No Tax Breaks for Gaming Industry in UK

Otacon

http://news.bbc.co.uk/1/hi/technology/10374867.stm

There will be no tax breaks for the gaming industry in the emergency budget, chancellor George Osborne has announced.

Yves Guillemot, chief executive of Ubisoft, Europe's largest video game publisher, said that incentives were needed for firms to "take risks".

Britain's previous government floated the idea of extending the 20% tax break enjoyed by the film industry to the video games development sector.

But the changes were never implemented.

"We will not go ahead with the poorly-targeted tax relief for the video games industry. There will be a small reduction in the rates for capital allowances, which will remain broadly in-line with economic depreciation," said Chancellor George Osborne.

Dr Richard Wilson, chief executive of the video game trade association TIGA said the decision was "a kick in the teeth" for the industry.

"We are extremely disappointed by the announcement," he told BBC News.

"If we don't have games tax relief we will lose millions of pounds of investment."

He also said the news was a "betrayal" of promises made by both the Conservative and Liberal Democrat parties prior to the general election.

Mike Rawlinson, director general of the Entertainment and Leisure Software Publishers Association (ELSPA) said the move was "a bad decision".

"(It) doesn't recognise the economic value the industry could bring to the UK," he told BBC technology correspondent Rory Cellan-Jones.

It was a view echoed by Ubisoft's chief executive.

"The UK needs to react to what's happening in the industry and help the creatives in the UK," said Mr Guillemot.

Other countries are more generous. In Canada, the governments of Ontario and Quebec already offer significant tax breaks for developers, while earlier this month, the state of British Columbia (BC) also entered the fray, announcing significant tax breaks of their own.

"The enactment of this program has already resulted in an increase in our investment in BC and will continue to raise BC's profile as the international digital media centre," said Brian Ward, senior vice president of studios for Activision.

High costs

Incentives like these have helped numerous firms relocate development studios to the area and have now overtaken the UK in terms of video game development.

"What was good in the last few months was that the pound went down, so the cost of creating games went down," said Mr Guillemot.

"When we created [the video game] Driver in England we saw a really big difference when the pound went down, but now the cost is getting too high."

A report by PricewaterhouseCoopers (PWC) expects revenues from the entertainment and media market will grow by 20% over the next few years.

Despite the optimism exhibited at last years E3, revenue in the video games market fell 7.7% last year, to £2.6bn ($3.8bn). This was despite the release in November 2009 of Call of Duty: Modern Warfare 2, the best selling video game of all time.

Strong sales

Ubisoft boss Yves Guillemot talks to BBC about its latest game
PWC thinks the future looks more optimistic, predicting a 10% growth over the next four years, with much of that growth fuelled by the rise in online gaming.

That view is shared by many in the games industry.

In an interview with BBC News, Frank Gibeau, the president of Electronic Arts game label, was optimistic.

"Things are good right now, so we are now seeing some very strong game sales in the first half of this year and as we look forward to the future, it's going to be a good future for games," he said.

I have to say I think this is a bad decision. Fair enough if you want to cut the proposed 20% to 15% or 10%, but to remove it entirely is wrong. The market may have fallen in the last year but its still making money.

heffomike54

Any chance some of these companies could be tempted to relocated over to Ireland? I only recently discovered that we have some very large video games companies here already and it could be good for the economy to get more of these companies to set up here.

johanz

heffomike54 wrote: »

Any chance some of these companies could be tempted to relocated over to Ireland? I only recently discovered that we have some very large video games companies here already and it could be good for the economy to get more of these companies to set up here.

I don't see a reason why they would want to relocate here, really.

johanz

"If we don't have games tax relief we will lose millions of pounds of investment."

johanz wrote: »

I don't see a reason why they would want to relocate here, really.

......:rolleyes:

Overheal

its all farcical at the end of the day. companies give consumers discounts to incentivise them to buy; countries give companies breaks to incentivise them to invest.

Really its all just a big ****ing game to make something seem like a better value than it really is.

death1234567

johanz wrote: »

I don't see a reason why they would want to relocate here, really.

The same reason most foreign companies come here, 10% corporation tax and an english speaking population.

gizmo

death1234567 wrote: »

The same reason most foreign companies come here, 10% corporation tax and an english speaking population.

As has been covered in various threads before, we simply don't have the pool of experienced industry workers that countries like the UK have. It's certainly changing however I wouldn't expect any AAA development being done at home for a few years yet.

death1234567

gizmo wrote: »

I wouldn't expect any AAA development being done at home for a few years yet.

Me either. Just pointing out that we do have some things going for us despite the desolate shambles of a nation that this is.

Rezident

heffomike54 wrote: »

Any chance some of these companies could be tempted to relocated over to Ireland? I only recently discovered that we have some very large video games companies here already and it could be good for the economy to get more of these companies to set up here.

True and before Intel bought them Havok was Irish and funded by an Irish venture capital firm.

It's a growth industry, I read somewhere that gaming surpassed the film industry for total revenue last year.

RedXIV

Rezident wrote: »

True and before Intel bought them Havok was Irish and funded by an Irish venture capital firm.

It's a growth industry, I read somewhere that gaming surpassed the film industry for total revenue last year.

It's done that a few years now.

I think we're getting alot closer to getting decent development over here especially since Big gaming names have offices over here already. And While I realise we don't have the experience in the talent pool that the UK might have, we have alot of eager developers keen to get into games.

look at www.gamedevelopers.ie to see how many interested people are in this country already, many with serious talent

Nehaxak

My 6 year old son wants to be a games developer, purely off his own imagination to come up with that too - so there's some possible future talent out there too that actively express an interest
He's already created levels or something or other for that Little Big Planet game that he shares out, with teleport hacks or something...I'm getting old

gizmo

Wonderful.

Should be interesting to see who it is though...

RedXIV

I'd love to know who this is....although someone commented on the article on develop.com fairly accurately with the notion that why would people publishers come to the UK when they have the likes of Canada now?

I think if Ireland wants a chunk of the action we're going to have to either focus on niche areas like Havok with their physics engine or try and take a different sector of the games industry i.e. mobile or browser games.

gizmo

RedXIV wrote: »

I'd love to know who this is....although someone commented on the article on develop.com fairly accurately with the notion that why would people publishers come to the UK when they have the likes of Canada now?

ELSPA has told GamesIndustry.biz that it will not go on a "witch hunt" to find a publisher accused of sabotaging planned tax relief for the UK games business.

Pity.

VinLieger

gizmo wrote: »

Pity.

Its a ****ing disgrace, whoever did should be named and shamed

Nehaxak

Probably Sega I reckon, them or Sony.

RedXIV

Well if we think about it, it's got to be someone who's pushing to get development OUT of the UK so that probably means recent significant investment somewhere else.

And the other thing to note is that just about every big publisher has an office in the UK, so why wouldn't they want some sort of tax break unless they were trying to leave the country.

They may not reveal the sources behind this but just wait and see if a publisher pulls out of the UK to set up shop in a different country and we'll probably have our answer.

It is extraordinarily disheartening though. Especially for anyone wanting to get into the industry

Nehaxak

I'll try ask the lads in SIgames later on tonight or tomorrow when I'm playing FML, see if I can get some insider info

Otacon

RedXIV wrote: »

They may not reveal the sources behind this but just wait and see if a publisher pulls out of the UK to set up shop in a different country and we'll probably have our answer.

Couldn't that also be caused by the announcement of no tax relief? My bet would be Ubisoft in either case.

VinLieger

Nehaxak wrote: »

Probably Sega I reckon, them or Sony.

it was a one of the big publishers kotaku narrowed it down to EA since activision were lobbying for the tax break

gizmo

Well you could look at all of this in two ways really...

One, the publisher wants to move development out of the UK or two, they want to limit the number of studios being created in the country.

Now, the first idea really doesn't make any sense given the industry in the UK. Wages are generally lower than across the pond, corporation tax is lowering thanks to the budget and they have a great pool of talent coming on stream every year. On top of that you have competitions like Dare which highlight some of the best of these grads thus making the hiring process even simpler.

Finally you have the simple issue that publishers don't need an excuse to close a development studio. If they want to downside then they'll have no problem reducing head counts at a studio or even closing them.

Two makes somewhat more sense as companies poaching experienced staff off each other is always a problem. However, lobbying against tax breaks is taking that a little bit too far.

Given that every major publisher has studios in the UK though and that the tax breaks in question would have amounted to approximately £40m according to the Tories, the second scenario is still the most likely unfortuantely.

As for narrowing it down, in this case it'll make things far more difficult and basing it off who was involved in the lobbying process with TIGA really doesn't say anything as to their true motives.

noodler

death1234567 wrote: »

The same reason most foreign companies come here, 10% corporation tax and an english speaking population.

Unless we have a special CT rate for the video games industry I don't know about then you should be aware Ireland's Corporation Tax rate is 12.5%.

Also, I'd say EU membership and a highly educated (and more relevantly, a highly flexible) workforce are bigger factors.

RedXIV

noodler wrote: »

Unless we have a special CT rate for the video games industry I don't know about then you should be aware Ireland's Corporation Tax rate is 12.5%.

Also, I'd say EU membership and a highly educated (and more relevantly, a highly flexible) workforce are bigger factors.

There is the added bonus of having 2 years of NO corporation tax to any new company in this country. As far as I know, any company setting up here, video game giant or not, can avail of this

noodler

RedXIV wrote: »

There is the added bonus of having 2 years of NO corporation tax to any new company in this country. As far as I know, any company setting up here, video game giant or not, can avail of this

I'll take your word for it - have to say I never heard of it though.

RedXIV

noodler wrote: »

I'll take your word for it - have to say I never heard of it though.

Found out about it when I set up my company....which subsequently bombed but we still get emails about it from the revenue

Nehaxak

There's also significant tax breaks + other deals and incentives available from the Irish government for any company wishing to setup here.
You'll get the standard stuff as per the books and what's available but talk with the right people and you could get a lot more.
If the game industry approached the Irish government with a request for specific tax breaks in regards the gaming industry giants setting up here (or even expanding more so at this stage seeing as there's a few here already), they would have a high chance of getting it.

Just wish they'd do more than open up feckin' call centres
"Yeah I work in the game industry" "Oh cool what do you do ?" "I answer the phone to numpties whining about their xbox"

Dont be at yourself

gizmo wrote: »

As has been covered in various threads before, we simply don't have the pool of experienced industry workers that countries like the UK have.

I don't think that's a big hurdle, to be fair. the industry is full of young people who are very mobile, and with Ireland being an English-speaking country culturally similar and geographically close to the UK, I don't think we'd have much problem poaching staff if the jobs were here.

gizmo

NekkidBibleMan wrote: »

I don't think that's a big hurdle, to be fair. the industry is full of young people who are very mobile, and with Ireland being an English-speaking country culturally similar and geographically close to the UK, I don't think we'd have much problem poaching staff if the jobs were here.

That unfortunately doesn't really apply to the games industry. While companies are always on the look out for talented grads, they will always have a core group of seniors with plenty of experience in the industry to not only lead development but also entice publishers onto projects. The latter of which, of course, is vital to getting a large project off the ground.

In so far as tempting people back home, you'd be asking potential hires to move to a country where there would be only one studio they could possibly work for. A situation that is then made worse given the volatility of the industry itself.

As has been said before, things are certainly changing for the better though. With more and more publishers locating bases of operations in the country, regardless of their function, comes increased confidence in expanding operations to include actual development studios. Once that happens it'll be a completely different ball game.

Dont be at yourself

gizmo wrote: »

That unfortunately doesn't really apply to the games industry. While companies are always on the look out for talented grads, they will always have a core group of seniors with plenty of experience in the industry to not only lead development but also entice publishers onto projects. The latter of which, of course, is vital to getting a large project off the ground.

I don't really agree with that. I'm working overseas for a large publisher and 70%+ of the staff are ex-pats. This doesn't extend only to talented grads, but right the way up to senior management. It's one thing to expect staff to move to or from the US or Canada, but I don't think it's a big hurdle to recruit staff from across the EU - especially from the UK.

If you build it, they will come, I reckon.

gizmo

Hmm, my first paragraph was aimed at addressing your young and mobile remark more so than anything else. The travelling bit was addressed later and I think it still stands. While I don't doubt people are willing to travel (it is, in fact, a necessity in many cases) my point is that I would imagine they'd be loath to move to a place with only one studio to possibly work for. Germany, UK, US and Canada all have multiple studios in various cities so moving within the country would be no issue. Hell even Dundee here has a range of studios of different sizes people could move between.

All it takes is one to start up at home of course, which is why I think the increased publisher presence is possibly the key to that getting off the ground.

noodler

Pumping investment into an industry that won't be employing Irish people seems insane to me in the current climate tbh.