Investors Bypass Computer Game Producers

While the revenue of computer game producers worldwide has been declining in recent years, those in Croatia have been growing. According to data from the Cluster of Croatian Computer Game Producers, in 2022 they collectively earned more than sixty million euros and had a total profit ten percent higher than the previous year. The Croatian video game industry grew by 17 percent the year before last, but its revenue is trivial compared to that of the global video game industry, which is recovering rapidly and has already reached a value of two hundred billion dollars, incorporating a new billion users. Despite this, investors are not very interested in investing in this sector, which is why venture capital activity fell to pre-pandemic levels last year. Investors are unwilling to wait five years to see investment results. So where does the money for the Croatian gaming industry come from for new games and the development of human resources? In addition to investors, Croatian computer game producers receive financial support from the Croatian Audiovisual Centre (HAVC), some local and regional government units, they have access to funds from the European Union, and they are also supported by the company A1 Croatia.

– Unlike publishers who understand the industry, private investors are often uninformed about the industries they invest in, so they often expect a return on investment in a short period from video games, while almost all domestic experiences show that real success for studios comes after several released titles and many failed projects. This is why investment money is misdirected, with investors often investing heavily in one project instead of building studios and capacities for sustainable business. Such an investment structure, due to the nature of the industry, almost always fails to return the invested money in Croatia and beyond, regardless of the amount invested – says the director of the game development studio Gamechuck and secretary of the Cluster of Croatian Computer Game Producers Aleksandar Gavrilović​.

Small Niche

According to him, although the statistics are different worldwide, in Croatia, based on revenue, the video game industry accounts for only one-tenth of the IT industry and about one-fifth of the audiovisual industry.

– Probably because, unlike the rest of the IT industry, gaming most often cannot obtain lucrative projects with public bodies, such as expensive software maintenance, and unlike the rest of the audiovisual industry, this industry does not have nearly as much available public incentive funding, which is often inadequately distributed due to a lack of knowledge about the industry, thus growing slower in both aspects than it could. The result is that the video game industry in Croatia is an extremely small niche compared to other industries, as evidenced by the fact that only about five hundred people are employed full-time in it – says Gavrilović.

According to him, most employees in the video game industry are still self-taught in using video game production tools, but basic knowledge of programming, drawing, or management is often acquired at universities or colleges. For several years now, there have also been various formal education programs specialized in video games, such as programs at Algebra University, a six-month education in the PISMO incubator in Novska, or the Machina video game production school in Zagreb.

Financial Adventures

Gavrilović further explains that video game production often takes years and can cost millions or tens of millions of euros, and unlike other sectors in the entertainment industry, there is very little public support. Studios most often receive money for production thanks to investments from publishers or (less frequently) from private investors. According to him, in the first phase, from idea to demo version, it is hardest to find financing, and in the second, from demo version to finished product, it also depends on the quality of the product and the experience of the team.

– Besides private capital, there is the possibility of crowdfunding, and studios often adopt an agency work model until they raise enough money to finance their own project – says Gavrilović.

Support for the development of computer games is provided by European funds through several competitions within the ‘Creative Europe’ envelope, some of which are for encouraging the development of new games, while others are for supporting the marketing of existing games. In Croatia, there is only one support specialized for video games, awarded by the Croatian Audiovisual Centre.

– Some local government units provide support to studios for the development of video games. Since 2018, the City of Novska and the Sisak-Moslavina County have offered financing of five thousand euros to local video game studios. They are followed by the City of Rijeka, which this year also introduced financing for video games as part of cultural needs. It is worth mentioning various institutions in Istria, such as the Tourist Board, which invested money in the development of the Pula studio Red Martyr Entertainment – lists Gavrilović.

Support for Independents

All of this is not enough for domestic computer game production to realize its full potential and engage educated people.

Since 2021, HAVC has co-financed the development and production of video games as part of a public call. In the last three years, 45 projects from independent video game producers have been co-financed. In addition, it provides support and advocates for the Croatian video game industry at the national and international levels. For example, it supports the ‘Global Game Jam’ projects in Zagreb and Novska, co-organizes the meeting of the domestic video game industry that took place in Zagreb in early March this year, and participates in ‘Gamescom’ in Germany, the largest video game fair in the world, in collaboration with the Cluster of Croatian Computer Game Producers (CGDA), etc.

– We want to see how our video game industry matures, and by providing support to independent producers, we contribute to that goal, especially in times of reduced investment activity. We are working with partners on new initiatives in the upcoming period and on the joint branding of the Croatian video game industry. This joint brand will be presented for the first time at the ‘Reboot Develop Blue’ fair in Dubrovnik at the end of April 2024 and internationally at ‘Gamescom’ in Cologne. The goal is for our industry to be recognized internationally and to take its place alongside other major video game industries in the world – say HAVC representatives.

Tight Incubator

According to the head of the Department of Economy and Agriculture of Novska Boženka Spahić, gaming has in some way determined the direction and intensity of the development of that city. It has brought two new entrepreneurial incubators, PISMO 1 and PISMO 2, one with business offices and the other with the latest equipment needed for that sector.

– The City of Novska is the pioneer of the measure to co-finance beginner entrepreneurs in the video game sector. As early as 2019, we designed a measure that encouraged this sector and provided additional financial support to beginners who achieved the HZZ measure for self-employment. All those who started entrepreneurial ventures in Novska and achieved the HZZ measure for self-employment could apply for the city measure. The incubator is becoming tight for all new startups, but those who started four years ago with one employee now have about ten and are buying real estate in Novska to expand their company and activities – notes Spahić.

Gaming has also brought a new direction to the Novska High School, a technician for video game development, which has resulted in the enrollment of children from all over Croatia and the establishment of a second student dormitory in the Sisak-Moslavina County.

– There are also private investments in housing construction, which have not been seen for the last thirty or more years, and now there are four in our area. All of this is happening today, and we will soon witness what video games will bring by building a video game center on nine hectares in the Novska Business Zone – claims Spahić.

Serious Business

The development of the Croatian video game scene in the last ten years has also been significantly contributed to by the company A! Croatia, which launched the A1 Adria League in 2017, now the longest-running regional e-sports league.

– At that moment, gaming in the world was on the rise, while here it was in its infancy, so we decided to gather players from Croatia, Slovenia, Serbia, Bosnia and Herzegovina, North Macedonia, Montenegro, and Albania into one large regional league that would enable the development of new talents and the exchange of experiences in the community. We are convinced that our long-term support for the regional video game ecosystem, both for players and influencers and fans of video games, further motivates young people to focus on this industry, which is growing faster than all others. We continuously invest in its promotion and expansion of potential, and last year we also launched the A1 Student eChallenge, a league that brings together the best gamers from Croatian universities – says senior sponsorship and events specialist at A1 Croatia Diana Svalina.

In addition to gamers and e-sport athletes, A1 aims to gather all those who want to try their hand in other domains of organizing competitions in electronic sports, from casters to programmers and others.

– Over the years, we have seen that the awareness of gaming has changed, and the public no longer perceives it as just playing video games. It has become clearer that it is a serious industry that grows more each year in both revenue and the number of employees – notes Svalina, also emphasizing that A1 supports the PISMO incubator powered by A1, home to about eighty startups engaged in video game development and further enriches the microcosm of video games in the region.