Games industry: Arrested development

October 24th, 2008, 02:50 Posted By: wraggster

In uncertain times such as these, it ought to be reassuring to turn to British successes. The UK video games industry – or at least its development, as opposed to the publishing side – is a rare example of Britain punching above its weight. At least, that's the popular perception. Speak to any independent British games developer and you will find a considerably more apocalyptic prognosis. Recently, the situation has deteriorated so badly that a coalition of British development studios, backed by developers' trade body Tiga and ELSPA, the publishers' body, has embarked on a campaign to lobby the government, entitled "Games Up?".

Games Up? seeks two things: tax breaks for UK developers in line with those enjoyed by the film industry, and institutional change in universities, designed to re-establish a flow of graduates with skills that are relevant to the game development process. But hang on: according to Games Up?, games made in the UK between 2006 and 2008 alone are on track to generate global revenues of £4bn, and the global games market is worth £18bn and growing at 9% per annum. The credit crunch isn't even an undue worry: consumers are known to turn to games in difficult times, as they offer protracted entertainment for a smallish outlay. So why are UK developers looking to the government for help?

Seductive benefits

The most pressing problem is that the UK development scene has slipped down the global pecking order since several other countries decided to seduce games companies with tax breaks. Ian Livingstone, creative director and head of acquisitions at Eidos, one of the few remaining British games publishers – and not a man ordinarily given to doom-mongering – explains: "We've recently slipped from third to fourth in world development behind Canada. We're now the most expensive country in the world in which to develop. Other countries – not just Canada, but two states in the US, Scandinavian countries, France, Singapore, Korea and others – offer salary subsidies. Canada saw games as a clear opportunity to invest in the future, as traditional manufacturing was disappearing, and made a conscious decision to invest in games. They don't see it as a handout but as an investment. They have actually given out, in salary subsidies, 37.5% to every employee in games companies, and up to 40% R&D tax-credit.

"Over 10 years, they have invested C$500m (£244m). But that has actually generated $1.5bn of inward investment from companies like EA, Ubisoft, and Eidos. It's paying off, because they have a great infrastructure there: they've got great universities providing skilled students, and they are generally pro-games. The difference between there and here is that our government clearly sees any state support as a handout, not an investment. It seems to me the UK government would rather see our great industry go into decline than help it maintain its prominent position in the world, and that is madness."

Livingstone paints a bleak picture of the future of UK games development. "In the past six years, half of the independent UK development studios have already closed or been bought by foreign publishers who see more value in our studios and intellectual property than we do ourselves. We'll end up being a work-for-hire nation. The inherent intellectual property that is created at those studios will be foreign-owned, and they can move that IP to be produced wherever they want in the world, if it suits them."

Richard Wilson, chief executive of Tiga, is the spokesman for the Games Up? campaign. He has been meeting civil servants from the departments for Culture Media and Sport, Innovation, Universities and Skills, Business Enterprise and Regulatory Reform, Children, Schools and Families and the Treasury, among others. He doesn't, however, sound enormously optimistic that the government will heed his call for "20% production tax credit, like that approved by the EU and already found in France". Not to mention that enjoyed for many years by the British film industry.

He adds that "the government understands that UK games developers are not competing on a level playing field" but is "reluctant to introduce tax breaks for games production unless it can be shown that there is an issue of market failure or that there are strong cultural reasons for supporting UK games developers".

Perhaps unsurprisingly given the economic circumstances, the various government departments proved unreceptive to inquiries; the Department of Culture, Media and Sport was particularly dismissive. The Treasury did manage to produce a stultifyingly generic response although, promisingly, it says: "Following approval of a cultural tax relief for games in France, the government is now working with the UK gaming industry to collect and review the evidence for introducing such a credit in the UK."

Battle for breaks

Don Foster, Liberal Democrat spokesman on culture and media, points out that the games industry is competing with others for tax breaks, notably fashion and tourism. He also believes the games industry suffers from an unjustifiably poor image: "I hardly play any games – I'm not from that generation – but because of my job, I had to research the industry. The vast majority of my parliamentary colleagues are always wanting to ban the latest game, but they don't know the details of the industry. Few people in this country realise how important it is to the UK economy." Livingstone agrees: "We're still seen as the red-headed stepchild of the creative industries, one notch up from pornography in the eyes of most of the establishment. They forget that half of the world and half of the UK's population play games. Games help define who we are as human beings – they are as important, culturally and socially, as music and films."

There's another problem, though, which Foster highlights: a shortage of university graduates with the requisite skills. Which brings us to the second prong of the Games Up? campaign. There are 81 videogames courses on offer at UK universities, but only four are accredited by Skillset and therefore taken seriously by the games industry. Livingstone says: "These universities are churning out people who know a bit about games design and the history of games, but what we need are computer programmers, artists and animators: people with real skills who can start work tomorrow. It's better for us to go to somewhere like Imperial College and employ someone who has just done a computer science degree and knows how to program in C++."

This problem ought to be easy to solve collectively, Livingstone says: "The government, industry and education establishments have to come together to find a way to move forward." But Wilson says the government seems to have difficulty grasping the nature of the skills needed.

Bad law?

Jon Hare, director of development at Ukrainian developer Nikitova (and the co-founder of legendary UK developer Sensible Software) says that legislation of a decade ago which says developers must take contractors on as full-time staff after a year, or stop using them, has been economically damaging. Previously, such contractors would be paid a fixed amount for their work on the project, whether it overran or not, which allowed small developers to control their costs. Hare argues that tax breaks would merely offset extra costs which the government has introduced by that legislation.

The Games Up? campaign may not be perfect, but, says Foster, it needs to make its case "robustly". But given how beleaguered the government is by the ongoing financial and banking crisis, Livingstone is pessimistic: "The perception is 'why do we need it, as clearly we're doing well?' But do you put a new roof on your house when it's raining? Surely you should do it when it's sunny?"

http://www.guardian.co.uk/technology...games-industry

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