UK video games: the studio that owns its hit beats the armies working for hire

The most profitable games studio in Britain employs 23 people. Kinetic Games, the Southampton studio that owns the ghost-hunting hit Phasmophobia, made £45.5M of pre-tax profit on £62.3M of turnover — a 73% margin, on a total staff bill of about £1.3M. In the same period Sumo Group, the Sheffield-headquartered co-development group whose 1,641 people build other companies’ games, lost £59.3M — £48.4M of it write-downs of goodwill and studio assets after a restructuring year, on trading that was roughly breakeven. The contrast still tells you the economics of the industry: own the game and a hit pays you forever; build someone else’s and you carry the payroll while they keep the upside — and when publishers cancel projects, as they have across 2023–25, the restructuring bill and the write-downs land on your accounts, not theirs. The 117 UK games companies that publish a full profit-and-loss book £6.20bn of combined turnover, but most of that headline number is not really a market: over half of it is the intercompany arithmetic of American parents, and a surprising share of the rest belongs to gambling companies wearing games-development clothes. Figures are approximate — verify against a company’s own accounts before relying on any single number.

Read the register first

Three things change how you read every number below.

The biggest revenues are group bookkeeping, not British games sales. Activision Blizzard UK tops the register at £1.75bn of turnover and a £259.8M pre-tax loss — but that filing is an eighteen-month period, not a year: $2.33bn over the 18 months to June 2024, extended to align the year-end with Microsoft after the takeover and converted here from the dollars it reports in. Annualised it would be nearer £1.17bn — below Epic Games Ventures — so the top slot is a period artefact, and the figures say more about group reorganisation than about selling games in Britain. Epic Games books another £1.5bn through two London-registered vehicles: Epic Games Ventures (£1.22bn of turnover, 1,384 staff worldwide, a £12.3M profit — an operating loss turned positive by interest income, and in any case a transfer-pricing setting, not a performance) and Epic Games Royale, which put £318.0M through 8 seconded staff — it employs no one directly — while growing “revenue” +799%. None of these margins can be benchmarked; the money answers to California, not to any market.

The cost-plus studios’ margins aren’t margins either. Britain’s most famous studios are development subsidiaries of foreign publishers, and their revenue is a recharge from the parent: The Creative Assembly (Sega’s Total War studio — a headline 55.8% “margin” of which £48.5M is a dividend from its own tax-credit subsidiary; its trading margin was 4.7%, alongside revenue down 36% and headcount down 44%), Ubisoft Reflections (46.7%), Playground Games (Forza Horizon, Xbox — 29.1%), Ninja Theory (Hellblade, Xbox — 16.5%), Naturalmotion (Zynga’s mobile arm). What the parent decides to recharge — plus UK tax relief — sets the number. These studios are real, large and important employers; their profit lines are accounting constructions.

A lot of “games development” is gambling. Gamesys (online casino and bingo, £141.3M), Global Draw (betting terminals, £105.9M at a 69% margin), the two Blueprint entities (slot-machine content and operations, ~£130M combined), Alchemybet and the loss-making LiveScore Group (sports media and betting, £206.3M) together account for roughly £600M of the register. Add Sony’s sports-officiating business Hawk-Eye Innovations (£81.7M) and the dating app Feeld and the lesson is clear: the category’s label and its contents are different things. All of the above are excluded from the competitive reads below.

The giants

† Activision Blizzard UK’s latest accounts cover an eighteen-month period (January 2023 to June 2024, a year-end change to align with Microsoft) and are filed in dollars — $2.33bn, converted here; annualised turnover is roughly £1.17bn, which would rank it below Epic Games Ventures. ‡ Creative Assembly’s £53.0M of pre-tax profit includes £48.5M of dividend income from its own subsidiary, The Creative Assembly VGDC; its trading operating profit was £4.4M, a 4.7% margin.

…and 107 more. Just below the cut: Hawk-Eye Innovations (£81.7M, sports officiating) and Naturalmotion (£70.7M, Zynga mobile). Of the top ten by turnover, only three — Jagex, Team17 and Sumo — are games businesses whose revenue line reflects an actual market, and one of those three wrote off its way to a £59.3M loss.

The IP dividend

Strip out the gambling firms, the recharge subsidiaries and the group vehicles, and the benchmarkable core of British games is surprisingly small — and it splits cleanly on one question: who owns the game?

Dovetail Games (Scotland) (£19.8M through 4 staff, +82%) reads as a group licensing entity of the train-simulation publisher rather than an operating studio, and a handful of profitable mid-sized names in the band aren’t identifiable as operating games businesses; both are left out of this read.

The owners occupy the top of the margin table. Kinetic Games is the purest case in the whole dataset: one self-published hit, 23 employees, a wage bill smaller than most studios’ recruitment budget, £45.5M of pre-tax profit and £104M of net assets accumulating on the balance sheet. Jagex has run RuneScape for a quarter of a century and still converts it at a ~20% margin on £151.4M; Team17 turns its own back catalogue plus publishing for other indies into 29%. And Hello Games shows what an owner can choose to do with the dividend: turnover up 71% to £56.0M on the back of No Man’s Sky’s long tail, yet a small pre-tax loss — because its staff bill was £28.8M across 55 people, over £500k a head. The profit didn’t disappear; it was paid to the team.

The workers-for-hire live lower down, and the gap is structural. Double Eleven (Middlesbrough, ports and co-development for major publishers) and Flix Interactive are the model done well — steady 13–26% margins, real headcount, no hit risk. But nothing in work-for-hire compounds the way an owned catalogue does, and the ceiling on the model is visible one section down.

Work for hire and the closures wave

The industry’s 2023–25 contraction — cancelled projects, closed studios, publisher cutbacks — is written most clearly into two sets of accounts. Sumo Group, Britain’s biggest work-for-hire employer at 1,641 staff and Tencent-owned since 2022, posted a £59.3M pre-tax loss on £125.2M of turnover — the headline number of the contraction, but read its composition: £48.4M of it is write-downs of acquisition goodwill and studio assets plus £5.0M of redundancy costs, and underlying trading on the £102.8M staff bill was roughly breakeven. When clients cancel, a co-development group keeps the payroll, loses the pipeline, and writes down the studios it bought in better times. And at Sega’s Creative Assembly, the recharge tells its own story even if the margin doesn’t: revenue down 36% and headcount down 44% in one year — the accounts-level shadow of a major project cancellation and the layoffs that followed.

The tax system leaves fingerprints here too. UK games development is subsidised through an expenditure credit (formerly Video Games Tax Relief), claimable by the statutory “video games development company” on each title — and Sega structures for it literally: The Creative Assembly VGDC (£59.9M of turnover, £17.9M of profit — essentially the expenditure credit booked on a cost-plus recharge to its parent) and Sports Interactive VGDC (£46.2M, £12.7M, no recorded employees, £23M declared as dividends) are dedicated claim entities named after the term in the legislation. The money flows straight back up: £48.5M of Creative Assembly’s own £53.0M headline profit is dividend income from its VGDC entity, so the same tax-credit profit stream appears in two rows of this register. The credit is a real support for a real industry — but it also means that even the subsidiaries’ flattering margins are partly the Treasury’s doing, and it is one more reason no profit line in this section should be read as market performance.

The shape of the market

The healthy core of the industry is the £5–25M band — 57 companies, three-quarters profitable: established independents, successful co-dev shops, the subsidiaries’ smaller siblings. Above it, profitability holds around 71–76% all the way up. Below £1M the picture inverts: only 12% of that tail is profitable, and it is best read as studios running down rather than starting up — because genuinely small studios (most of British games development by studio count) publish abridged accounts and never appear in this data at all. What you see here is the top of the pyramid.

Growth, read with care

Most of the extreme growth is structure, not sales. Epic Games Royale’s +799% is a group vehicle being loaded with revenue — eight employees didn’t 9x anything. Dovetail’s Scottish entity and Koei Tecmo’s European arm grew on licensing and distribution flows set within their groups. The one unambiguous story is Kinetic Games: turnover +186% with headcount +188% and a 73% margin — a self-published hit (its console and cross-platform release) compounding, and the team growing behind it, from 8 people to 23. Hello Games’ +71% is genuine demand too; its loss, as above, is a choice about where the money went. The rest of the fast risers are either loss-making (+182% at −21% margin is buying revenue) or too opaque to credit.

Market structure, ownership and vintage

On paper the category is concentrated — the top five hold 58.7% of the £6.20bn. But three of those five are Activision’s UK arm (an eighteen-month filing) and Epic’s two vehicles: the concentration measures where global groups chose to book revenue, not who dominates British games. Strip the group vehicles and the gambling firms out and the real industry is a £2bn-and-something market with no dominant firm — a few £100–150M owner-operators, a band of subsidiaries, and a wide floor of £5–25M studios.

This is one of the youngest registers we’ve mapped: only 8 of the 117 companies pre-date 2000, and the other 109 were incorporated since — a reminder that almost none of today’s studios existed when RuneScape launched. Ownership splits nearly evenly (59 individual-owned, 55 corporate-owned), which is itself unusual: half of British games is still founder-held, and only 9 companies carry the Holdings/Bidco naming fingerprint of private-equity structuring. The buyouts that do happen come from strategics and mega-funds — Sumo to Tencent, Jagex through a succession of investment owners — not from the mid-market buyout machine.

What the map shows

1. Owning the IP is the entire margin story. Kinetic Games made £45.5M at a 73% margin with 23 people; Sumo Group — 1,641 people building other companies’ games — traded at roughly breakeven and then wrote off £48.4M of goodwill and studio assets.
2. Most of the £6.2bn isn’t a market. Activision’s UK arm and Epic’s two vehicles book £3.3bn between them at margins set by intercompany agreement — and Activision’s slice is an eighteen-month period, not a year; the benchmarkable British games industry is nearer £2bn.
3. The closures wave lands on the builders. Work-for-hire and cost-plus studios carry the industry’s 2023–25 contraction in their accounts: Sumo’s £59.3M loss (£48.4M of it write-downs, £5.0M redundancy), Creative Assembly’s revenue −36% and headcount −44%.
4. A rough £600M of “games development” is gambling — casino, bingo, slots content and betting terminals (Gamesys, Global Draw, Blueprint, LiveScore) — plus a sports-tech business and a dating app for good measure.
5. The tax credit is visible in the corporate structure. Sega claims through dedicated entities named after the statutory term — one with £46.2M of turnover and no recorded employees — and the relief flatters every subsidiary margin in the register.
6. Growth worth believing is rare. One company grew fast, profitably, while nearly tripling headcount: Kinetic. Hello Games grew 71% and paid the proceeds to its 55 staff — over £500k a head.

Methodology and caveats

This covers only the UK games companies that publish a full profit-and-loss — 117 of a register of around 356, so the small studios that make up most of British games development by count file abridged accounts and are invisible here. The register’s own labels are unreliable: gambling operators, sports-technology firms and app businesses sit in the category and are excluded from competitive reads but included in headline totals. Margins are not comparable across the category’s revenue models — IP owners, work-for-hire studios, cost-plus development subsidiaries whose revenue is an intercompany recharge, and group vehicles — and subsidiary profit lines additionally reflect UK games tax relief rather than market performance. Several US-owned entities — Activision Blizzard UK and both Epic vehicles — file in dollars; their figures are converted to sterling at roughly the average rate for their period, and Activision’s accounts cover an eighteen-month period to June 2024 rather than a year. Intra-group recharges between register members (Creative Assembly and its VGDC claim entity, Sports Interactive’s VGDC) mean some development spend is counted in two rows, inflating the headline total beyond the US-parent effect flagged above. Each row uses the latest accounts available when the data was assembled; year-ends span mid-2024 to late 2025, and newer accounts may since have appeared. Large one-off losses may reflect write-downs and reorganisation rather than trading. Business-type labels are directional. Figures are approximate — this is analysis, not financial advice; verify any specific figure against the company’s own accounts.