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The first comprehensive analysis of New York City’s video game sector, Getting in the Game, finds that the industry represents a promising opportunity for New York’s economy. The report, by the Center for an Urban Future, City Limits’ sister think tank, shows that New York is one of just a handful of cities in North America to develop a cluster of gaming firms, thanks to a considerable spike in the number of gaming firms here in the past few years. But despite recent gains, the study finds that New York’s gaming sector faces significant challenges and still lags well behind established gaming hubs like Seattle, Los Angeles, Montreal and Boston.

The report concludes that New York has tremendous potential to cultivate a larger game industry—a prospect that, if achieved, could lead to hundreds, if not thousands, of new jobs and help the city diversify its economy. The study shows that New York has many of the ingredients necessary to be a major center for the industry: it boasts a deep pool of creative workers and it is home to some of the world’s most successful film, media and publishing companies—sectors that have similar characteristics as gaming. As with other Center reports on the biotechnology, air cargo and fashion industries, “Getting in the Game” highlights this sector as an untapped opportunity for the local economy.

New York faces a number of challenges in capturing a larger share of the industry’s future growth, however. Chief among these problems is a limited supply of technical workers, compounded by the fact that the city’s universities aren’t creating the pipeline of technical talent that local video game companies need. Other challenges include the high cost of doing business in New York and the fact that city and state economic development officials have done little to support the industry’s growth.

The report calls on city officials to integrate the gaming sector into their overall economic development strategy, urges New York’s universities to expand their video game programs to include a technical game design degree program and encourages universities and local game companies to forge closer ties.

Here's an excerpt from “Getting in the Game”:

Video games have been around for more than 30 years now, but the industry has exploded in the last decade as home systems came to eclipse the arcade games that swallowed quarters by the millions in the 1980s. Computer and video game software sales in the United States have nearly tripled since 1996, reaching $7.4 billion in 2006, according to a 2006 report by the Entertainment Software Association (ESA). The number of video game units sold also skyrocketed, from 74 million in 1996 to more than 250 million a decade later. Meanwhile, membership in the International Game Developers Association (IGDA) grew by nearly 3,000 percent between 1999 and 2007.

The industry has taken off in part because games aren’t just for kids and teenagers anymore. New systems like Nintendo DS and Xbox Live Arcade, and the growing popularity of “casual games” like Diner Dash and Bejeweled, have redefined the industry. These casual games often are easier and shorter than typical “console” games like Halo and The Sims. Now a 40-year-old woman who likes to solve puzzles during her lunch break is now considered as much of a ‘gamer’ as a teenager playing a first-person shooter game for hours each night.

“It’s clear that video games are definitely a major mass medium now,” says Eric Zimmerman, co-founder of Gamelab, New York’s largest casual game company. “Games are not anymore just for geeky young males. In the generation growing up now, everyone is playing games. It’s simply part of their leisure landscape.”

According to local industry experts, the number of game development companies in New York City could be counted on one hand as recently as five years ago. But today, based on our analysis, the city is home to more than 30 game development companies and another 55 firms involved in some aspect of games, from sound effects to distribution. Only a handful of other cities in North America have as many gaming firms.

We estimate that the industry employs roughly 1,200 people in the five boroughs—our research identified that many workers, but the overall job total is undoubtedly slightly higher than this figure since we were not able to obtain employment information from a number of firms. While the employment total is still small, the workforce in the five boroughs has swelled in recent years. For example, Kaos Studios has grown from 15 to 90 employees. Other city-based firms like Arkadium Games, Powerhead Games and Large Animal Games have experienced considerable job growth.

Unlike most other gaming centers in North America, New York does not have any of the industry heavyweights that employ thousands of people locally. Take-Two Interactive Software and Atari are the two largest video game companies headquartered in the city. Both are major players in the industry, but most of their jobs here are in marketing, sales and other business fields rather than game development. The city is also home to entertainment companies like Viacom—which includes MTV, VH1 and Nickelodeon, among other networks—that are increasingly incorporating video games into their portfolio.

Although New York does not have an EA or Ubisoft, the city has become one of the nation’s leaders in two fast-growing sub-sectors of the gaming industry: casual games and mobile games, which are played on cell phones. The city is also developing a reputation as a major player in “serious games,” which are used for education, training or simulation. Industry experts believe these niche areas have only begun to take off, leaving New York well positioned for the future. “If you look back five or six years ago, there wasn’t that much going on in New York. There were casual game companies just getting their feet wet. A lot of the big studios that are very successful now weren’t even in existence,” says Coray Seifert, associate producer at Kaos Studios. “The growth of those studios has really been what’s sparked the game industry to have a presence in New York.”

Video game industry leaders and economic development experts are optimistic that these trends can continue: 58 percent of the local gaming executives who responded to our survey indicated that the city’s video game sector has “considerable potential” for growth in the years ahead while 37 percent say it has “some potential.”

“The video game sector in New York is going to keep growing,” says Franklin Madison, technology program director at the Industrial Technology Assistance Corporation (ITAC), a Manhattan-based nonprofit organization that has worked with several video game firms. “As it matures, I think it’ll become more of an important sector for economic development people to look at. It’s a new and burgeoning industry and we should court it because it doesn’t take a lot of space and it doesn’t take a lot of money.”

But despite the recent growth, the city’s video game industry is still small compared to other regions with game development workforces that number in the thousands. “New York is an interesting case because you would think it would be an ideal place for game development and creative workers,” says Jason Della Rocca, executive director of the IGDA. “Surprisingly, there are far fewer game studios as compared to the San Francisco Bay Area, Seattle, Austin or even nearby Boston. While the game development community in New York is growing, it is still relatively small.”

New York has significant challenges to overcome if it is to cultivate a larger video game industry. Chief among these problems is a lack of technical workers: while video game companies based in the city usually have no problem attracting artists, illustrators and other creative talent, they often struggle to fill positions for programmers and engineers. Indeed, a third of all companies who responded to our survey indicated that the limited technical talent available and the high salaries those workers demand are among the greatest challenges for New York’s video game companies.

Many of those interviewed for this report cite two factors missing from New York City that are crucial for growth: a major gaming studio, and a critical mass of small and medium-sized game development firms. In cities that boast robust gaming sectors, the presence of one large company like Microsoft, Sony or Electronic Arts typically serves as a critical anchor for the region’s growth. Simply by supplying a large number of jobs for programmers, illustrators, musicians and producers, these firms help attract a talented workforce to the region. Many of these workers eventually branch off to start their own game development companies. Similarly, a critical mass of gaming firms provides additional job opportunities for game developers and signals to aspiring entrepreneurs that the city is an attractive climate for video game companies to prosper. The result of all this is a “gaming ecosystem,” where developers can readily move from company to company or start their own shop.

This ecosystem hasn’t yet been established in New York. As a result, many of the industry’s most promising entrepreneurs and skilled workers opt for other cities. Most native New Yorkers who become skilled programmers are hesitant to pin their career hopes on New York’s small game industry and move away; those who do live here are often snapped up by investment banks or ad agencies that pay much higher salaries.

Another problem is that the city’s universities aren’t creating the pipeline of technical talent that video game companies need. While universities in the five boroughs do offer many more game-related degree programs than a few years ago, none of them currently offers a degree in game programming, the technical side of the trade. “The technical absence is a big, big deal,” says Nick Fortugno, co-founder of Rebel Monkey, a casual game studio. “If there was a serious [academic] games programming department in New York City, that would be an enormous boost to the game industry. I think that would be the single biggest thing that could happen.” Some developers say that the city’s schools also don’t do enough to link up with industry and feed students into local companies.

Additionally, several of the video game entrepreneurs and executives interviewed for this study expressed frustration that economic development officials for both the city and state have done little, if anything, to support the industry’s growth. In fact, more than three-quarters of those who responded to our survey said they had never interacted with the city—and of those who had, most characterized their experiences as negative. They say that city officials have never attended a video game industry trade show or met with the local IGDA chapter.

A number of other cities and states, notably Austin and Georgia, have developed strategies and invested significant resources in growing their video game industries. New York’s Economic Development Corporation (EDC) did conduct an internal study of the video game sector in 2007, but eventually decided that its small size didn’t merit investment of their limited resources. This may have been an understandable conclusion at the time, given the sector’s small size. But as the city’s unhealthy over-reliance upon Wall Street becomes more glaring in the wake of the nation’s credit crunch, EDC officials would be wise to re-evaluate its prior decision and develop a plan for supporting a sector with undeniable growth potential.

Establishing or growing a video game company doesn’t require a great deal of infrastructure or real estate investment, and can have a major economic payoff. “It’s a knowledge industry,” stresses Della Rocca. “We don’t need big warehouses and coal burning engines. It’s a bunch of guys and girls in an office with computers. From an economic point of view, if you’re a city or state or country and you’re looking for something that is high output, give some computers to these people, let them rip, and find some ways to support them.”

– Tara Colton