Comment: UK games industry faces IP crisis as publisher buyouts loom

Every report written about the state of the UK videogames industry over the past few years - and there have been several - has highlighted one key problem facing the sector. While game development in Britain continues to consistently punch above its weight, delivering a host of global hits far out of proportion to the size of the UK retail market, game publishing is another matter entirely. Home-grown British publishers are few, far between, and with the sole exception of Eidos, insignificant on the international stage. The net result, of course, is that the lion's share of the revenues generated by the massive success of UK-developed games ends up in the coffers of foreign companies.

This week, the situation could become even more grim, as the UK's largest remaining publisher, Eidos, finally looks set to succumb to a takeover attempt by an overseas rival. Ubisoft is apparently the front-runner in the race to take over the company, whose market position has been severely shaken by a succession of profit warnings in the past years, while other less credible rumours attach Electonic Arts to the deal - presumably because of the publisher's well-known interest in acquiring Hitman developer Io Interactive, which Eidos bought earlier this year.

Talk of a management buy-out effort has also circulated, with some senior Eidos executives apparently keen to keep the company independent - but it's tough to see how such a takeover would be funded. After Eidos' most recent profit warning, which was issued just ahead of its financial year-end in June, its share price collapsed to well under 100 pence, wiping a significant amount off the books of some of its largest investors, such as investment bank Schroders. While a significant amount of that value has been clawed back, not least because of the prevalence of takeover rumours in the past few weeks, it's unlikely that anyone in the City would jump at the chance to put capital into the publisher right now.

So Britain may find itself falling even further down the international publisher league tables - and while SCi has been performing strongly in recent years, it's hardly in a position to fill the boots of a house of Lara just yet. Codemasters is the only other publisher of significant size remaining in the UK; privately held, it's less susceptible to takeover bids than the other two, but even that hasn't stopped rumours of a French buyout circulating in the past week. Even if both Codies and SCi remain independent, though, the situation looks grim. The strength of Britain's development community will continue unabated, no doubt, but the fruits of their labours - both in terms of intellectual property and actual revenues - will flow overseas at a faster rate than ever before.

The fact that it's a French publisher making a bid for Eidos is also significant in its own way. Despite the fact that French game development pales in comparison with the British industry, the country boasts two of the world's largest publishers - Ubisoft and Atari - and has consequently seen its firms taking over the running of many of the UK's most talented games companies. The reasons for this are many, with the most obvious being the fact that the French financial markets were more receptive and patient than their British counterparts when it came to investing in their games companies in the nineties. The consequences being felt now as a result of this contrast are significant; in a time when few publishers are prepared to consider working on properties for which they do not own the IP, Britain may well be about to lose its biggest local powerhouse for videogame intellectual property.