The percentage of businesses with a turnover of between 250,000 and one million euro has decreased ( from 12% total in 2014 to 6% in this survey). The percentage of businesses that declare having a turnover of between 100,000 and 250,000 euro has almost doubled (from 8% to 15%). Lastly, the businesses whose turnover is included in the lowest range have seen a sharp drop (from 21% to 9%) in the 1,000-10,000 euro range and a tangible increase (from 24% to 35%) in the 0-1,000 euro range.

Target markets Around 86% of videogame developing studios operate in the consumer market (B2C) producing commercial videogames targeted at pure entertainment; a lower percentage (61%) operates on the business market (B2B), that is, producing videogames with educational or promotional purposes on behalf of third parties. The quota of those operating on the B2C market is practically the same as that of the previous survey (89% against 86%), while studios operating B2B have increased (from 46% to 61%). The vast majority of operators in the sector (52%) operates on both the consumer and business markets. Developing studios which operate solely on the business sector are relatively few (11%), while more numerous are those who are concerned exclusively with videogames targeted at the end consumer (37%).

Development platforms The production of videogames in Italy appears to be concentrated particularly on two platforms: PC (37%) and mobile (35%). Fewer but still a significant number are for consoles (14%) and online gaming (13%). Compared to the previous survey one may note an increase in development for PC (37% against 27%) and a fall in the mobile sector (35% against 47%). A significant quota of developing studios (42%) make videogames in virtual reality, an indication of how keen developers are to embrace technological advances and to enter into the dynamics of the international market.

Production Most developing studios (44%) have produced in total between one and five videogames in the last 3 years, focussing in particular on certain genres such as action (12%), adventure (13%), arcade (11%) and puzzle (11%). If one analyses the impact of developed games on turnover, in 36% of cases just one game contributes preponderantly to the studio's earnings. Production costs represent between 50% and 75% of total costs according to the specific case, while the resources allocated to marketing and promoting the product are rather low even when the game developer uses self-publishing methods, that is, they publish their own products autonomously without the support of a publisher. Operations carried out "at home" without outsourcing are very frequent and on a large scale even though most businesses are small scale from a structural point of view. Programming and game design are the most frequent activities (each totalling around 22%), followed by graphics and scenery (respectively around 19 and 13% each). Interactive applications developed for marketing and communication purposes make up around 34% of the total, whilst those developed for educational purposes make up 27%. In over half the cases (55%) the customers are private companies, followed by groups and associations (20%) and institutional bodies (16%).

Territorial distribution Northern Italy hosts around two thirds of Italian development studios (61%), followed by Central Italy (22%) and by the South (16%), including the islands. Distribution on the territory is in line with the previous survey, with the exception of percentage erosion of developing studios in the South of Italy (around -5%). On a provincial level there are some areas of agglomeration. The province of Milan leads with over 22% of developing studios, followed by the province of Rome (12%). Together the two provinces represent around 35% of the sample. Also noteworthy are the cases of Turin (5%), Bologna (5%), Verona (4%) and Genoa (4%). On a regional level, the decreased number of businesses was particularly evident in Piedmont (-5%), Tuscany (-3%) and Sicily (-2.2%) against a marked increase in Apulia (+5%), Emilia-Romagna (+3.5%) and Lazio (+2.6%). The leadership for the number of businesses is still held by Lombardy, confirming its growing trend (+1.1) and which alone hosts around 25% of Italian businesses.

International position Italian developing studios have a strong tendency towards internationalization of their products and they see the international market, rather than the Italian one, as the destination of their business. Europe is the main market of reference, followed by North America, Asia and South America. The figures ascertained in this survey are in line with those of the previous one: 93% of businesses operate in Europe (against 91% in 2014), 83% in North America (previously it was 91%), 64 % in Asia (against 71%) and 58% in South America (against 65%). the degree of internationalization of businesses in the field is therefore very high. On average, each company considered serves at least three out of the four market areas considered (Europe/Middle East/Asia, North America, South America and Asia/Pacific).

Sources of Funding In Italy the large majority of videogame developing studios operate with self-funding (56%). Compared to the previous survey one may notice a tendency, although not yet an established one, of varying sources of funding, by integrating self-funding with the financial support of publishers (around 17%) or less frequently, with that of private equity (around 8%). Almost absent is institutional funding and that of banks (3%), while its worth noting an increase in the use of crowdfunding (over 7%).

Obstacles and development factors The lack of financial sources, whether external or internal, is held to be the first and most significant obstacle to development, connected with reduced capitalization and less intervention from external financial subjects.

In fact, on a 7 point scale, the importance of economic obstacles to development was considered as follows: Lack of external sources of funding (5.3 points out of 7) Lack of internal financial resources (5 out of 7) Too high a risk (4.5 out of 7) Costs of innovation (3.3 out of 7)

Other factors that limit development are identifiable in the lack of combined technological and managerial skills, probably due to an imbalance in favour of productive areas, in the lack of skilled staff and in skills which are not suited to the current state of the market and technology.