UK game industry group TIGA is continuing its full court press for the introduction of Games Tax Relief and other measures that would assist game developers in the region.

This time around TIGA used comments put forth by Jeremy Hunt, Secretary of State for Culture, Media and Sport to once again push its initiatives. Hunt called for the UK to become a “digital superpower by 2015,” while noting that the UK was “probably the second best country in the world in the creation of digital content.”

TIGA chief Dr. Richard Wilson answered Hunt’s call, stating, “The UK creative industries have great potential. However, we cannot will the end without the means. Many other countries have high hopes for the economic potential of their own creative industries and are investing significant sums in them. The UK cannot be a digital superpower on the cheap.”

Wilson continued:

By all accounts, Canada is now the third largest home to videogame developers in the world, a realization that Capcom’s Keiji Inafune attributes to both favorable tax breaks and the populace’s work ethic.

Speaking to NowGamer, Inafune, who produced Dead Rising 2 and is head of R&D for the Japanese publisher, noted that Canada was “getting very important now,” before conveying his opinion as to why that might be.

“There are lots of background reasons for it, tax relief and government policies and so on and so forth, but from the developers point of view, Canada is part of North America so you can sort of [include it as] North American,” he stated.

Inafune continued:

But compared to Americans, Canadians are a bit... more serious, if you like. Also, compared to big cities such as Los Angeles, it's also a little bit cheaper. So they've got potential to be at the epicentre of videogame development.

UK public-service broadcaster Channel 4 is pumping some timely funds into the Dundee, Scotland economy, just a week or so after that city’s RealTime Worlds entered into administration.

According to the Herald Scotland (thanks The Escapist), the one million pound infusion (approximately $1.55 million U.S.) will be used to commission “apps and games” based on the TV shows Come Dine With Me and Peep Show from Tag Games, as well as a Facebook game from Dynamo Games, which will draw on various Channel 4 shows such as Gok Wan’s How To Look Good Naked.

UK Labour party leadership candidate Ed Balls recently made a stop at Dundee and, in the wake of Realtime World’s administration, has blamed the cancellelation of planned tax breaks for the UK games industry are the "cause of the company’s failure."

In a post on his personal blog, Balls reminded readers that the tax breaks by the "previous Labour government" were cut by his colleagues in the Tory and Liberal coalition.

 

Balls also highlighted the stiff competition his country faces from places like Canada, where government support for the industry coupled with aggressive recruitment tactics of UK companies has made the country look like a shining beacon to developers who are looking for ways to make games and save some money.

While we’ve been using data from the Entertainment Software Association of Canada to crown our neighbors to the north as the world’s third-largest home to videogame development for a few months, trade association TIGA seems to have just recognized that claim as official, and used it to lash out at UK politicians.

TIGA said that UK politicians have been “asleep at the wheel” while Canada, and other countries, cherry pick UK talent with incentives. TIGA Chief Dr. Richard Wilson said that there was “nothing inevitable about this process,” and added:

Rhode Island Treasurer Frank Caprio is still attempting to poke holes in a $75 million guaranteed loan that helped lure Curt Schilling’s 38 Studios to the Ocean State from Massachusetts.

Speaking to Providence’s NBC 10 I-Team, Caprio, who is also a Democratic candidate for Governor, said that investors might be hesitant about buying into the $75 million "moral obligation" bonds because the nature of their structure makes them high risk and "there's nothing legally that would make Rhode Island pay off the investors."

Caprio continued:

Say this for the deal Curt Schilling and his 38 Studios worked out with the state of Rhode Island; it’s giving political candidates in the state a platform to campaign on and rail against.

38 Studios was lured to Rhode Island from its current home in Massachusetts, largely due to a guaranteed $75.0 million loan from the Rhode Island Economic Development Corporation (EDC). This commitment raised the ire of Ocean State Independent Gubernatorial candidate Lincoln Chafee, who previously questioned Schilling’s integrity by intimating that the pitcher may have faked an injury in the 2004 American League Championship Series.

Nathaniel McClure (pictured), CEO of the game development Scientifically Proven Entertainment, has launched a suit against the Michigan Film Office and the Michigan Department of Treasury claiming that the state has denied his application for tax credits.

The Detroit Free Press reports that McClure is incensed over rules that “make it impossible for all but the smallest video game developers to use Michigan's 42% video game tax credits.” McClure and his company, which employs 15 and also provides internships to Michigan State University students, are creating a game based on the Discovery Channel show Man vs. Wild.

Curt Schilling, who accepted a guaranteed $75 million loan from Rhode Island and will move his game development company 38 Studios to the Ocean state from its current home in Massachusetts, took to the airwaves of WEEI to stand up for his decision.

Schilling, appearing on the Dennis & Callahan Morning Show earlier today, was asked, “In a perfect world, would you have liked Massachusetts to have shown a little bit more love and kept your company here?” Schilling answered, “Absolutely.”

He continued:

Not everyone, it seems, is a fan of the recently passed North Carolina tax incentives for videogame makers, film producers and other makers of interactive media.

The North Carolina Institute for Constitutional Law (NCICL) bills itself as a “nonprofit, non-partisan organization devoted to educating the public, bar, and policymakers about constitutional issues,” but what really seems to raise its hackles is “the granting by governmental entities of so-called ‘incentives’ in the form of taxpayers’ money being used for corporate welfare.”

The Raleigh-based organization came out against the recently enacted tax breaks in the latest issue of its newsletter, entitled Corporate Welfare Weekly, writing:

The CBI, a self-proclaimed advocate of and lobbying organization for UK creative industries, has issued a manifesto which serves up detailed recommendations on how to stimulate expansion within that sector.

Entitled Creating Growth: A Blueprint for the Creative Industries (PDF), the document puts the onus on elected officlas, stating that “The government should develop a strategy to deliver the right business environment.”

Among its suggestions, the CBI wrote that the government must:

Yesterday North Carolina Governor Beverly Perdue signed into law new tax incentives for the videogame industry, among other things. The bill, H1973, was signed at Epic Games headquarters in Cary, North Carolina. The new incentives grant media and content producers a tax credit of 15 percent - 20 percent if they work with a university or community college - on development costs that exceed $50,000. The tax credit can not exceed $7.5 million.

In addition to interactive media companies, the measure also provides tax credits for the creation of "eco-industrial parks" and enhances North Carolina’s credit for film production companies, increasing the cap on "qualified expenses" from $7.5 million to $20 million.

"This was a result of a lot of hard work by a lot of dedicated, passionate people," said Wayne Watkins, project manager for Wake County Economic Development.

Louisiana, Georgia, Florida, and Virginia have all enacted similar provisions within the last 18 months, according to Watkins.

Source: Biz Journal by way of E. Zachary Knight

UK Chancellor George Osborne announced today that he would review support for the research and development tax credits for the videogame industry this fall. In a letter to Joe Fitzpatrick, MSP for Dundee West, Osborne reiterated his support for tax credits for the game industry, saying that he "recognises that there has been a relative decline in the tax competitiveness of the UK" and that "the UK’s R&D tax credit schemes provide an internationally competitive tax regime for R&D activity, providing nearly £800 million of relief and supporting around 7500 innovative companies each year, including companies in the videogames industry."

Osborne said that the government will consult with "business in autumn 2010 to review the taxation of intellectual property, the support R&D tax credits provide for innovation and the proposals of the Dyson review."

Meanwhile, MSP Fitzpatrick said that he will encourage the video game industry to make a stronger case for tax breaks after Osbourne took them out of the budget earlier in the year. Fitzpatrick's Dundee constituency includes Realtime Worlds and Denki.

On Wednesday, surrounded by Utah Governor Gary R. Herbert and other state and local officials, Electronic Arts executives had a "grand opening" of its offices in Salt Lake City to much applause. The office has actually been running in Salt Lake for three months, but this grand celebration allowed the public to get a look inside EA's new operation. The 20,000-square-foot office serves as a base to develop and manufacture games featuring pet and Nerf guns toys for children and families as part of an agreement it signed with Hasbro.

But after the ceremonial "grand opening," EA took the opportunity to strongly urge Utah lawmakers to give the videogame industry more tax incentives on par with what it currently gives the film industry. EA government affairs director Craig Hagan led the charge, saying that in other parts of the country, like Texas and Florida, and in Canada's Vancouver and British Columbia, governments are offering rebates on corporate income taxes of up to 42 percent to companies like EA.

Gathering up the strength to appear at the UK’s Develop Conference despite the government removing game industry tax incentives from its emergency budget, Shadow Minister for Culture Ed Vaizey walked a fine line—claiming that he championed the games biz, yet endorsing George Osborne’s plan to focus on the greater and more immediate financial needs of the UK.

In recounting a question to Vaizey about Games Tax Relief being offered in the future, the Guardian wrote that Vaizey was “non-committal, but offered a glimmer of hope." The MP stated, “I can't emphasise enough that I'm not the chancellor; it's just that in my view the treasury is always open to rational argument.”

The Entertainment and Leisure Software Publishers Association (ELSPA) and fellow industry group TIGA have joined forces in order to apply further pressure to the UK government for videogame developer tax breaks.

Members of both organizations, along with specialists from the law, tax and public affairs domains, have already formed a steering committee. Led by TIGA, the committee will “review the existing TIGA submission with a view to enhancing the arguments, evidence and justification for the government to provide a tax break for the sector for the production of qualifying videogames and interactive entertainment products.”

ELSPA board members from the following game companies backed the move: 505 Games, Activision, Disney, Electronic Arts, Mastertronic, Microsoft, Nintendo, Sony Computer Entertainment, Square Enix and Warner Brothers.

The UK’s emergency budget, introduced in June, contained no provisions for game developer tax incentives.

Attendees of a recent Game Horizon Conference in the UK last week found mock Canadian passports on their seats in a stunt designed highlight Canada’s pro-game developer tax incentives. The timing of the marketing initiative however—coming less than a fortnight after similar tax breaks were killed in the UK—managed to rankle a few feathers.

One anonymous British developer told CVG that the promotion, put on by the relocation firm Quickstar Global, made Canada seem like “vultures.” The source stated, “As a British developer it makes me disappointed and angry to see the Canadian government agencies circling the UK like vultures as soon as word was out that the Government u-turned on our tax breaks.”

Another source bemoaned “Are things now so tight that we can't find British companies to sponsor our events rather than having the Canadian Government preying on our talent and companies?”

At least a few UK publishers may be concerned that any tax incentives invoked for developers could have a trickle down effect and cause problems in other areas of their business.

Develop details the feared repercussions, one of which centers around the “cultural” elements of tax breaks, which could lead to games being classified as audiovisual products—instead of software—possibly leading to a rise in taxes placed on the goods and higher prices for the end user.

The article calls such concerns “routinely rubbished,” but says that, despite that, such worries remain “prevalent across certain industry groups, bodies and companies.”

The apprehension goes back to a 2008 tax relief proposed in France, which was openly opposed by the Interactive Software Federation of Europe (ISFE) over fears of a reclassification of games as AV products.

As Develop further explained:

Executives from two of the world’s largest videogame publishers indicated that removal of tax breaks for game developers from the UK’s budget could have an impact on their plans to expand in the region.

Activision Blizzard Chief Bobby Kotick, told the Financial Times, “The talent pool in the UK is among the best in the world for what we do. But we really need to see some more incentives. We are seeing great incentives in Canada, Singapore and eastern bloc countries.” Activision currently employs about 700 people in the UK.

Sony Computer Entertainment Europe (SCEE), which has a trio of studios employing around 1,200 might also rethink its strategy in light of incentives being pulled off the table. UK Managing Director Ray Maguire said, “The existing plans will continue but any further new developments would have to be looked at. Maybe something that was planned for the UK would go abroad now.”

North Carolina House Bill 1973, also known as the Keep North Carolina Competitive Act, features a slew of incentives for interactive entertainment developers.

The Bill, which passed the state’s House and has been referred to the Senate, features a provision that would bestow tax credits of 15% upon a qualifying production that cost at least $50,000 to produce. Additionally, if a company creates at least 20 new full-time jobs during a 24-month period, and sustains those positions for three years, that company would be eligible for a tax credit of $5,000 per new job.

The Bill also contains provision for tax benefits for datacenters, major industrial facilities and for general production companies. Representatives Bill Owens (D), Pryor Gibson (D), William Wainwright (D) and Harold Brubaker (R) are the Bill’s primary sponsors.

The UK’s emergency budget, designed to balance the region’s books within five years, does not contain any measures for providing tax relief or incentives for local game developers.

Chancellor of the Exchequer George Osborne instead opted to provide more wide spread tax incentives that may help a wider selection of businesses, instead of the “poorly targeted” aid for interactive creators.

Industry groups TIGA and The Entertainment and Leisure Software Publishers Association (ELSPA), who had both long championed Games Tax Relief, were not happy with the news.

Saying he was “extremely disappointed,” ELSPA Director General Michael Rawlinson, stated, “Our industry will be rightly puzzled as to how tax breaks can be lauded before an election, only to be seen as ‘poorly targeted’ and scrapped just 6 weeks later.”

As the hopes of tax incentives for UK game developers continue to tread water, industry group TIGA has stepped up its pressure, now stating that UK videogame makers could aid the economy by occupying a “valuable role” in an “export led recovery.”

TIGA recently commissioned a research report entitled “The UK Video Games Industry: An Export Success Story,” which it claimed showed that 91 percent of UK game developers export their products. That compares to figures cited from other research indicating that only one-third of small and medium sized, non-game producing businesses in the UK exported their products.

Richard Wilson, TIGA’s CEO, stated:

Facing a budget shortfall of $1.2 billion, the state of Oklahoma is looking to zap vending machine and arcade operators with a fee increase of about 300 percent.

Effective July 1, the cost of a license for such machines will rise from $50 to nearly $150, which will make life more difficult for arcade operators like Mike Sefcovick, who operates Cactus Jack’s in Oklahoma City.

Sefcovick pays about $17,000 a year currently to license his 350 machines, a number that will skyrocket to around $52,000 (approximately $145 per machine) following the implementation of the increase.

Sefcovick, speaking to News9, said about the increase, “It’s going to hurt us bad.”

Governor Brad Henry's spokesperson Paul Sund added, “The question was simple, do you raise fees or do you lay off teachers. Do you raise fees or furlough troopers; we thought it made more sense to raise fees.”


Thanks E. Zachary Knight!

As preposterous as it sounds, you, the consumer, could be tasked with bailing out the newspaper business by way of a tax implemented on electronic devices.

A Federal Trade Commission (FTC) look into “Potential Policy Recommendations to Support the Reinvention of Journalism” (PDF, thanks Kotaku) addresses the “challenges faced by journalism in the Internet age.” Noting that “The news is a ‘public good’ in economic terms,” the report adds that “it is often difficult to ensure that producers of public goods are appropriately compensated.”

The surprise announcement that tax breaks are forthcoming for UK game developers has prompted a flurry of stories and reactions.

Gamesindustry.biz has a good summary of the reactions, which have ranged from surprise to outright relief. A key point, however:

... it's worth noting that all of this is in the context of a looming General Election, after which the present government may be unseated and a large proportion of what was announced could be discarded. Conservative shadow minister Ed Vaizey seems positive on his party's support for the games industry, but has made no promises should the government in the UK change. Meanwhile current polls suggest a hung Parliament could be the most likely outcome of the voting process, and if that happens then nothing is clear.

It's an interesting wrapup of the situation. Would it be a stretch to say the UK speech was a political ploy to stay elected?

As part of yesterday’s London Games Conference, Shadow Culture Minister Ed Vaizey called for sweeping proposals to aid the UK’s videogame development industry.

Vaizey cited research that indicated the UK games market could shrink by 16.5 percent over the next five years, in turn losing some 1,700 jobs. Among the reforms he called for, via MCVUK, were:

• Look at extending the remit of the Film Council to cover the video games sector to give video games the national voice they need and deserve.
• Recognise that high technology companies in the UK face specific challenges when it comes to raising finance and attracting venture capital.
• Give the sector the support it needs to succeed and expand in the global economy.
• Stimulate investment in superfast broadband, vital to the future growth of the sector, through the telecoms regulatory structure.

In a speech at the conference, Vaizey said the UK had lost 44 studios already, and risked losing its current ranking of third in the world (behind America and Japan) in terms of game development. He continued:

Global competition is incredibly fierce, and high development costs in the United Kingdom are slowly killing the industry. Given what is happening, you would expect our Government to be acting urgently. After all, many others are.  Unfortunately, the UK is falling far behind.

Vaizey stopped short of endorsing a tax-break for developers, encouraging studios to “think more widely than that,” noting that, “First things first, we need to get the public finances under control by tackling our spiralling deficit.”

So, is Vaizey a gamer?

I am not a gamer. I have just got myself a Wii. So I am getting involved. It’s been the single greatest pleasure of my job to discover and learn about an industry I knew little about before this job.

The Irish government thinks highly of the game development industry in Scotland. So much so that they are considering offering tax breaks to developers to lure them in an effort to jumpstart the economy in Ireland.

According to a report in Herald Scotland (via Gamasutra), the Irish government is targeting Realtime Worlds, creator of the upcoming MMO APB and based in Dundee, Scotland, with the possibility of a five-year tax "holiday." Other Scottish developers that could be affected by the incentive would be Rockstar North (developer of Grand Theft Auto), Ruffian (maker of Crackdown 2), Denki, Dynamo Games, Firebrand Games, and Outerlight.

Colin Macdonald, studio chief at Realtime Worlds, told the Herald:

“If the package on offer in Ireland was attractive we’d have to give it serious consideration. Dundee is a great place to be based, one of the main hubs for ­computer games in Britain, but at the end of the day we’ve got to look after our bottom line.”

Macdonald also said that Canada had made serious overtures to the company and Realtime had actually lost some of its key people to the Great White North.

Scotland is apparently monitoring the situation. Tiga, the UK trade body for game developers, urged the Scottish Parliament's support for a 20 percent tax break for game developers earlier this year, according to Gamasutra.

Government tax breaks would create 1,400 new jobs for the UK video game industry within five years, says game developers group TIGA.

The organization, which has been fighting hard for government incentives in recent times, made its claim in a report sent to the UK's Department of Culture, Media and Sport late last week.

The document, titled Investing in the Future, lamented the loss of skilled British developers to nations in which government incentives for video game studios already exist:

Games would need to pass a cultural test, scoring against criteria of European heritage and game locations, languages, innovation, narrative, and location of development and key development staff. 44% of UK made games profiled in an exercise for the report passed...

 

With 60-80 titles benefitting per year, the tax measure would assist UK game developers without distorting the larger European game development market...

 

The Games Tax Relief is expected over 5 years to create 1,400 new jobs in the studio sector, increasing investment by games studios by 146m, direct and indirect annual tax revenues by 133m and GDP contribution by 323m. By year 5, for every 100 of investment by government in the Games Tax Relief, the industry will invest 176.

In a forward to the TIGA report, Lord Puttnam (left), Vice-Chair of the All Party Parliamentary Group on the Computer and Video Games Industry, gave his strong support to the notion of a tax break:

For far too long the UK video games industry has been effectively taken for granted. To ensure the continuing success of this pre-eminently creative sector, I can only urge the Government to support TIGAs case for the introduction of a form of Games Tax Relief, as set out in this report.

A spokesman for the Internal Revenue Service says that the agency saves U.S. taxpayers money by maintaining a personnel recruiting presence in Second Life.

This news comes by way of CollegeRecruiter.com, which acknowledges that the IRS is one of its clients. The site has posted a short interview with Frank Stipe, Virtual Worlds & Social Networking Project Manager for the IRS. Stipe explains the IRS's Second Life connection:

In 2008, the IRS project team established a presence in the Second Life virtual world... The team has created the IRS Careers Island and constructed a sky platform with an IRS Careers Center and an IRS Education Center... [these features have] been opened to the general population in Second Life since February 2009...

 

In the physical world, we could spend hundreds of thousands, if not millions, on sponsoring a race car that displays our brand in a field of thirty or more other cars. In the SL virtual world, we have spent a few thousand dollars to build complete entertainment and communications venue that includes a race course...

We are now entering the relationship building phase where we are reaching out to universities that operate virtual campuses in Second Life to market directly to their students...

While other American cities and states have been courting the video game industry with incentives and tax breaks in recent years, Philadelphia has largely stood on the sidelines.

But, as Philadelphia City Paper reports, a small team is hoping to change that equation by convincing government officials that encouraging video game development would prevent brain drain and bring jobs and tax dollars to the local economy.

The Videogame Growth Initiative Philadelphia recently pitched its case to state government officials at a meeting in the City of Brotherly Love. From the City Paper's coverage:

The group has two hours to convince representatives of state government that it's worth creating new incentives to lure video game companies to Philly... 

 

Philly might be an ideal city to take advantage of this opportunity. Currently, many video game studios are based out of Silicon Valley, Boston or New York. Philly's comparably low cost of living is attractive. What's more... Philly has... [at] the University of Pennsylvania... the only Ivy League game development program in the country, and graduates are routinely poached by large West Coast-based gaming companies...

There are, however, significant obstacles. The Pennsylvania legislature hasn't been able to reach agreement on a budget which should have been in place by July 1st. The city of Philadelphia itself is habitually in dire financial straits; earlier this week Mayor Michael Nutter warned that he may have to lay off more than a thousand cops and fire fighters.

While state officials suggested that the group try to push already-existing business incentives to entice video game firms, VGI member Hardik Bhatt, himself a developer, was skeptical:

That's still not enough, it's not like other cities don't have these kinds of incentives. I'm hoping it doesn't take a [video game] studio to look into the city and decide to go somewhere else for them to change their minds.

GP: As a Philly native, I pondered the same issue in a November, 2006 column for Joystiq...