International financial news doesn’t always catch my attention — no offense to the euros and the pounds, but you know, I’m busy playing games. But I do notice when it involves games.
In late June, the news broke that the British government would be scrapping plans for a tax incentive that would help UK-based developers stay competitive in the world market. Naturally, many game biz folks cried foul over the broken promise — and then a rumor went around suggesting that a major publisher actually sided with the government on this one. That publisher, according to the rumor mill, was probably Activision. No source or logical reason was offered for that rumor, so I got suspicious.
I put on my old journo hat, contacted some people, and found the truth is the exact opposite: Not only is Activision not to blame, Activision might be why that tax break is saved.
Dr. Richard Wilson, CEO of TIGA
First, a little background. In the UK, there are two important trade orginizations to know: TIGA and ELSPA. “Our vision is to make the UK the best place in the world to do games business,” says TIGA CEO Dr. Richard Wilson. “To that end, we lobby the UK Government and politicians in the Westminster Parliament and in the Holyrood (Scottish) Parliament to ensure that we have a fiscal and regulatory framework that is favourable to the video games industry. We also work to raise the media profile of the video games sector.” Wilson says ELSPA — the Entertainment and Leisure Software Publishers’ Association — is “traditionally focused on tackling piracy and dealing with age ratings” but also represents the interests of dozens of UK game makers.
The tax break was a major promise in an election year, so the sudden decision to abandon the plan (officially, the budget document says “Video games tax relief: not introduce”) is a major blow. “Game developers in many competitor countries receive national or state tax breaks for games production,” explains Wilson. “No such tax breaks exist in the UK and so investment and jobs are in jeopardy.” He adds that between July 2008 and July 2009, 15% of British video games firms went out of business, and an alarming 7% of the UK development workforce lost their jobs if you extend that period to March 2010. “Only a tax break for games production will enable the UK video games industry to compete on a level playing field.”
I went looking and quickly found evidence that Canada and Australia both support game development with tax breaks — it’s an exportable product that can bring long-term profits as well as act as a cultural outreach to the rest of the world. Here at home, North Carolina (hope of Epic Games) just announced its own incentive plan to keep top talent local, and other states have similar programs.
DJ Hero 2 developer FreeStyleGames has studios in London, Brighton, and Leamington Spa.
Traditionally, the developer-focused TIGA and the publisher-focused ELSPA have not always agreed on the issues, but they do on this one. “In the past, TIGA and ELSPA have disagreed on the need for a tax break for games production. Encouragingly, ELSPA now backs a tax break for games production and is supporting TIGA’s campaign. By cooperating closely, UK politicians cannot claim that the industry is divided on the tax break issue.”
James Bond 007: Blood Stone, currently in development by Liverpool's Bizarre Creations
But then there’s that rumor, posted by Develop (which has since taken the story offline), that “one of the biggest game companies in the world exerted pressure on the UK government and British trade associations to abandon plans for UK tax breaks.” The company, which was not named, suggested that this tax benefit would give the UK “unfair advantage over other nations.” Speculation ran wild and, of course, Activision was named because…well, as I’ve said before, I think people like having someone to hate, and right now, they like hating Activision.
However, the rumormongers didn’t do any research. Activision Blizzard — a member of TIGA — was actively involved in rallying everyone around the cause to get the tax breaks. Bobby Kotick spoke to the Financial Times in support of tax relief:
The talent pool in the UK is among the best in the world for what we do. But we really need to see some more incentives. We are seeing great incentives in Canada, Singapore and eastern bloc countries.
“Activision Blizzard’s decision to join TIGA has given our campaign for games tax relief a powerful boost,” says Wilson. “As the world’s largest games business, Activision Blizzard’s views carry real weight. Supportive statements from Bobby Kotick have further strengthened our cause. Activision Blizzard’s positive backing for the campaign in turn encouraged ELSPA to support the tax break initiative and for the industry to present a united front on tax breaks for games production.”
Please read that last sentence again: ELSPA got on board because Activision got on board. I’m glad everybody’s galvanized and working together, but let’s look at the logic anyway: If Activision owns two UK developers — FreeStyleGames (DJ Hero & DJ Hero 2) and Bizarre Creations (Blur & Blood Stone) — why on earth would it oppose tax breaks there? Supporting a tax break directly helps Activision’s bottom line and long-term investment, so squashing it would make no sense at all. Whoever the villain may be in this story, it was never Activision.
You didn't think you were getting through an article about UK-based developers in the Activision family without a Blur screenshot, did you?
So what now? With so many voices in chorus, the UK government is getting an earful from a unified front; all of the above mentioned parties are still lobbying to get what they were promised. It should be noted that the tax break is as much a cultural issue as it is a financial one — British games often have a unique feel and sensibility, an extension of the culture in which they were created. And if UK developers disappear, so do those experiences, plain and simple. “If the tax break for games production is not introduced, then the UK video games industry will lose jobs, businesses and investment,” says Wilson. “This in turn means that UK consumers will have a smaller choice of ‘British’ video games. Unless the UK Coalition Government introduces games tax relief, our historically successful industry will fail to fulfil its potential.”
I’ll keep an eye out for further developments, because I really hope this isn’t the end of the story. But at least now we know the facts that trump the rumors.
