Serious Gaming in Singapore - A Policy Memo

PP5505 Assignment 3 Vikas Sharma A0077679 Page 1
Getting ‘Serious’ about Serious Gaming
Jumpstarting Singapore’s Local Developer Community
A Policy Memo
For
Prepared as fulfillment of the requirements of Assignment 3 for course PP5505
Vikas Sharma
A0077679
Contains 12 pages (excluding the cover sheet and the appendix)

Executive Summary
Serious gaming – the use of gameplay for educational, instructional or investigative purposes – is a fast growing
segment of the global gaming industry and is finding acceptance in Healthcare, Education, Defence etc.. While
it accounts for 7% of the global market, in Singapore, it is only 3% of the local gaming market. Given that local
developers cannot compete with entrenched global players in traditional gaming segments, it is important for
the Media Development Authority (MDA) to focus on jumpstarting the high opportunity local serious gaming
segment. Upon investigation, probable root causes for this underperformance are found to be – 1) Issues with
financing 2) Lack of marketing for Singapore education overseas and 3) Lack of competent manpower.
Prioritizing among these problem areas, financing issues were tackled as the focus problem area for this memo.
Status quo is eliminated as a viable alternative due to the continuing underperformance of the local industry
under the current structure. Three alternatives were proposed to address the lack of financing available.
The three alternatives were analyzed on comprehensive framework of criteria (with underlying indicators)
including – Effectiveness, Political Support, Cost, Robustness, and Administrative Operability. Care was taken
to assign quantitative indicators wherever possible and detailed spreadsheet models were prepared for analysis.
Upon analyzing the alternatives, analysis matrices were developed to assist in comparing between the three
different alternatives. Upon comparison, Alternative 2 came out as the most favorable choice, and is
recommended for adoption by MDA.

Context Setting - A Brief Introduction to Serious Gaming
Definitions and Customer Segments
‘Serious’ gaming is a sub-segment of the burgeoning gaming industry. It refers to the application of gaming
concepts, technologies and ideas to non-entertainment applications. While they mostly do employ some aspects
of traditional game-play such as ‘look and feel of a game’, and a ‘chance to win’; their primary purpose is
typically to educate, train or investigate. Increasingly, they are finding use in a range of industry sectors such as
– Education, Defence, Healthcare, Scientific Exploration, Business Training etc.
Growth of Serious Gaming
As per PricewaterhouseCoopers’ (PwC) annual ‘Global Entertainment and Media Outlook’ report, the overall
Gaming market globally stood at almost USD 60 billion in 2010. Projected to grow at a CAGR of 9%, the
global gaming market should reach more than USD 90 billion in 2015. Using numbers from publications by
Atos Origin and the Game Developers Conference, the Serious gaming segment stood at USD 4 billion in
2010, a mere 7% of the total gaming market. Growth in take up of Serious gaming, however, is much more
impressive, with the segment expected to grow at a a CAGR of 30% over the next five years, to reach USD 14
billion in revenues by 2015, improving its share of the overall gaming market to 15%. Sustainable business
models driven by selling to organizations (as opposed to end-users for general gaming), coupled with lower
development costs and high degree of customization allowed, are together powering Serious Gaming forward.
Includes Does NotInclude
Edutainment Games
News Games
Organizational
Dynamics Games
Healthcare Games
Militainment
Advergames
Adult Games
Casual Games
Traditional Games
Tourism-Related Games
Education
Healthcare
Defence
BusinessTraining
Client Industries
Scientific Exploration
Serious Gaming

Problem Area - Singapore failing to exploit the opportunity in Serious Gaming
Working from industry projections by Frost & Sullivan, serious gaming constituted only 3% of the total
revenues generated by local game development studios in 2010 (less than half of the global average). This
underperformance of local developers is further underlined by the observation that take-up of serious gaming in
Singapore’s defence, healthcare and education sectors, has actually been rising steadily. This indicates that local
clients are preferring to commission games from foreign studios instead. Another development worth noting is
that more and more big foreign game studios/publishers are setting up regional bases in Singapore and
dominating the local market for traditional gaming segments such as PC/Online/Mobile gaming. This leaves
serious gaming as one of the few remaining niches that local studios can target. With ‘nurturing homegrown
media enterprises’ as one if its primary mandates, it is important that the Media Development Authority (MDA)
looks into the stunted growth of the local serious gaming segment as a policy problem of merit.
Probable Root Causes:
1. Financing Issues: Local game developers are typically small sized operations of meager means and a staff
size of between 3-7 people. With the development cost of a typical serious game hovering around SGD
250,000, it is essential for studios to borrow capital for financing their projects. However, this working capital is
difficult to come by. There are not many angel investors/venture capital firms specializing in gaming in
Singapore and banks are wary of lending to such small businesses as well. Consider a few scenarios as below:
Scenario A: (best case) Studio has an assured client willing to pay the ENTIRE amount (development cost plus
some profit) upon delivery of the game. Studio still needs to raise money to sustain over the development period
(6 months to 1 year) and if not able to secure a loan from a bank, has to reject the assignment.
Scenario B: (usual case) Studio has a confirmed client willing to pay PART OF (25% or 50%) the development
cost of the serious game. Studio has to recover the rest of the cost by customizing the game and reselling it to
more clients In this case, it is even more difficult to secure financing since there is a reasonable chance that the
studio will fail to recoup the loaned money. Consequently, studio has to reject the assignment.

2. Need to promote Singapore’s school curriculum overseas: Educational institutes are among the biggest
consumers of serious gaming. A strong reputation for Singapore’s school curricula would translate into higher
demand for educational games developed here. While Singapore students’ performance on standardized tests
such – 1) SATs 2) Trends in International Mathematics and Science Study (TIMSS) - have helped, a concerted
effort to promote the school system overseas is still lacking. It bears merit to note that this root cause would be
better addressed by the Ministry of Education (MOE), not by MDA. Also, the developing and implementing of
marketing campaigns and realizing their benefits subsequently, would require significant gestation time.
3. Lack of Competent Manpower: Local studios lament the non-availability of skilled manpower as a primary
reason for their failure to compete with foreign developers of serious games. Lack of creativity, inability to
work under stressful deadlines, and unreasonable compensation demands are cited. This root cause is very
expansive in its potential solutions and remedial measures may involve cooperation among several agencies
other than MDA. Also, grassroots-level issues like inculcating creativity need a long time horizon for fruition.
The three problem areas are assessed on pertinent parameters to prioritize them for action by MDA. They are:
a) Importance: measures the significance of the root cause to the overall health of the serious gaming segment
b) Timeline: measures the time it would take for the root cause to be addressed effectively (lower is better)
c) Applicability: measures the degree to which the root cause makes sense to be addressed by MDA
Each problem area has been rated on the three parameters (1 being lowest and 3 being highest) and the ratings
added up to arrive at an Aggregate Score (1 being lowest and 9 being highest).
As can be seen for the table, Financing Issues emerges as a good candidate for action by MDA to help
jumpstart the local serious gaming segment. The rest of the memo focuses on this problem area.
Root Cause Importance Timeline Applicability
Financing Issues 3 3 3 9
Need to promote SG Education Overseas 2 2 1 5
Lack of Competent Manpower 3 1 1 5
Aggregate
Score
Prioritization Parameters

Proposed Options
Considering the problem area to be tackled, i.e. Financing Issues, it is clear that the proposed alternatives should
work towards allowing MDA to facilitate easier access to financing for local serious game developers. With
this in mind, three alternatives are proposed to cater to the spectrum of typical financing scenarios faced. The
three scenarios differ on the % of cost that the developer is assured of covering through clients at the onset
of the development work. The three % figures used are reflective of typical scenarios in the industry.
Key Notes & Assumptions:
1. The development cost of a typical project is SGD 250,000 and the developer is looking for 100% financing
2. Banks would be willing to loan only as much as is assured to be paid by a client upon completion of the game
3. MDA would be able to negotiate an insurance scheme with the banks that covers the risk of the developer
defaulting on loans provided by either the bank or by MDA.
4. There are NEW serious gaming projects that would surface in the industry if suitable financing is available
5. MDA is looking to recoup its loaned amounts (NOT a grant), though it will waive interest charges
Proposed Alternative 1:
Description: MDA to offer financing support to game developers that already have an assured client willing to
pay for the ENTIRE (100% of the cost of development) project, at the END of the development period.
Details: Since there is an existing client willing to pay entirely for the game, banks would be willing to provide
financing to such a game developer to the tune of the entire development cost. The lending bank would of
course charge interest charges as are applicable for such business loans. MDA’s role would be to help match
such developers to banks, NOT to actually provide any loans itself. The lending bank would require developers
to pay an insurance premium to guard the loaned amount against default (it is possible sometimes for serious
game development projects to get decommissioned at some intermediate milestones). MDA would help co-pay
50% of this insurance premium, with the other 50% paid by the game developer getting the loan.

pay PARTLY (50% of the total development cost) for the serious game, at the END of the development period.
Details: For every serious game project, two different loan components would emerge as explained below:
a) The banks would only be willing to provide loans for the part of development cost that is assured of being
paid by a client (50% in this case), and charge interest on that loan as per prevailing rates. Like in alternative 1,
MDA’s role in this bank loan would be to match the developer to the bank, and also to co-pay half of the
insurance premium to guard the loaned amount against default (with the rest of the premium paid by developer)
b) The remaining 50% of the development cost will be financed by MDA via an interest-free loan to the
developer. This loan would have a term of 2 years since the serious game would be delivered to the assured
client only at the end of year 1. The developer would then modify the game and try to sell to additional clients
in Year 2. MDA will safeguard the loaned amount via another insurance premium that will account for the risk
of the developer failing to find any further clients other than the assured client. This premium will be paid
ENTIRELY by the developer and hence, would encourage developer to carefully assess projects before take-up.
pay PARTLY (25% of the development cost) for the serious game at the END of the development period. The
specifics mirror alternative 2, with the difference that MDA would finance 75% of the total cost (not 50%).
Bank Loan 100% of development costs
MDA Loan 0% of development costs
Payable on bank loan by
developer at prevailing rates
Interest Payment
Premium payable to secure
bank loan. Shared 50-50
between developer and MDA
Alternative 1
Insurance Premium
Bank Loan 50% (alternative 2) and 25% (alternative 3) of development costs
MDA Loan 50% (alternative 2) and 75% (alternative 3) of development costs
Alternatives 2 and 3
Interest Payment
A) Payable on bank loan by developer at prevailing rates.
B) MDA to waive off interest on its loan
Insurance Premium
A) Premium payable to secure bank loan. Shared 50-50 between
developer and MDA
B) Premium payable to secure MDA loan. Paid entirely by the
recipient game developer

Choice of Criteria for Analysis
As shown in the figure below, five pertinent criteria ‘buckets’ have been chosen to analyze the three policy
options. Each of the buckets is further broken down into ‘indicators’ that are the actual pivots of analysis.
Figure 1
1. Effectiveness : This criterion assesses the ability of the policy alternatives to achieve the ‘focal’ objective of
the exercise. In this context, the two pertinent indicators proposed to measure effectiveness are as below:
a) Soundness of Logic: Does the policy option work the ‘right’ way, i.e. does it actually improve access to
financing for local players in the serious gaming industry?
b) Incremental Industry Revenues: How much does the option increase industry revenues by?
c) Incremental Industry Profits: Does the option increase the revenues profitably?
2. Cost: Each of the proposed options requires MDA to dedicate resources for its implementation. These costs
need to be assessed for the options. The pertinent indicator proposed is:
a) Expected Monetary Outlay: How much money can MDA expect to spend on each of the proposed options?
3. Administrative Operability: Each of the three policy options should be assessed on the readiness and
ability of the existing administrative set up at MDA to roll it out. The proposed indicator is:
a) Operability: How would each option perform in terms of the commitment, skills, knowledge and support
required from the administrative regime at MDA overseeing the development of the Serious Gaming segment?
Costs
Administrative
Operability
Political
Support
Robustness
Effectiveness
Benchmarking
Parameters
Analysis
Criteria
Further
decomposed
into underlying
Indicators
Analysis Framework

4. Robustness : This criterion assesses the three policy options on how well they can adapt to dynamic
environments that may not always be optimal. The pertinent indicator used here is:
a) Performance in Adverse Market Conditions: Due to some reason, if the demand for serious games were to
fall, resulting in decreased willingness on the part of clients to pay for them, how would each policy option
perform in terms of continued provision of financing to the industry players?
5. Political Support : Each option would need to be assessed on the level of support it can hope to garner from
the various stakeholders involved. The key stakeholders identified are depicted in the figure below :
a) Serious Gaming Clients: Owing to the primarily B2B nature of the industry, these clients would typically be
organizations that commission the gaming studios to develop serious games for them. As described earlier, they
primarily hail from sectors such as Healthcare, Education, Defence, and Business Training.
b) Small Gaming Studios: Developers of serious games, and intended beneficiaries of the financing options.
Typically, these are small-sized local operations, with 3-7 person teams.
c) Big Gaming Studios and Publishers: Big, (typically) foreign-originated game development players such as
Electronic Arts, Ubisoft, Lucas Arts, Koei etc. that have local/regional operations based out of Singapore. They
focus on the high-end gaming segments such as AAA titles, online multi-player role playing games etc., and
hence would not be intended recipients of the serious gaming financing options being discussed.
d) Other media content industries: Owing to their similar business models (sale of media content) and shared
financing concerns, it would be ideal to also consider firms and business associations from other media
industries such as Publishing and Music.
Serious Gaming
Clients
Small Gaming
Studios
Stakeholder 1 Stakeholder 2
Big Gaming
Studios/Publishers
Other Media
Industries
Stakeholder 3 Stakeholder 4

Analysis of the Alternatives
This section discusses the performance of the three policy options at the level of the underlying indicators of the
criteria. The ‘status quo’ option in this context equates to NO financing support for the serious gaming
industry. Hence, its incremental effects on the indicators need not be analyzed. The analysis makes references to
outputs from worksheets that have been attached separately and submitted along with this memo document.
a) Soundness of Logic: All three options increase the number of gaming projects that have access to financing.
In relative terms, Option 3 facilitates financing for the MOST new projects (10), followed by Option 2 (5), and
lastly Option 1 (2.2). Please refer to the worksheets for the three options for detailed quantitative modeling.
b) Incremental Industry Revenues: All three options increase total revenues generated by the local serious
gaming industry. In relative terms, Option 3 leads to the MOST increase ($3.90 mil), followed by Option 2
($2.85 mil) and lastly Option 1 (0.66 mil). Quantitative modeling available in attached worksheets.
c) Incremental Industry Profits: All three options increase total revenues generated by the local serious gaming
industry. In relative terms, Option 2 leads to the MOST increase ($1.44 mil), followed by Option 3 ($0.79 mil)
and lastly Option 1 (0.08 mil). Quantitative modeling available in attached worksheets. It is worth noting that
Option 2 has higher profits than Option 3 even with lower revenues. This is because the costs incurred by
developers in Option 3 are higher (owing primarily to the high cost of insuring against lack of resale clients)
d) Expected Monetary Outlay: In Option 1, for every new project, MDA has to only pay 50% of the insurance
premium against risk of project failure. However, in Options 2 and 3, MDA has to incur the opportunity cost of
waived interest charges on the loan it extends to developers, in addition to the insurance premium co-payment.
As a result, from MDA’s perspective, Option 1 has the LEAST monetary outlay ($4,125), followed by Option
2 ($55,625) and lastly, Option 3 ($180.625). Quantitative modeling available in attached worksheets.

e) Operability: Task force members at MDA would need to carry out new tasks and add new skills to their
repertoire, decreasing operability. In Option 1, the number of financing projects is least (less admin work) and
also, there is no loan administration from MDA. Hence, Option 1 would score HIGHEST on operability. In
Options 2 and 3, the administrative complexity rises (in that order) as number of projects financed increases
and MDA’s involvement expands to include – 1) administration of funds 2) negotiating more difficult match-
ups with banks to offer part of the loan as well as structure an insurance product to secure MDA’s loan amount.
f) Performance in Adverse Market Conditions: If serious gaming goes out of favor with clients for some
reason, they would be willing to pay lesser and lesser of the total development cost when commissioning
projects. We can expect to see a decrease in number of projects with 100% assured revenue or even 50%
assured revenue. So, a robust option would be one that continues to provide financing to projects under such
adverse market conditions. Hence, Option 3 performs BEST, followed by Option 2 and lastly, Option 1.
g) Support from Serious Gaming Clients: As financing options become available, clients who cannot afford the
full cost of game development would get more chances to commission games (or in the case of Option 2 and 3,
buy as re-sale clients as well). Hence, Option 3 would find MOST support, followed by Option 2 and Option 1.
h) Support from Small Gaming Studios: Small-sized developers are the primary intended beneficiaries of these
options in terms of increasing financing available to them. Since Option 3 has the least stringent financing
criteria (25% of target revenue assured), it would find MOST support, followed by Option 2 and then Option 1.
i) Support from Big Gaming studios/publishers: It is reasonable to expect that big studios/publishers would
accuse the easy availability of financing for smaller studios as ‘unfair’ and non-competitive. With this in mind,
Option 1 (being the strictest) would get MOST support from them, followed by Option 2 and then Option 3.
j) Support from other media content industries-: It is expected that firms in similar media industries
(music/publishing) and similar financing concerns, would protest against the ease of financing for serious
gaming Hence, Option 1(strictest) would get MOST support from them, followed by Option 2 and Option 3

Analysis Matrices
For ease of reading and visual interpretation, the above analysis results have been summarized in the two
analysis matrices given below – one for all criteria (except political support) and one for political support only.
Criteria/Alternatives Matrix (excludes Political)
Indicators
(dervied from criteria)
Measure
Alternative 1 Alternative 2 Alternative 3
Proposed Alternatives
Operability
Amount of effort and
dedication required by
MDA taskforce members
BEST - least no. of projects
and no loan administration
GOOD - 2nd lowest no. of
projects + loan admin +
neogitation with banks
WORST- highest no. of
projects + loan admin +
neogitation with banks
Performance in Adverse Market
Performance when
demand drops and clients
want to pay less upfront
WORST- requires client
willing to pay 100% of target
revenue
GOOD- requires client
willing to pay 25% of target
revenue
BEST- requires client willing
to pay only 25% of target
revenue
Incremental Industry Profits
New profits earned by the
local Serious Gaming
industry
WORST - increases industry
profits by S$0.08 million
BEST - increases industry
profits by S$1.44million
GOOD - increases industry
profits by S$0.79million
Expected Monetary Outlay
Cost to MDA if alternative
is implemented
BEST - expected cost to MDA
is S$4,125
GOOD - expected cost to
MDA is S$55,626
WORST - expected cost to
MDA is S$180,625
Soundness of Logic
Number of new projects
that get access to
financing
WORST - provides financing
to only 2.2 new projects
GOOD - provides financign
to 5new projects
BEST - provides financing to
10 new projects
Incremental Industry Revenues
New revenues earned by
the local Serious Gaming
industry
WORST - increases industry
revenues by S$0.66million
GOOD - increases industry
revenues by S$2.85 million
BEST - increases industry
revenues by S$3.90million
Serious Gaming Clients
Would support
alternative that lets them
purchase serious games
with least own
LEAST - requires clients to be
willing to pay 100% of the
target revenue for the game
MODERATE - requires only
50% commitment + offers
chance to buy at (lower)
resale price
MOST- requires only 25%
commitment + offers chance
to buy at (lower) resale price
Big Gaming Studios/Publishers
Would oppose easy
availability of financing to
serious gaming studios
citing it as 'unfair'
MOST - most difficult for
serious gaming studios to
get financing
MODERATE - 2nd most
difficult for serious gaming
studios to get financing
LEAST - easiest for serious
gaming studios to get
financing
Other Media Content Industries
Would oppose easy
availability of financing to
serious gaming studios
citing it as 'unfair'
MOST - most difficult for
serious gaming studios to
get financing
MODERATE - 2nd most
difficult for serious gaming
studios to get financing
LEAST - easiest for serious
gaming studios to get
financing
Small Gaming Studios
Would support
alternative that provides
them financing with least
stringent conditions
LEAST - strictest conditions
for eligibility (100% of target
revenue pledged by client)
MODERATE - 2nd strcitest
eligibility (50% of target
revenue pledged by client)
MOST- least strict eligibility
(25% of target revenue
pledged by client)
Political Support / Alternatives Matrix
Stakeholders Motivation
Proposed Alternatives
Alternative 1 Alternative 2 Alternative 3

Policy Recommendation
Taking both the Crtieria/Alternatives matrix and the Political Support/Alternatives matrix together the matrices
together in consideration, Alternative 2 seems to have the most favorable profile.
1. In the Criteria/Alternatives matrix, Alternative 2 performs well on all the criteria indicators and does not
have WORST rating for any of the indicators. While it can be seen that it performs worse than Alternative 3 in
terms of overall number of new projects financed as well as incremental industry revenues, it is important to
note that Alternative 2 results in the highest incremental PROFIT for the industry. Being a profit-driven private
sector industry, it is important that the serious gaming segment does not grow its revenues at the cost of
sacrificing profitability. Also, it should be noted that Alternative 2 achieves these profits while supporting
moderately risky projects (100% fully paid by assured client 50% paid by assured client 25% paid by
assured client, in INCREASING order of risk of not being able to recuperate loaned amounts).
2. In the Political Support/Alternatives matrix, Alternative 2 performs moderately on all the stakeholder groups
analyzed for their support. While it does not rate MOST for any of the stakeholders, it is difficult to pick a clear
winner between Alternative 1 and Alternative 3 since both of those alternatives score MOST and LEAST for
two stakeholder groups each.
Hence, based on the information available at this juncture and the analysis of the three proposed alternatives, it
is recommended that the Media Development Authority of Singapore (MDA) should adopt Alternative 2
to facilitate access to financing for local developers in the Serious Gaming segment.

Appendix
Reference Sources
For the purpose of writing this memo, the following key sources were referred to.
1. “Serious Games” market report published by IDATE in July 2010
2. ‘Global Entertainment and Media Outlook’ report 2010 by PricewaterhouseCoopers’ (PwC)
3. “Accelerating MDA’s Media in Learning & Training Initiative”, a study by Frost & Sullivan Singapore
Disclaimer: From his work at Frost & Sullivan, the author has prior exposure to the nuances of the Gaming
industry in Singapore. He has leveraged on that ‘understanding’ to define the policy problem in this memo.
However, all work in this memo is original and attributable to the author.

Serious Gaming in Singapore - A Policy Memo

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