We F Games Tax Credits Nordicity Presentation (2010 01 21)

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We F Games Tax Credits Nordicity Presentation (2010 01 21)

  1. 1. Produc/on
Tax
Credits
for
the
UK
Video
Games
Industry:
Lessons
from
the
Canadian
Experience
21
January
2010
Delivered to Prepared byWestminster eForum Nordicity
  2. 2. To
begin:
 Expenditure
tax
incen/ves
have
supported
the
con/nued
 development
of
the
UK’s
film
sector
 Some
Canadian
jurisdic/ons
have
tax
credits
that
support
 the
video
games
industry
 The
Canadian
video
games
industry
is
growing

 (28%
year‐over
‐year
job
growth*)
 Seems
simple
enough?
 *
Hickling
Arthurs
Low,
Canada’s
Entertainment
So0ware
Industry:
The
Opportuni:es
and
Challenges
of
a
Growing
Industry,
prepared
for
the
 Entertainment
SoWware
Associa/on
of
Canada,
March
2009.


  3. 3. But
things
are
seldom
as

 simple
as
they
seem

  4. 4. Perhaps
a
tax
credit
is
just
one
piece
 
 of
a
larger
puzzle 

  5. 5. Let
us
take
a
closer
look
at
video
games
support
in
 three
very
different
Canadian
jurisdic/ons:
 Quebec
(Montreal)
 Ontario
(Toronto)
 Bri/sh
Columbia
(Vancouver)
 Long
history
of
excellence
in
3D
  
Up
to
40%
produc/on
tax
  No
produc/on‐based
tax
credit
 design
and
anima/on

 credit
that
had
been
recently
  But,
a
long‐standing
major
 Up
to
37.5%
produc/on
tax
 expanded

 publisher
(Electronic
Arts
‐
 credit
(est.
1996)
  Numerous
suppor/ng
 1991)
 
Lured
UbisoW
in
1997
(and
 programs
  Close
connec/on
to
California
 others
aWer)
  Recently
lured
a
UbisoW
studio
  44%
of
Canada’s
games
 37%
of
Canada’s
games
  14%
of
Canada’s
games
 development
industry
jobs

 development
industry
jobs

 development
industry
jobs

  6. 6. Ontario’s
mul/‐pillar
approach: 
 Produc/on
Tax
Credit

 Interac/ve
Digital
Media
Fund
–
small
investments
in
 smaller
games
 IP
Fund
–
early‐stage
investment
in
prototyping

 Directed
investment
to
ajract
a
top‐level
publisher

 Various
training
and
professional
development
programs
 This
approach
could
also
 address
the
UK’s
situa/on

  7. 7. Traditional games development vs. emerging development process High-cost Games Development Process Launch of Game + Sales B Cash Flow Development A Costs - Emerging (Social/Casual) Games Development Process Early Signs of More new content traction, revenue + launched model established Cash Flow Launch of new content, B D spike in revenue Building new features A C (new characters, areas, E game modes, etc.) More investment in - new content for the Initial Dev’t Cost (few game game elements)
  8. 8. There are also very different production cycles Traditional Games (and F/TV) Slates Game 1 Game 2 Game 3 Cost Time Downtime, waste due to overhead Emerging (Social/Casual) Games Development Cycle Game 1 (continued Game 2 investment) (no traction) Game 3 (slow rev. Cost growth) Time
  9. 9. Diverse
business
models
require
a
diversity
of
 incen/ves

  10. 10. Tax
credits:
Why
should
they
be
part
of
the
 support
regime?

  11. 11. Tax
credits
offer
a
market‐driven
tool
for
support 
 Alloca/on

driven
by
entrepreneurs
rather
than
financiers
 More
likely
to
lead
to
market
outcomes:
the
crea/on
of
 marketable
IP
 Predictable;
not
subject
to
ra/oning
 Are
flexible
enough
to
underpin
rights‐op/miza/on
 strategies

  12. 12. Where
to
go
from
here?

  13. 13. Summary
of
Key
Conclusion
  The
Canadian
experience
demonstrates
that
growth
of
the
video
 games
industry
is
driven
by
a
number
of
factors,
including
 interven;on
  Consider
Ontario’s
mul;‐pillar
approach:
a
diversity
of
incen;ves
 for
a
diversity
of
business
models
  Consider
the
market‐driven
approach
offered
by
a
tax
credit,
to
 promote
the
crea;on
of
marketable
IP
  Underline
financial
performance
and
encourage
op;mal
 management
of
rights

  14. 14. London Toronto+44 (0) 751 197 9022 +1 416 657 2521Ottawa dchodorowicz@nordicity.com+1 613 234 0120 nordicity.com

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