How do foreign exchange (FX) movements affect video game studios?

A game developed in the UK might be sold to players in the US, Europe, Asia and beyond within minutes of release, and whilst this reach is one of the sector’s biggest strengths, it also means studios are often exposed to foreign exchange (FX) movements in ways that aren’t always obvious.

Why are gaming companies particularly exposed to FX?

Unlike many industries that operate mainly within one market, gaming studios typically operate across multiple countries.

Revenue might come from global platforms and international publishers, while development costs may involve contractors and teams located in different jurisdictions. Even relatively small studios can find themselves receiving income and paying costs in several currencies.

As a result, a studio’s financial performance can be influenced not just by how well a game sells, but also by movements in exchange rates.

For example, if a studio earns most of its revenue overseas, the value of that income can change when converted back into sterling. In some cases, exchange rates alone can increase or reduce reported earnings even if sales volumes remain the same.

Revenue in multiple currencies

Many game studios distribute their titles globally through digital platforms. Players typically pay in their local currency, while the studio may receive payments converted into a different currency by the platform operator.

This creates an additional layer of complexity. The conversion often happens using exchange rates set by the platform or payment provider, which means the studio has limited control over the exact rate used.

Even relatively small changes in exchange rates can affect how much revenue ultimately reaches the business. Over time, as international sales grow, the studio’s exposure to currency fluctuations tends to increase.

Costs can also be international

Game development often involves global teams. Studios may hire overseas contractors, work with international artists or programmers, or collaborate with partners based in other countries.

Those costs may be agreed in foreign currencies, which means the amount a UK studio actually pays in sterling can change depending on the exchange rate at the time of payment.

For example, a contract priced in US dollars might cost significantly more, or less, if the pound strengthens or weakens during the development cycle.

Managing multiple currencies in practice

Because of this exposure, many studios end up managing several currencies at once.

In practice, this can involve:

Receiving revenue in one currency but reporting accounts in another
Holding multiple foreign currency bank accounts (allowing them to receive and make payments without immediately converting funds, which can help reduce transaction costs and limit exposure to exchange rate fluctuations.)
Converting income and costs at different exchange rates during the year
Retranslating balances when preparing year-end accounts

Accounting rules also require certain items, such as foreign currency bank balances or overseas debtors, to be retranslated at the exchange rate at the reporting date, which can create gains or losses in the financial statements.

For example, foreign currency bank balances, trade debtors and creditors may need to be retranslated using the exchange rate at the reporting date. This can create foreign exchange gains or losses in the accounts even when the underlying transactions have not changed.

These movements don’t always reflect changes in the underlying business performance- sometimes they are simply the result of currency movements during the year.

How can your gaming studio plan for FX risk?

As currency exposure can affect both revenue and costs, studios increasingly need to think about FX as part of their financial planning.

This might include:

budgeting development costs in different currencies
monitoring where revenue is generated globally
considering how exchange rates could affect future cash flow
ensuring contracts clearly specify payment currencies.

Agreeing the currency of payments early in the contract can be particularly important when working with overseas publishers or partners, as exchange rate movements between signing the agreement and receiving payment could otherwise affect the value of the deal.

Industry insight: taking a more structured approach to FX

India Mills, Head of Strategic Clients – Sport, Entertainment & Creative, Alt21 notes that:

For many gaming studios, FX is still treated as a short-term exercise in securing the best spot rate. But as studios grow and operate across multiple markets, that approach can quickly become limiting.

What we’re seeing is a shift towards more structured FX planning, where businesses align their currency strategy with development cycles, cash flow and budgeting. That gives much better visibility and control, rather than reacting to market movements as they happen.

Gaming businesses are unusual in how quickly they become global. Revenue can come from multiple regions almost immediately, while costs are spread across different currencies. Without a clear FX plan in place, businesses often aren’t actively managing this exposure – they’re simply absorbing whatever the market delivers at the point payments are made.

As margins tighten and growth becomes less predictable, FX is no longer a background consideration. Putting a plan in place early allows it to support the wider business strategy, rather than erode it over time.

Hedging

In some cases, larger studios may also consider financial strategies such as hedging to reduce uncertainty caused by currency movements.

Hedging is essentially a way of locking in an exchange rate to avoid large fluctuations. For example, if a studio knows it will need to pay a contractor $10,000 each month, but its functional currency is sterling, the cost in pounds could vary significantly over time depending on exchange rates.

Financial instruments can be used to fix or stabilise that exchange rate, helping the studio manage the risk that currency movements could significantly increase its costs or distort its reported financial performance.

A hidden variable in game development

The global nature of the gaming industry is one of the reasons it has grown so rapidly over the past few decades. International distribution has helped transform games into the largest entertainment sector worldwide.

For developers focused on building and launching their next title, foreign exchange may not always be top of mind. However, as games are sold across more markets and development becomes increasingly international, understanding how currencies affect revenue and costs is becoming an important part of running a successful studio.

How can Price Bailey help?

Our team works with a range of businesses operating internationally, including companies in the video games and wider technology sectors. We can help studios understand how foreign exchange movements may affect their accounts, financial planning and tax position.

This might include advising on the accounting treatment of foreign currency transactions, supporting financial planning where costs and revenues arise in different currencies, and helping businesses consider the wider tax implications of operating internationally.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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