Project Finance and Public Funding for Games

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Games lawyer Jas Purewal discusses two underrated sources of funding for games: project finance and public sources of funding. This was part of a games finance seminar organised by UKIE.

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Project Finance and Public Funding for Games

  1. 1. Project finance and public funding forgames in the UKJas Purewal26 April 2012
  2. 2. osborneclarke.comOverview• What is project finance and how can it help fund games?• Public sources of funding 1
  3. 3. osborneclarke.comAbout Osborne Clarke• Osborne Clarke is a leading UK/European law firm to the games industry• We advise the full range of games businesses, from start-ups and small developers to publishers• We advise on matters including: contracts, IP, funding, corporate/tax, employment and disputes 2
  4. 4. osborneclarke.comAbout me• Im a games lawyer at Osborne Clarke – I advise clients like Nintendo, EA, AppyNation, Dynamo and Supermono on contracts, IP, funding and disputes• I wrote a blog dedicated to explaining legal issues to devs: www.gamerlaw.co.uk• I like Twitter: @gamerlaw• I am not Phoenix Wright :/ 3
  5. 5. osborneclarke.comWhat is games project finance?• Finance provided to fund the completion and release of a specific game under an agreed structure.• Investment is limited to the project in question – it is not an investment in the developer or the IP generally. 4
  6. 6. osborneclarke.comHow does project finance work? Part 1Note: this is a basic summary - project finance is much more complex in real life! 5
  7. 7. osborneclarke.comHow does project finance work? Part 2• Typically (but not always), Publisher signs a publishing agreement with Developer.• Developer puts the IP into a special purpose vehicle ("SPV"), owned by Funder or Publisher.• SPV contracts Developer to develop the game.• Funder funds the game development costs.• Funder may require a completion bond.• If things go wrong, everyone has a degree of protection…(but it gets complicated in practice) 6
  8. 8. osborneclarke.comHow does project finance work? Part 3In theory:• The Publisher is happy because it doesnt have to fund the game.• The Developer is happy because it has funding.• The Funder is happy because it makes a (medium- sized) profit if all goes to plan.• The Completion Bonder is happy because its paid a fee for making sure the game is completed. 7
  9. 9. osborneclarke.comA few example of games made usingproject finance• Neverwinter Nights 2 (Obsidian)• Railsimulator (Railsimulator.com)• Urban Freestyle Soccer (Acclaim)• Made Man (Silverback/Mastertronic)Or just take a look at Kickstarter… 8
  10. 10. osborneclarke.com Opportunities and challenges for games project finance Opportunities Challenges• More controlled and less • Still in relatively early days invasive than equity (or debt) • Risks need to be managed investment • Historically focused on publishers• Publisher has less risk • Complex legal/financial rules• Developer retains IP control • Can be expensive start-up costs• Better deal for developer (?) • Developer still dependant on a• Can be combined with other third party for funding investment sources • Investment rules dont help (yet)• Promotes innovation? 9
  11. 11. osborneclarke.comWhos involved in project finance?Some examples:• Funders/Project managers: Fund4Games, Standfast• Bond providers: Film Finance Limited, IFG• Banks: Barclays Bank, HBoS(Source: NESTA - http://www.nesta.org.uk/library/documents/The_Money_Game_v7.pdf) 10
  12. 12. osborneclarke.comPublic source of fundingThere are still several sources of public funding, if you knowwhere to look (and dont mind getting knocked back…)1. EU funds2. UK government funds3. Other sources 11
  13. 13. osborneclarke.comPublic source of funding: EU funds• The EU makes funds available in UK via the European Regional Development Fund: • Abertay Digital Prototype Funding (http://prototypefund.abertay.ac.uk/) • North West England (http://www.thenorthwestfund.co.uk/funds/digital-creative) • Screen Yorkshire (http://www.screenyorkshire.co.uk/funding/)• You can apply directly to those funds for funding, or could apply directly to the Department for Communities and Local Government (but needs public sector help…?)• Expires in 2013? 12
  14. 14. osborneclarke.comPublic source of funding: UK governmentfunds• National Endowment for Science, Technology and the Arts • Used to provide games funding more widely • Now a charity-> funding must meet charitable objects• Enterprise Capital Funds: small grants to SMEs by government-backed funds (e.g. IQ Capital): http://www.bis.gov.uk/policies/enterprise-and-business-support/access-to-finance/enterprise-capital-funds• Creative Skillset: funding for training• National Lottery? Arts Council? 13
  15. 15. osborneclarke.comPublic source of funding: other sources• Competitions: • IGF: http://www.igf.com/ • Dare to be Digital: http://www.daretobedigital.com/ • Middleware, e.g. Unity: http://www.kongregate.com/unity_game_contest • Hacks, e.g. Gamehack: http://www.gamehack.co.uk/• Charities? (e.g. Wellcome Trust)• Try other indies – e.g. Indie Fund• Crowdfunding again 14
  16. 16. osborneclarke.comThanks! Jas Purewal Lawyer Osborne Clarke T +44 (0) 207 105 7268 jas.purewal@osborneclarke.com Twitter: gamerlaw 15
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