According to GamesIndustry.biz, EA has an $800 million digital business and just promoted Barry Cottle to run EA Interactive (Playfish, Pogo, EA Mobile, Hasbro, PopCap). EA is diversified with operations in Canada, Asia, Washington, Virginia, Texas and other states, and is another major publisher in the games industry to watch as the debate over online sales taxation heats up.
In our opinion, Zynga will likely be an even bigger target for lawmakers, however Zynga seems pretty savvy in California politics having already negotiated a preferred tax deal with the City of San Francisco in exchange for keeping their main operations in the city. This was a smart move by the city as well since it increased the number of jobs and the employees will be taxed on their income, and retail sales tax.
Activision Blizzard had $1.14 billion in digital sales during the second quarter of 2011, up from $967 million for the same period last year.
Digital sales were 37 percent of the company’s revenue, which as a percentage of overall revenue, was up 27 percent over the previous year.
These numbers underscore the growing importance of digital distribution for games and are additional data points showing that the market is shifting to a greater percentage of products being downloaded directly by consumers.
One thing that needs to be considered is California’s internet taxation where online sales will be subject to sales tax, regardless of where the consumer resides since the majority of Activision’s business is in Santa Monica, California. This will be an area to watch as online game companies start to fight the newly passed bill that will definitely cut into profits.
Unfortunately, California’s lawmakers don’t have the foresight to see how digital commerce jobs will be moving out of the state and into new corporate entities. For a parallel, they need only look at how Amazon has reacted to taxation of internet sales by moving operations from states that choose to impose the taxes, to those that would rather have their citizens employed and taxed on payroll and income.
We would expect to see more online game companies moving their operations and especially billing outside of California in the next 18-24 months to remain competitive and protect shareholder value.
According to the third annual Game Developer Census by Game Developer Research, which covers North American game companies, the games industry employed 44,806 people in 2009. This is an increase of 406 jobs over the 2008 estimate (44,400). Other key points include:
- Canada now employs 12,480 people in the games industry
- In 2008, Canada employed 9,500 people in the games industry
- California has 20,815 developers (46 % of the U.S. total)
- Washington has over 4,500 game industry employees
- Texas has over 2,600 game industry employees
- 8 states (California, Washington, Texas, New York, Massachusetts, Illinois, Florida, and Maryland) have more than 1,000 working game industry professionals
- Game tools companies, game contracting/services companies, external PR, marketing, legal, and other business services, and liaison or licensing divisions at larger media companies are not included in the census, however Game Developer Research estimates this number at around 18,000 across North America.
The’Game Developer Census 2009‘ has data on more than 700 game development companies in North America and is now available as a paid digital download for $2,495. Any questions about payment, delivery methods, or further licensing of the data can be directed to Game Developer Research at firstname.lastname@example.org.