The space exploration game first came out on the BBC Micro in 1984, and is widely considered a classic. Look back at its rudimentary 3D graphics and you might wonder what all the fuss was about, but within the limits of the technology available at the time it was revolutionary, as was the scale of the universe it lets its players occupy. Thanks to advances in technology, its universe is now bigger still and can be shared by millions of players simultaneously, and in virtual reality. It really is amazing how far and how fast this technology has developed and it is not an exaggeration to claim that British developers have been centre stage in this – David Braben wrote the original Elite and remains at the head of Frontier.
Now, however, I am back in investment mode, and as well as bringing back some happy childhood memories, the extraordinary recent success of Frontier did also invoke a not-so-welcome sense of déjà vu. When I was a technology analyst nearly two decades ago, gaming was enjoying a boom as new platforms enabled much improved gamer experiences. As a result, my own firm decided to employ not one but two dedicated gaming analysts, and it was not alone.
But this boom proved short-lived, for UK listed gaming companies at least. Developing games was becoming increasingly complex and expensive, which meant development cycles were lengthening and delays to games could get very costly indeed. When share prices had been enthusiastically bid up on the promise of the next big hit, that left them very vulnerable to sharp sell-offs, exacerbated when the end product turned out to be not quite as good as everyone expected. And for smaller developers, a flop could easily spell financial ruin – and could easily follow a string of hits.
So, after a sevenfold share price rise this year we’re not chasing the potential for Frontier to deliver follow-up hits to Elite. What’s more, in scaling up to develop its next title, Jurassic World Evolution, it faces the same risks that did for Eidos, for years the UK’s most successful game developer thanks to its Tomb Raider franchise. Its business model centred on in-house development, which became a liability when Lara Croft ran out of steam and other developments went bad – it was eventually bought by SCi Entertainment, which preferred an outsourced development model that made it much easier to crack the financial whip and keep games on time and on budget.
I hope my fears are misplaced in Frontier’s case, but investors should nevertheless be mindful that the development of video games remains a high-risk business with few second lives.
