Back in the 1980s, two gamers struck up a friendship at university. The students, David Braben and Ian Bell, created Elite, an immersive space simulation where players roamed galaxies on a spaceship. It was revolutionary for its time, and the pair became millionaires.
They eventually parted ways and Braben founded Frontier Developments in 1994, listing it on AIM in 2013. Since then, the shares have risen by more than 1,500 per cent — surging recently thanks to a gaming boom during the pandemic. It has become a multibillion-pound sector, and Frontier is at the front of the pack among British developers.
Over the years, it has shifted from developing games for third parties to publishing its own, which has boosted margins. It has won big licensing deals including with Universal Studios for Jurassic World Evolution, and with Games Workshop for Warhammer. And in a world where social media is driving trends, Frontier has increasingly used influencers to advertise its games on sites such as Twitch and YouTube.
Braben will no doubt be keeping a close eye on his rivals. Sumo Group, which worked on the Fast & Furious franchise, was snapped up by Tencent last month. The Chinese tech group is also an investor in Frontier, with a 9 per cent stake bought in 2017. There will be more dealmaking ahead as console-focused publishers snap up mobile app developers to expand their reach. Bigger platforms also want to secure exclusive content.
For Frontier, revenue growth has tended to be erratic, depending on the date of releases in any one year. Braben, 57, apologised to customers in May after a new game, Elite Dangerous: Odyssey, had performance issues. Frontier also revealed that a new Formula One management game would be released later than expected.
However, there are reasons to be optimistic. Frontier plans to release a sequel to Jurassic World Evolution this year, and it will benefit when Universal releases the film Jurassic World: Dominion next June. The first iteration of this game earned more than £70 million in its first year. Analysts have pencilled in £40 million for Frontier for its new game.
When it reports at the start of next month, the company is expected to announce a 20 per cent rise in sales to £91 million for the 12 months to the end of May, at the lower end of its range.
Frontier’s slightly bumpy year is reflected its shares: they rose to a high of £34.30 in January before retreating, closing on Friday at £25.95, valuing it at about £1 billion. Now may be the time to buy.
