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...

So far, every single law seeking to restrict the sale of violent video games has been struck down by the federal courts; it would seem that such legislation is a losing proposition.  So how else might the government try to regulate our favorite pastime?  Writing for Joystiq, lawyer and gamer Mark Methenitis offers two possible scenarios which censorcrats might seek to employ.

The first is to impose content restrictions - not on the type of violence that can be shown but on the type of stories that can be told or the types of characters presented. The idea here would be to ensure that games are politically correct so as not to offend anyone and prevent flaps over perceived racism in games like Resident Evil 5, Left 4 Dead 2, or Call of Juarez: Bound in Blood.  Of course, this still boils down to regulating speech so it’s not likely to be any more successful in the courts than restricting violent content has been.

The second is an idea presented by Jack Thompson during his debate with Methenitis at SGC09 earlier this month. Thompson speculated that the Obama administration might address America’s obesity issues by regulating our play time. But how? The government can’t just march into your home and turn off your Xbox. While there is no indication that Obama is planning any such thing, Methenitis explains how such a scenario might work:

When the government wants you to stop doing something, they tax it. Alcohol is taxed. Tobacco is taxed. Certain kinds of less-fuel efficient cars are taxed. In short, the theory is "fewer people buy things at a higher cost." And it's something that can be levied against both retail sales and digital downloads.

Taxing games is not a new idea but with the economy the way it is, now seems like the absolute worst time to try it.  Still, you never know. Methenitis:

It's always difficult to predict what the government may or may not do, or how the courts may or may not rule. The system, however, relies on the vigilance of the public to ensure that our rights are not infringed....

-Reporting from San Diego, GamePolitics Correspondent Andrew Eisen...

The British government will establish a "video games committee," reports MCVUK.

The concept for the new group came out of a meeting last week between representatives of UK game publishers' group ELSPA and Siôn Simon (left), the government's new Minister for Creative Industries. The committee will have representatives from a number of British Cabinet offices, including the Departments of Culture, Media and Sport, Business Innovation and Skills, Health, the Home Office and Children, Schools and Families.

ELSPA head Michael Rawlinson told MCVUK that he was encouraged by the decision to create a video game-specific government committee:

The news was indeed upbeat. The Minister assured us that the Government is confident of being able to introduce pro-PEGI legislation before the next election.

We also covered the other hot topic of the moment: tax breaks for the industry. Siôn Simon confirmed that the Treasury is now open in principle to the idea of tax breaks for the country’s video games industry.

But endlessly calling for tax breaks is not enough. What is obvious is that hard evidence has so far been very lacking so the Minister has now asked ELSPA to help further the debate by furnishing that evidence. This, of course, we are happy to do.

If you're a Swede who has unloaded an unwanted MMO account for a few extra Kronas, the taxman would like a word.

On the other hand, if you're an American who has sold your account to a Swede, the taxman would still like a word.

GameCulture points out a Stockholm News report detailing efforts by Swedish tax officials to come to grips with e-commerce. To that end, the Skatteverket is even taking a look at small fish like gamers:

The Swedish Tax Agency hold that you have to pay tax for selling an avatar from a computer game. The agency has investigated the trading in avatars during a 14 month period and found the advertised sum of avatars for sale by Swedes to be 662 million SEK. But no one has ever declared any income for trading in avatars to the Tax Agency.

But even U.S. citizens could be subject to Swedish taxation on such virtual transactions, according to the Economics of Virtual Worlds blog:

[Note that] a sale has taken place in Sweden if the seller is a Swedish trader who sells [to]... a private person in Sweden or another EC [European Community] country. A sale from a foreign trader to a Swedish trader has also [legally] taken place in Sweden. The same applies if a trader from outside the EC sells services to Swedish private persons.

Thus, even U.S. citizens are subject to Swedish taxes in virtual worlds, as long as one of the participants is Swedish. The implication is that if similar tax rules are adopted around the globe, U.S. citizens could end up owing taxes to Sweden, Japan, South Korea, and other nations (depending on which and how many worlds they are part of) – all because they played some games...

Skatteverket states that gamers should send invoices to each other. It’s unreasonable stuff they’re talking about. The [game] users [typically] don’t know who they’re interacting with...

Recent news that the government of Ontario plans to grant $263 million to assist video game publishing giant Ubisoft in the creation of a game development studio in Toronto has generated a good bit of controversy.

Supporters maintain that Ontario is investing in job creation while critics see a government handout to a company that is profitable, foreign and in the business of creating violent games.

But Brad D. of ExGamer.net looks at the deal from the game addiction perspective. In last week's podcast, Brad comments on the new marriage between Ubisoft game makers and Ontario bureaucrats:

The government of Ontario has just made a massive investment in the firm Ubisoft... When we see massive infusion of cash, let's say in... casinos, we always see that matched with public education programs around the potential dangers of excessive gambling...

 

When I see a quarter-billion dollars being invested by the government in the video game industry, it raises a couple of eyebrows. While I'm thrilled to see jobs in any industry that will be high-paid and lasting, I am concerned that the government is not matching that with some kind of investment in education on the risks of excessive [video game] usage.

Michael Rawlinson (left), who heads British game publishers group ELSPA, details his organization's new - and apparently successful - approach to dealing with the U.K.'s government bureaucracy in a guest column for MCVUK.

Despite some difficult recent years in which most of the political dialogue on video games in the U.K. involved criticism of game violence, the British game biz has scored some big wins of late. Most notable among these was the government's recent adoption of the PEGI content rating system favored by the industry.

At its core, ELSPA's strategy seems to involve working both harder and smarter. Rawlinson writes:

PEGI’s ascent to becoming the sole ratings system for games was a momentous achievement for the industry – and just goes to show how we can really get the Government’s attention when we get our approach right.

 

We’ve deliberately become more professional in terms of our dealings with Government. We’re strategically planning what we do – we don’t just bowl up to meetings, answer questions then leave.

We not only had to convince Government... we also took our arguments much wider, taking in the whole of Westminster, as well as the devolved parliament in Scotland and the regional assembly in Wales as well as the European parliament. Retailers, children’s charities and more were also covered. All of these groups had different needs we had to meet...

The unprecedented $263 million grant with which the Ontario government enticed Ubisoft to open a new game development studio in Toronto has drawn its share of fire since it was announced last week.

Most of the criticism has focused on the economics of the deal and the idea of giving away so much taxpayer money to an already-profitable, foreign company.

This morning, columnist Andrew Dreschel of the Hamilton Spectator takes a few shots at the money angle, but also slams the government of Premier Dalton McGuinty for essentially funding the creation of violent video games:

If using tax dollars to assist a foreign private-sector company is an iffy proposition, the thread becomes even more frayed when you look at some of the games in Ubisoft's roster.

Assassin's Creed enables players to experience the thrill of murdering people in Renaissance Italy. Red Steel allows you to feel the power and freedom of slaying your enemies with bullet and blade.

Call Of Juarez lets you use your gunslinging skills and arsenal of deadly weapons to kill anyone who stands in your way. America's Army: Rise Of A Soldier thrusts you into the role of a sniper assigned to kill enemy officers...

The McGuinty government's investment is offering concrete support and official blessings to amoral games that both glorify and trivialize violence and, arguably, contribute to anti-social behaviour -- all in the name of business.

GP: In the pic, Ontario Premier Dalton McGuinty (right) and Ubisoft CEO Yannis Mallat seal the $263 million deal...

The recent news that the government of Ontario would fork over $263 million to Ubisoft for a new studio in Toronto remains controversial. In today's Globe & Mail columnist Marcus Gee is beside himself over the decision:

With a budget deficit of $18.5-billion, your provincial government is strapped - but not so strapped that it can't find a quarter of a billion in the pocket lint to pay some Frenchmen to set up a new video-game studio...

 

Ubisoft executives say they are in love with Toronto... But game developers are a footloose bunch, jumping from place to place in search of talent and government handouts... Who is to say they won't jump across the pond when the [U.K.] tax picture changes. Or when currency-exchange rates make Canada less desirable...

 

That quarter-billion has to come from somewhere, much of it from good Toronto businesses that don't have the buzz factor... Their tax burden will rise, and their business will suffer, while the cool kids in the video-game industry collect government cheques.

Meanwhile, David Olive at The Star seems cautiously optimistic about the Ubisoft deal:

Corporate welfare is tough to justify at the best of times... Could there be better uses of public money than developing the next generation of Assassin's Creed... And at a cost of $329,000 for each of the up to 800 workers to be employed by the new Ubisoft Toronto?

On balance, the investment is probably wise...

Louisiana Gov. Bobby Jindal (R) has signed into law a package of tax breaks designed to bolster video game production in the state, according to the Associated Press.

Jindal also approved several other bills providing tax breaks to non-game related sectors. While some critics have questioned the wisdom of giving up state tax revenue in a troubled economy, Jindal referred to the incentives as "critical tools":

By signing these bills, we're ensuring that we not only have the ability to remain economically competitive, but that we can continue to move our state forward by making Louisiana the greatest place in the world to find a great paying job and raise a family.

A press release on Gov. Jindal's website offers a bit of information on the video game bill:

SB 277 by Sen. Ann Duplessis is similar to Governor’s package bill HB 457, which extends and expands the Digital Interactive Media Tax Credit by permanently extending and increasing the credit by 5 percent creating a single rate of 25 percent of expenditures plus an additional 10 percent for Louisiana resident payroll expenditures (35 percent total credit for resident payroll). The bill also expands the definition of digital media to include technology companies.

UPDATE: Game publishers lobbying group ESA issued a press release praising Jindal for signing the tax break into law. ESA boss Mike Gallagher's commented:

We commend Governor Jindal for his strong leadership as well as that of Senator Duplessis for expanding the state’s computer and video game development and production base, and helping lead the way in creating the next generation of entertainment innovation in Louisiana.

 

Developers and publishers live and work for years in states where games are created, providing a higher return on investment than any form of entertainment.

In yesterday's GamePolitics coverage we took note of an editorial in Canada's National Post which slammed the Ontario government's recent announcement that it would grant Ubisoft $263 million for the publisher's new Toronto studio.

Canadian blogger Eli Green offers the opposite view, however, claiming that the deal is a good one for Ontario because it will boost the local economy. In an opinion piece for Comic Book Bin Green writes:

To begin wit... Torontonians, or anyone else from the general vicinity, looking for a position with the [Ubisoft] will no longer have to make the... six hour jaunt to Quebec... That means more talent stays within Ontario, which, naturally, is beneficial for the province as a whole.

There is something far more important happening here though... an investment of this magnitude, in this industry, from the government of Ontario was long overdue... If the government plays its cards right, the Ontario video game development community should continue to grow and thrive, giving a nice boost to the economy, and local talent will continue to be just that – local.

It's not just important news for Ubisoft, it's important news for Ontario.

GP: In the pic, Ontario Premier Dalton McGuinty (right) and Ubisoft CEO Yannis Mallat seal the deal...

The government of Finland awarded €10 million to video game firms in 2008, reports Develop.

The funding was distributed by Tekes, the government's technology funding body. Mari Isbom, an advisor to the agency, told Develop: 

Tekes has identified games as a strategically important research and development area and thus one of the key focus areas. Around €10 million were targeted for game companies in 2008 via the Verso programme.

Games like Max Payne and Flatout 2 were developed in Finland, which is also home to Habbo Hotel and N-Gage manufacturer Nokia.

When Ontario's Premier Dalton McGuinty (left) announced on Monday that the provincial government planned to give $263 million to Ubisoft to offset the cost of opening a new game studio in Toronto, some eyebrows were raised.

Game industry types seemed understandably pleased, but an editorial in the National Post expresses shock and dismay over the amount of money involved and the fact the that those funds are going to a highly profitable company:

Ontario gives $263 million to company that makes $111 million in profit. Smart. Weren't we supposed to have learned something from the recession? Apparently not...

It’s bad enough that companies with terrible balance sheets get cash from taxpayers, but encouraging software companies that make money to play the same game is something else again. If you're losing money, Ontario wants to support you. If you're making money, Ontario wants to support you.

Commenters to the editorial were, by and large, not receptive to the plan, either.

- Soooo, do the math: That's 80 jobs per year. At a cost to the taxpayer of........ wait for it......................... $328,750 EACH !!  WHAT A "DEAL" !!

 

- Let's call a spade a spade: Ontario liberals pissing away $300.000 per job created. You know what? I am not paying any more taxes. That's it... Why paying taxes, if everything I pay is getting just given away to the foreign businesses? I'd rather move to Honduras...

A few commenters, like the one below lauded the deal, however:

The author of this article clearly misses the point.  The $263M "invested" by the Ontario government are in the form of tax breaks over ten year as an incentive to set up shop here, so no cash outlay.  Further, the tax breaks are kind of a moot point since these taxes wouldn't have been paid anyway had UbiSoft not set up shop.  The fact that they're spending $500M to open a studio, clearly they'll be here for a while, thus creating more jobs... 

A Massachusetts legislator hopes to extend the state's tax credit for movie production to video game developers.

To that end, Rep. John Binienda (D, left) has proposed H.2690. The measure will be debated tomorrow in the State House.

Of his bill, Binienda told NECN:

It's basically just tax credits to keep this industry here. It's to bring jobs here, keep jobs here, and stimulate economic development.

 

The idea here is that if you could make some tax credits and some tax breaks, that not only could you get your degree here, but you could work here to keep the best and the brightest minds here, in the [video game development] field.

Passage of Binienda's bill appears uncertain at this point given that some of his legislative colleagues have expressed concerns about giving up tax revenue in the current economic climate. A similar measure failed to pass in 2008.

France and England both mandate that video game projects be culturally relevant in order to qualify for financial incentives. But the head of the European Game Developers Federation told gamesindustry.biz that such requirements make little sense either culturally or as a matter of economic policy.

Guillaume de Fondaumiere (left), who is also an exec with Heavy Rain developer Quantic Dream, spoke to gi.biz at the recent GameHorizon conference:

The cultural test is a problem... When you look at [European Union] rules, you have to ask: 'Actually, what is culture?' It's a national decision, so it's kind of weird that we, as the videogame industry, have to work with standards that other cultural areas don't have to follow.

To me, all games are cultural. Videogames aren't just a form of entertainment, but a true form of cultural expression, and I think that in twenty years' time this will be a given. No one will dispute that any more...

We know that tax breaks are extremely effective in stimulating an industry, and I think again that Montreal and Quebec have shown us the way...

So I think it's high time for governments, and the EU, to understand that money given in the form of tax breaks to the industry is not money thrown away. It's an investment with a very high return, so it's time that we had those breaks.

It's unclear whether a member of Britain's Parliament may have purchased a PlayStation game with his tax-funded expense account, reports Eurogamer.

A number of MPs have been found to have used public funds for questionable expenses in recent months. Eurogamer spotted the Labour Party's Nigel Griffiths (left) among a list of MP with oddball expenditures published by The Guardian. Griffiths strongly denied that he bought a game, however, and Eurogamer can't find one with the title as given:

According to a list of the stranger expense claims... Nigel Griffiths, Labour MP for Edinburgh South and former deputy leader of the House of Commons, expensed "GBP 29.99 for a PlayStation computer game, Premiership Arsenal".

Griffiths disputes the report, however, telling The Sun that the Dixons receipt in question is misleading. "It's not a game, it's a branded memory stick," said the beleaguered MP. "I'm well past playing video games."

We certainly don't recall a game called Premiership Arsenal and can't find any reference to one, either, although it's possible the title refers to Codemasters' PS2 offering, Club Football: Arsenal 2005.

Under somewhat more of a microscope than Griffiths is frequent video game critic Keith Vaz, also of the Labour Party. Bruce on Games cites a BBC report detailing Vaz's questionable use of public funds:

[Vaz] claimed more than £75,000 to fund a second home in Westminster, even though his family home is just 12 miles away in Stanmore. The Telegraph also suggested he changed his designated second home for a single year to property in his Leicester constituency, before claiming more than £4,000 on furnishings.

British game developers have been lobbying for tax breaks some time. And, based on yesterday's release of the Digital Britain report, the Government seems to finally be listening.

But, as reported by The Guardian, tax breaks proposed for game developers by Lord Carter's report may come with cultural strings attached:

The [Digital Britain] report also contains the fascinating sentence in its executive summary...: "The Government has therefore committed to work with the industry to collect and review the evidence for a tax relief to promote the sustainable production for online or physical sale of culturally British video games.

Culturally British. We suspect we know what they mean - games companies based in the UK - but what if it's not? What if they actually mean something like, for example and completely hypothetically, Grand Theft Auto: Weston-super-Mare?

Or Left 4 Dead: The Light Brigade?

Come on, what would you suggest as a "culturally British" computer game that we could offer to Lord Carter?

GP: Actually, there are some precedents for the cultural requirement recommended by Digital Britain. As GamePolitics reported in 2007, France imposed a similar restriction. The French Government requires that game projects seeking tax breaks have a "cultural dimension."

In the U.S., the state of Texas has content-based restrictions on its game and movie subsidies.