Screen Australia, in the Playing for Keeps Report (November 2011) proposes two new options for computer games: and Interactive Entertainment (Games) Offset, which will provide indirect support for computer games through the taxation system, in a similar way to the existing tax offset for film and television production; and with Screen Australia also proposing that direct support for original online content through an Online Production Fund. These are important initiatives that I consider should be implemented.
Canada provides incentives to the entertainment software industry, which the Software Association of Canada’s May 2011 Report states as having provided 11% growth in the past 2 years for the games production industry with 17% projected growth in the next 2 years. The Canadian provinces of Ontario, Quebec, and British Columbia provide refundable tax credits on labour ranging from 17.5% to 37.5% of expenses; with the Federal government providing R&D tax credits. The Canadian success, and the declining number of independent games production companies, has motivated the U.K. games industry organisation, TIGA in a January 2011 Report to lobby for tax credits for computer games that meet a test directed to the cultural content and connection to European culture, heritage or creativity and the employment of European personnel.
The international games industry in the last decade has seen the emergence of substantial companies with consolidation among the major publishers/distributors of triple-A games titles. In this space, the focus on the publishing of a smaller number of big budget ‘franchise’ titles has impacted on the level of fee-for-service work being available for Australian studios. The high value of the Australian dollar also results in the major publishers/distributors looking for studios in lower cost countries or where there are substantial tax credits on labour cost and other investment incentives.
Screen Australia’s proposal can be seen as a valuable strategy to build and sustain the existing independent development studios that operate in Australia. While very small ‘garage’ start-up’s do not face barriers of entry, there are hurdles to building and sustaining development and production teams. The independent studios need to compete for fee-for-service work while funding development work on original IP projects.
The Software Association of Canada attributes the key business conditions that contribute to the success of the Canadian games industry is the internet and communications structure followed by availability of qualified personnel. The Canadian experience is that the “shares of total resources dedicated to downloadable, handheld, and PC games have been holding relatively steady, traditional console share has been declining, and is expected to continue to drop in response to rapid growth in resources dedicated to social, mobile, casual, and MMO (massively multiplayer online) gaming.”
The improvement in recent years in the digital platforms and Apple’s iOS and the Android technology, in particular the emergence of tablet devices and new generation smart phones, provides opportunities for independent publishers to directly distribute their titles through these digital platforms. The success of the ‘Angry Birds’ title shows that small independent games companies can build run-away successes with inventive and addictive gameplay.
The Interactive Entertainment (Games) Offset, proposed by Screen Australia, in the Playing for Keeps Report (November 2011) proposes a 20 per cent tax credit on eligible expenditure with a minimum expenditure threshold of $200,000. This will provide part of the budget for games for social, mobile and casual gaming platforms.
The big budget, big teams and long production time frames of triple-A console games will usually require publisher financing. The proposed 30 per cent tax credit on eligible expenditure with a minimum expenditure threshold of $500,000 will provide larger independent games companies with part of the budget to attract the interest of international publishers for triple-A console games.
Screen Australia’s proposal for direct support for original online content through an Online Production Fund will provide a source of funding for those Australian independent development studios that are active in MMO (massively multiplayer online) gaming.
Having worked on "Frontiers of Utopia”, the first interactive project financed by the Australian Film Commission in the mid 1990s; then on web based projects; and having worked at Activision in recent times, I have see at first hand the evolution of online business strategies and the dramatic innovations that have allowed the games industry to undergo exponential growth so that consumer spending on computer games has, for the past decade, exceeded that spent on the music and movies.
The economics of the development and financing of game titles is similar to the animation production – labour intensive with a high proportion of the cost of game development budgets being spent on artists, animators, designers and programmers. Project development is always a process of fitting the pieces of the financing jig-saw together. Screen Australia, in the Playing for Keeps Report (November 2011), when read in conduction with the Software Association of Canada’s May 2011 Report, shows a pathway to build and sustain independent game studios in Australia.
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