Sunday, 15 February 2009

Goodbye Eidos

(By Richard Holway) Sad as it may sound, I’ve been following Eidos since their USM (that was the precursor to AIM) IPO at 100p in Dec 1990. Britain may not have produced an IBM, a Microsoft or an EDS but we were rather good at computer games - and Eidos was the British standard bearer. For most of the 1990s I reported as they bought a dozen or so other games developers with names like Big Red Software, CentreGold and Black Dragon. But, above all, Eidos was known for the ‘improbably curvaceous’ Lara Croft of Tomb Raider fame Most computer games are spin offs from films – Lara Croft did it the other way around!

By the end of 1999, as the bubble reached its peak, Eidos had a valuation of over £1billion. As other British games producers got bought by the Japanese, Eidos remained doggedly British. Unfortunately the share price went south. Lara lost her charms and sales slumped this Christmas. Profit warning followed profit warning and there were risks that Eidos would breach its banking covenants.

Last week the Eidos board accepted a bid, valuing the company at £84.3m, from the Japanese publisher Square Enix, best known for the Dragon Quest and Final Fantasy role-playing games. The bid was at a 260% premium to the price Eidos traded at a few weeks ago before the bid was rumored.

Ten years ago Britain led the world in computer games. Although analyst group Games Investor Consulting claims that UK-made games were valued at £2 billion in 2008, the UK is now in danger of falling to fifth in the sector's global revenue rankings as Canada and South Korea are set to leapfrog the UK in the rankings. For some reason, HM Government seems to not recognise software development as either manufacturing or the creative arts. So other countries have moved in to provide better tax breaks.

Computer games are the ‘sexy’ part of IT – exactly the area that might encourage more young people to ‘Get into Computing’. Now it looks like it’s another sector where we have needlessly surrendered our lead to others. That must surely be lamented.


SM said...

Thanks for highlighting the importance of the UK games industry Richard. It's often overlooked that the games industry attracts the brightest technical minds in the country. But the massive investment needed for blockbuster games, and fickle nature of the games market, means that running a successful games company is very tough these days. It's unfortunate that there is not more support for this "sexy" side of IT.

But the consolation is that the UK is still producing some of the most cutting edge innovations in gaming, and we still have some crown jewels, not least Rockstar Games and its infamous Grand Theft Auto series. Microsoft, Sony and Nintendo use UK developors for many of their leading licenses - especially when they're looking for new gameplay innovations.

And Eidos may well have found a good home in Square Enix. Like Lara Croft, Final Fantasy was a major game license that became a film industry first. As Japanese publishers try to woo more of the International market they will continue to turn to British developers. As long as there are any left that is...:)

Abdul Bijur V.A. said...

I am not really sure whether it is my place to comment, but it is imperative that continuous innovation is required.

Eidos struck gold with Championship Manager, but soon lost sight and split it up and Football Manager is still selling quite a bit.

There are more competition now from Blizzard or the Icelandic CCP Games(Eve Online) and gaming is moving more and more towards this trend. Recently watched a video on Ted by the makers of classic games like MDK 2, but the question is where is the old creativity? As SM said Lara Croft or Final fantasy is merely spill overs from hollywood and any Gaming lover would love some innovation, and that was what was lacking from most UK gaming companies. It has nothing to do with being UK or not, and a clear example is GTA which is still, as SM said, a "crown jewel".