TIGA, the trade association representing the UK video games industry, said today that the French video games tax credit helped games development companies grow by 20 period over a period during which British games development declined by 10%. The French experience demonstrates that a carefully focused tax break for games production could boost the UK games development sector and support the wider economic recovery.

New data reveals that:

  • Job growth linked to tax credit: After introduction of a tax credit in 2008, overall numbers of people working in the French games industry rose from 3,000 in 2008[1]to 5,000 in 2011[2], and numbers of development staff rose by 500 from 2,500 in 2008 to 3,000 in 2011. Conversely, employment of development staff in the UK games industry, which does not benefit from a tax credit, fell by more than 1,000 jobs over the same period.
  • Brain drain addressed by tax credit: 64 per cent of French companies that benefited from the video game tax credit stated that the measure had encouraged them to bring jobs back to France, equating to 1-5 jobs for 53 per cent and 20-50 jobs for 33.7 per cent[3]. 77 per cent of UK studios in a new TIGA survey think TIGA’s proposed new Games Tax Relief will trigger headcount growth and 92 per cent think new investment will be triggered by a new Games Tax Relief.
  • Tax credit generated return on investment for government: Total French Government tax receipts from the tax credit were€63.4m versus the cost of the tax credit of €38m, a 1:1.7 return on investment[4].
  • Tax credit drove up games development investment: For each euro of video game tax credit paid in 2009, €6.7 of expenditure was generated in the French game development industry[5].

To develop their projects, studios have to bear the risk of the initial design phase. These first few months are financed from their own funds or from borrowing and are a significant cost for the company. The French video game tax credit received for previous projects gives studios greater financial flexibility between projects (between delivery of the last project and payment for the next) and enables them to finance design of future projects while keeping employee numbers stable.

Dr Richard Wilson, TIGA CEO, said:

“The evidence from France shows that the French video games tax credit creates high skilled employment, benefits projects large and small, reduces sub-contracting overseas, enhances studios’ working capital, incentivises inward investment and more than pays for itself.  TIGA is advancing the case to HM Treasury in the run-up to the March Budget that a carefully focused Games Tax Relief will have similar positive consequences for the UK video games development and digital publishing sector and for the wider economy.”

Commenting on the impact of the French tax credit, Guillaume de Fondaumière, Co-CEO, Executive Producer of Quantic Dream, said :

“France’s tax credit for video games production has helped to increase employment in the French games industry and has improved cashflow for small development studios. The tax credit has helped to revive the French video games development sector. France’s experience shows that a tax credit for games production is good for developers and good for the wider economy.”

Nicolas Gaume, co-founder and CEO at Mimesis Republic and President of the SNJV (France’s National Video Game Syndicate), said:

“The video games tax credit has created jobs and boosted investment in the French video games sector. It has enabled the French video games sector to compete on a more level playing field. Crucially, the experience of France is that a tax credit for games production more than pays for itself and produces a positive return for the French Government. The UK would be wise to introduce a similar tax credit to enable the UK games development sector to prosper and to grow.”

Notes to editors:
The French video game tax credit was established in 2008 to support video games that have a cultural aspect to them. Games must have a high level of artistic creativity and technological innovation to qualify. The tax credit enables eligible games developers with a development budget of at least 150,000 euros to deduct some of their production expenses. The tax credit is 20 per cent of the total amount of eligible expenses incurred by the company for the approved video game. A maximum of €3 M is allowed per company per financial year. The total amount of tax credits awarded is estimated at €13.9 M for 2008 applications and €11.5 M for 2009 applications.

The amount forecast at the moment for 2011 applications is estimated at between €6.5 M and €7.5 M. Between its creation in 2008 and the end of July 2010 the CNC received 189[6] applications for approval and awarded a video game tax credit to 81 of them, i.e. a selection rate of 42 per cent.

About TIGA:
TIGA is the trade association representing the UK’s games industry. The majority of our members are either independent games developers or in-house publisher owned developers. We also have games publishers, outsourcing companies, technology businesses and universities amongst our membership. TIGA won 10 business awards and was nominated a finalist for 9 other awards during 2010 and 2011.  In 2010 TIGA won two business awards including ‘Trade Association of the Year’ from the Trade Association Forum.

In 2011, TIGA won eight business awards including ‘Trade Association of the Year’ from the Trade Association Forum, ‘Outstanding Organisation’ from the Chartered Management Institute and two Global Business Excellence Awards, including ‘Outstanding Marketing Campaign’.  Richard Wilson won the ‘Leadership Award’ from the Trade Association Forum and the ‘Outstanding Leader’ award from the Chartered Management Institute. TIGA is an Investors in People organisation.

TIGA’s vision is to make the UK the best place in the world to do games business.  We focus on three sets of activities: political representation, generating media coverage and developing services that enhance the competitiveness of our members.  This means that TIGA members are effectively represented in the corridors of power, their voice is heard in the media and they receive benefits that make a material difference to their businesses, including a reduction in costs and improved commercial opportunities.

For further information, please contact Dr Richard Wilson, TIGA CEO on: 07875 939 643, or email richard.wilson@tiga.org.

According to the Interactive Skills Integration Scheme (ISIS), which is funded by Australia’s Department of Education, Employment and Workplace Relations, Australia has:

  • 931 full-time developers
  • 126 studios around the country

This is a major decline from 2008 when the country had more than 2,000 game developers working in the industry. ISIS project director Justin Brow attributed part of the decline to the work for hire market drying up and projects going internal at most of the publishers.

The country had focused on very few original IPs on console platforms, but has had success on iPhone with Firemint and Half Brick leading the pack.

Countries looking to get their fair share of the market need to consider a few things:

1) If you compete on price for work-for-hire projects, it should be a transitional period to build skill sets and experience towards developing original IPs. Most countries have rising labor costs as skills are acquired and experience gained among the workforce. This advantage is lost as the next country competes on price as it builds its workers’ skills.

2) Canada, with its tax incentive programs, is the #1 competitor to all countries with a trained and skilled workforce in the creative media industries. When the price is subsidized and the geographical location is more favorable, it’s impossible to compete. You can’t move geographically, but you can subsidize a worthwhile industry that will bring in tax revenues in excess of the incentives. The long-term training of the indigenous workforce is also a major benefit of these programs.

3) The barrier to creating a game and commercializing it is almost non-existent today. The barriers to getting a wide audience are making a quality game and finding the channels for distribution and awareness building. Marketing tends to be a black art among many developers, but it really needs to be a consideration early in the development process. Governments can support their creative industries by providing training on marketing and distribution, as well as general business administration and economics skills. These are essential for any business and don’t have to be industry specific.

4) A healthy games industry means more skilled knowledge workers which boosts tax revenues and average household income. These reflect positively upon a government when it is creating and supporting higher paid jobs and building a larger tax base. The most successful example of this is of course Canada. Everyone should follow Canada’s lead to some degree.

The Canadian province of Ontario just announced new tax credits and incentives that will make developing game in the region even more attractive. Details include:

Increasing the digital media tax credit for large game developers from 25% to 40% for original IP development

The tax credit was also raised to 35% for studios doing work-for-hire projects for international clients.

Ontario will also allow game developers that spend more than$1 million per year on labor costs in the province to benefit from a new 35% Ontario interactive digital media tax credit.

All of this makes development in Canada more attractive and will likely mean less projects going to Australia and Europe unless similar incentives can be added in those regions.