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A VISION FOR THE INDUSTRY

IN 2020

P.4Forewords

P.10Introduction

P.12TIGAandthegamesindustry

P.16Summaryofproposals

P.20Powerupsmallfirms

P.23Buildworldwinninggamesbusinesses

P.32Promotegamesclusterstoboostregionalgrowth

P.36Enhanceskillsandeducation,promotemeasuredmigration

P.42Footnotes

20/20 VISIONTIGA’S MANIFESTO FOR THE UK VIDEO

GAMES DEVELOPMENT INDUSTRY 03

‘Split Second’, developed by Realtime UK

‘Total War: SHOGUN 2’, developed by Realtime UK

This manifesto contains many sound ideas that I have discussed while working closely with TIGA in my capacity as Chair of the Video Games All Party Parliamentary Group. In that time, TIGA has done a consistently good job of spreading awareness of this vital industry at Westminster and elevating the industry’s standing in Whitehall.

Theideasinthismanifestoshouldbetakenseriouslyasanimportantcontributiontopublicpolicydebate.TheUnitedKingdomisaworldcentreofexcellenceinvideogameinnovationandweneedtomakesurethatwecontinuetoattractinvestmenttotheseshoressothatBritainremainsinthelead.IcongratulateTIGAondevisingacomprehensive,credibleandcoherentpolicyagendafortheUKgamesindustry.

“In my role as an MP I come across many trade associations. TIGA is distinctive in its focus, professionalism, and tenacity. TIGA has campaigned relentlessly for Games Tax Relief over many years and played a critical role in convincing first the UK Government to adopt this measure and then enabling the Government to make a successful case for Games Tax Relief to the EU Commission. TIGA’s successful campaign for Games Tax Relief will benefit both the games industry and the wider economy and I am glad to have been able to advance this important measure.

“Representingnumeroussmallbusinessesandcomprisinganindustryofthefuture,TIGA’sisavoicewhichdeservestobeheard.IwelcomethepublicationofthismanifestoasonewhichIbelievewillshapethedebateabouthowtosustaingrowthinthevideogamesandcreativeindustriesintheyearstocome.”

THE UK VIDEO GAME INDUSTRY IS IMPORTANT ECONOMICALLY, CULTURALLY AND INCREASINGLY EDUCATIONALLY.

JUSTIN TOMLINSON MP

DAMIAN COLLINS MP

I know from my time as a Minister in the Treasury what a good track record TIGA has in making well considered submissions to Government and just how persuasive TIGA’s arguments can be. That is why the proposals in this manifesto deserve serious consideration by all those formulating policy proposals in advance of the 2015 General Election.

Thevideogamesindustryisattheforefrontofthedigitaleconomy.Itssuccess,reflectingthecreativityofthecountry,ismakingaveryimportantcontributiontooureconomicrecovery.TheproposalsinthismanifestowillneedtobeweighedcarefullybytheGovernmentwhichtakesoverin2015.

RT HON STEPHEN TIMMS MP

FOREWORDs



“Representing numerous small

businesses and comprising an

industry of the future, TIGA’s is a

voice which deserves to be heard.

I welcome the publication of this

manifesto as one which I believe

will shape the debate about how

to sustain growth in the video

games and creative industries in the

years to come.”

TIGA represents developers, digital publishers and the service companies in our industry. Our core purpose is to strengthen the game development and digital publishing sector. We achieve this by fighting for the industry in the corridors of power, championing the industry in the media and helping our members commercially.

TheUKvideogameindustryisimportanteconomically,culturallyandincreasinglyeducationally.

TheUKvideogamesectormakesavaluablecontributiontotheUKeconomy.In2014thevideogamessectorcontributed£1.02billiontotheUK’sGDPandgenerated£419millionforHMTreasuryintaxrevenues.128,000peopleworkinthegamesindustry,including9,896ingamesdevelopment.Gamedevelopmentsustainsknowledgebased,graduateemployment.Atypicalgamedevelopmentstudiowillhave80percentofstaffqualifiedtodegreelevelorabove.Theindustryisexportfocused:95percentofUKgamesdevelopmentstudiosexportatleastsomeoftheirgames.2

VideogamesareincreasinglyembeddedinUKcultureandsociety.73percentofthepopulationregularlyplayvideogames,includingtwo-fifthsofpeopleagedover50.3Videogamesarecultural,audiovisualproductsonaparwithfilm,televisionandanimation.Theydrawonartisticdisciplinessuchasmusicandart,andsometimesinvolvenarrative.Videogamesalsointeractwithotherformsofmedia,forexample,

inspiringfilm,televisionandmusic.Nowonderthat86percentofBritishpeoplebelievethatvideogamescanbeculturalproducts.4

Videogamesareeducational.Allvideogameshavearulesetthathastobelearnedbeforetheycanbeplayedandwhenaplayerstartsanewgametheyhavetobetaughthowtoplayit.ManyUKgamesbusinesseshavemadeeducationalorseriousgames.5Anumberofstudiessuggestthatvideogamesmayhelptopromoteskillssuchasvisualandmotorskills,strategicthinking,relationshipbuilding,computerliteracy,collaboration,competition,multi-taskingandexperientiallearning.6Videogameshavethepotentialtoplayavaluableroleinmainstreameducation,7intrainingandinworkforcedevelopment.8

Thegamesdevelopmentanddigitalpublishingsectorisasuccessstory.TheintroductionofGamesTaxReliefin2014–ameasurewhichTIGAsuccessfullycampaignedforoverthelastsevenyears–willhaveasignificantpositiveimpact.YetifthegamesindustryistoachieveitsfullpotentialandmakeasignificantcontributiontoUKemploymentandgrowth,thenweneedtodomore.Inparticular,weneedpolicymakerstobuildanenvironmentthatisfavourabletostart-upsandthegrowthofsustainablestudios,thepromotionofregionaldevelopmentclustersandfurtherimprovementsineducationandskills.Thismanifestoshowshowwecanachievethesegoals.



JASON KINGSLEY OBE CEOandCreativeDirectoratRebellionandTIGAChairman

LUCIANA BERGER LabourandCo-operativeMPforLiverpoolWavertree

“I have worked with TIGA for many years to help introduce Games Tax Relief in 2014. This measure will help to create jobs, boost investment and grow businesses. Yet we need to do more to ensure that the video games industry continues to grow. So I am delighted that TIGA has prepared this well considered manifesto.

TIGA’smanifestocontainsaseriesofwellthoughtoutproposalswhichwillreceiveseriousconsiderationbymanypoliticiansandpolicymakersanditwillhelptoinfluencethepolicydebateconcerningthecreativeindustries.IlookforwardtoworkingwithTIGAinthefuturetohelpadvancethisimportantindustry.”

JIM MCGOVERN MP

Games Tax Relief would not have happened without TIGA’s effective, passionate and vigorous 7 year campaign. During this campaign TIGA has successfully convinced four political parties, three governments and played a critical role in persuading the EU Commission to authorise the introduction of Games Tax Relief. I am delighted to have been able to work with Richard Wilson, TIGA CEO, in successfully lobbying for Games Tax Relief.

Iamconfidentthatthisimportantmeasurewillhaveamajorpositiveimpactonjobs,investmentandprojectsintheUKgamesindustryincludinginLiverpoolandacrosstheNorthWest.IampleasedthatTIGAhasnowdevelopedthiscomprehensivesetofpolicyproposalstohelptheUKgamesindustrytobuildonthesuccessofGamesTaxRelief.ThisisanimportantcontributionasallpoliticalpartiesconsidertheirmanifestosforthegeneralelectiontobeweighedcarefullybytheGovernmentwhichtakesoverin2015.

“Games Tax Relief would not have

happened without TIGA’s effective,

passionate and vigorous 7 year

campaign.”

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INTRODUCTION



The central economic theme of the current Parliament (2010 – 2015) has been to reduce the Government’s fiscal deficit which arose because of the financial crisis, damaging recession and sluggish recovery. The economic crisis caused significant economic, social and political damage and undermined the UK’s standing in the world. Although the economy has returned to growth there is still a long way to go.9

TheParliamentandGovernmentwhichiselectedin2015needadifferentemphasis.TheUKneedsastrategyforsustainableeconomicgrowth.HighergrowthandhigherproductivityimproveslivingstandardsandwillimprovetheGovernment’sfiscalsituation.Economicgrowthrelieson:thesupplyofthefactorsofproduction-land,labourandcapital;andproductivitygrowth,whichisdependentuponinnovationandinvention.Governmentpolicyaffectsthesevariables.Onland,planningcontrolsaregenerallyregardedasrestrictive.TheUK’sinfrastructureisnotasgoodasitshouldbe:theWorldEconomicForumjudgesBritain’sinfrastructuretobejust28thintheworld.10Onlabour,improvementsareneededineducationandtrainingandtheUKshouldremainopentohighlyskilledworkers.Oncapital,theGovernmentneedstoencourageinvestmentandenhanceaccesstofinance.Oninnovation,theGovernmentcanplayarolethroughitsinvestmentinhighereducation,theresearchandsciencebaseandmaintainingasocietythatitopentonewideasandtonewhighlytalentedpeople.

BroadlyspeakingtheUKneedstopromoteamorebalancedeconomicrecoverywhichislessdependentonfinancialservices,consumerexpenditureandanexpansionofprivateborrowingtobuyhouses,andmorereliantoninvestmentandexports.Thiswillbeasignificantchallenge.UKgrossinvestmentasapercentageofGDPwas14.2percentin2012.11Capitalexpenditureremains20percentbelowits2008peak.12TheUK’stradeperformancecontinuestodisappoint.Despitea25percentdepreciationofsterlingbetween2007and2009,therewasminimalimpactontheUK’stradeingoodsandservices.13Thetotaltradegapin2013remainedvirtuallyunchangedon2012at£108billionandexportsgrewjust1.4percentinthesameyear.14TheUK’sproductivityperformanceisalsoamatterofconcern.TheBankofEnglandhasestimatedthatoutputperhourin2013was16percentbelowthelevelthatcouldhavebeenexpectedhadthepre-recessiontrendscontinued.15

ThenextParliamentandGovernmentneedtostrengthen(andcertainlyavoidharming)thosesectorswheretheUKhasacomparativecompetitiveadvantage:forexample,aerospace,businessservices,defence,high-valuemanufacturingandengineering,hightechnologyindustries,highereducation,lowcarbontechnologyandthecreativeindustries,includingthevideogamessector.

‘Split Second’, developed by Realtime UK

THE UK NEEDS A STRATEGY FOR SUSTAINABLE ECONOMIC GROWTH. HIGHER GROWTH AND HIGHER PRODUCTIVITY IMPROVES LIVING STANDARDS AND WILL IMPROVE THE GOVERNMENT’S FISCAL SITUATION.

TIGA is intent on building an enduring organisation which continually improves; a business that will make a significant impact on the games industry and so benefit our membership and the wider economy. Since 2010, TIGA has won 20 business awards, an achievement which reflects TIGA’s drive for improvement and to meet best practice.

AtTIGAweknowwhatwestandfor–developers,digitalpublishersandserviceproviders.Weknowwhatwewanttoachieve–tomaketheUKthebestplaceintheworldtodogamesbusiness;andweknowhowtoaccomplishthis–byenablingdevelopers,digitalpublishersandserviceproviderstosetupandgrowstrong,sustainable,independentbusinesses.

TheUKgamesindustryischanging.Manypublisher-ownedstudioshavecloseddown,down-sizedorinvestedoverseasinrecentyears.Traditionalworkforhirepracticeisgivingwaytonewbusinessmodels.Digitaldistributionisintheascent.Retailisindecline.Developershaveaccesstomoreoptionsintermsofplatforms,genresanddistributionthaneverbefore.Thestudiopopulation

ischanging.InAliceinWonderlandfashion,theUKgamesdevelopmentanddigitalpublishingsectorhasachievedtheapparentlyimpossiblefeatofexpandingandshrinkingatthesametime.Ontheonehand,thenumberofstudiosexpandedfrom278in2010to620in2013/Q12014.Ontheotherhand,theproportionofstudioswithfiveormorepersonnelshrunkfrom58percentin2010to41percentin2013.ThisisadirectconsequenceoftheUKgamesindustry’sincreasingfocusonmobileastheprimarygamesplatform.16

Therehasbeenabigriseinstart-ups–andclosures:64percentoftheUK’sgamescompaniesstartedupbetween2008and2013,but30percentofgamesbusinessescloseddownoverthesameperiod.17Withtheriseinbothstudiostart-upsandfailuresoverrecentyears,thekeystrategicquestionfacingtheUKgamesindustryin2015isclear:howdowesupportthegrowthandviabilityofmoreindependentcontentcreatorsanddigitalpublishers?

NowatTIGAourmissionistostrengthenthegamesdevelopmentanddigitalpublishingsector.Weinstinctively

TIGA and the

GAMES INDUSTRY

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NOW AT TIGA OUR MISSION IS TO STRENGTHEN THE GAMES DEVELOPMENT AND DIGITAL PUBLISHING SECTOR.

understandtheneedsofindie-developersanddigitalpublishers:TIGAisitselfasmallbusinessandisrunbyUKdevelopersanddigitalpublishersforUKdevelopersanddigitalpublishers.

TIGAhasavisionforthefutureofhowtheindustryshouldprogressby2020.Overthenextfiveyearswewanttoseeaflourishingdeveloperanddigitalpublishersector,withstrongnumbersofstart-ups,growingsustainablestudios,adeclineinthecurrent30percentbusinessmortalityrateandanincreaseintheoverallstudiopopulationfromthecurrent620businessesthatexistedin2013/Q12014.TIGA’svisionisforconsistentincreasesinemploymentandinvestment-drivenbyGamesTaxRelief-withover2,000newstudiojobs,a£220millionincreaseininvestmentfromgamesdevelopmentcompaniesandregionalclusterscontributingtotheindustry’sgrowth.TIGA’svisionisforanincreaseinthenumberofstudioswith15ormorestaffsothattherearemorebusinessesintheUKcapableofhandlinglargerprojectsandinvestmentsfromglobalpublishers.Accesstofinanceshouldbelessofachallengeandthebraindrainoftalentedstaffoverseas

shoulddiminishasaproblem.TIGAwantstoseetheUKbecomeagloballyrecognisedcentreforgameseducationandacontinuousprofessionaldevelopmentinthesector’sworkforce.TIGA’sambitionisforanincreaseintheproductionofculturallyBritishvideogames.Thismanifestowillrealisethisvision.

TIGA’smanifestosetsoutarangeofpoliciesfortheUK’spoliticalpartiestoconsiderintherunuptotheGeneralElection.SomeoftheproposalsdescribedinthispaperidentifyhowtobuildonthesuccessandinherentpotentialoftheUKvideogameindustry,therebybenefitingthewiderUKeconomyandsociety.However,someoftheproposalsinourmanifestoareunashamedlycross-sectoralinnature.TIGAmakesnoapologyforthis:wewanttoseetheadvancementofpoliciesthatbenefittheUKeconomyandsocietygenerally.WehopethatpoliticalpartieswillsupporttheagendaoutlinedinthismanifestoandthatthenextGovernmentwillimplementit.

TIGArecognisesthemacro-economicconstraintsfacingtheUKatthistime.YettheUKvideogamesindustryrepresentsasignificantdriverininnovativeeconomic

activityandwiththerightsupporttheindustrycouldcontributetothegrowthofamorediverseandsustainableUKeconomy.TheUKisaworldleaderinvideogamesdevelopmentandwiththerightpolicyenvironmentithasanopportunitytowinasignificantshareofglobalmarketforvideogames.18Theglobalmarketforvideogamescouldbeworth$82billionby2017,upfrom$67billionin2012(www.forbes.com/sites/johngaudiosi/2012/07/18/new-reports-forecasts-global-video-game-industry-will-reach-82-billion-by-2017).

Dr Richard Wilson TIGA CEO.

NUMBER OF UK GAMES INDUSTRY STUDIOS

2010 2013

58% 41%

278 620

PROPORTION OF UK GAMES INDUSTRY STUDIOS WITH MORE THAN FIVE PERSONNEL

2010 2013

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‘Operation Flashpoint: Red River’, developed by Realtime UK

Summary of Proposals

TIGA MANIFESTO FOR THE GAMES INDUSTRYPOWER UP SMALL FIRMS

1.Prototypefundingshouldbemadeavailabletoenablestart-upstudiostoaccessfinanceanddevelopnewIP.

2.ACreativeContentFund(CCF)shouldbeestablishedinordertoencouragenewstudioformation,stimulatecreativityandco-fundnewcontentdevelopmentandIPgeneration.

3.NationalLotteryfundingcouldbemadeavailabletoprovidefundsforgamesdevelopment,includingprototypefundingandtheCCF.

BUILD WORLD WINNING GAMES BUSINESSES

4.An‘ExportTaxRelief’shouldbeintroducedtoincentivisemorefirmstoexport,therebypromotingexport-ledeconomicgrowth.

AnExportTaxReliefiscurrentlyprohibitedunderEUlaw.However,theprimacyofUKdomesticfiscalpolicycanbeseenintheUK’sabilitytointroducethePatentBox,andretainthePatentBoxevenwhensomeotherEUmemberstatessoughttohaveitabolishedbecausetheydeemedittobeunfair.Interestingly,GermanyprovidesdrawbacksonlocalVATtaxpaidonexportedproducts.TheUKGovernmentcouldthereforeexplorethecasefornegotiatingandsecuringanExportTaxRelief.

5.AwarenessofUKTI’sofferingshouldbeincreasedtoensurethatmoreSMEsaccessitsexportservices.

UKTIshouldenablemoreUKvideogamesbusinessestomaximisetheirexportpotential:In2013/14just1.4percent

(£220,100)oftotalUKTITradeAssistanceProgrammefundingwasallocatedtothevideogamessector.Additionally,just0.18percent(£25,000)oftotalUKTIEventsandMissionsspendingwasassignedtothevideogamessector.

6.TheUKshouldbeaggressivelymarketedasanattractivelocationforinwardinvestmentforthegamesindustry.

7.VideoGamesTaxReliefshouldberetained.DuringthecourseofthenextParliamenttheGovernmentshouldcarryoutacostbenefitanalysisofthemeritsofincreasingtheleveloftheRelieffrom25percentto30percenttostimulatefurtherinvestment.

8.TheamountofmoneythatacompanycanraiseviaSEISinvestmentshouldbeincreasedfrom£150,000to£200,000perannumtoreflecttheriseindevelopmentbudgetsrequiredtomakeinternationallycompetitivegames

9.TheUKshouldencouragethedevelopmentandprovisionofsuperfastbroadbandspeedsthatrivalthebestintheworld.

10.GreatercompetitionshouldbepromotedinthebusinessbankingsectorandnewentrantsencouragedtoenterthemarketastheUKbankingsectorremainsheavilyconcentrated.

11.PEGI,theEuropeangamecontentratingsystem,shouldenditspunitivepricingpolicy.PEGI’scurrentpolicyistochargeadeveloperafeeforcontentratingeverytimeitlaunchesagameonadifferentconsoleplatform,evenifthecontentisexactlythesame.Chargingfeesforthesamecontentshouldbestoppedtosavedevelopers’money.

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12.TheEUfundingregimeforvideogamesshouldbereformed.GamesshouldnotberequiredtohaveanarrativecomponentorgamegenreinordertobeeligibleforEUfundingviatheCreativeEuropeprogramme.‘Serious’gamesshouldnotreceivepreferentialtreatmentundertheEU’sHorizon2020programme.

13.Policymakersshouldpursueacommonglobalregulatoryapproachtowards‘freetoplay’(F2P)gamesandin-apppurchases(IAPs)basedontheOfficeofFairTrading’sPrinciplesforOnlineandApp-basedGames.ThiswillenableUKgamesbusinessestocompeteonalevelplayingfieldandensuretheeffectiveprotectionofUKconsumers.

PROMOTE GAMES CLUSTERS TO BOOST REGIONAL GROWTH

14.Regional/NationalGamesDevelopmentIncubatorsshouldbeestablishedatauniversityoraconsortiaofuniversitiesineachoftheEnglishregionsandineachofthenationswithintheUKtoenablemoresuccessfulstart-ups(theincubatorswouldsupportbothstudentandnon-studententerprises).

15.HightechnologyvideogamesclustersshouldbepromotedaroundtheUKthroughtheprovisionofmorebusinessincubatorsatdesignatedregionaluniversities(seepoint14),strengtheninglocalindustryanduniversitylinks,buildingconnectionswithfinanceprovidersandthroughtheprovisionofbusinessmentoring.

16.TheGrowthAcceleratorserviceshouldbetailoredtotheneedsofgamesdevelopersanddigitalpublisherstoensurethatmorestudiosbenefitfromtheserviceoverthelifeofthenextParliament.

ENHANCE SKILLS AND EDUCATION, PROMOTE MEASURED MIGRATION

17.ApilotSMETrainingTaxRelief(TTR)shouldbeintroduced.TTRwouldoperateinasimilarwaytotheexistingR&DtaxcreditsandwouldenableSMEstooffsetexpenditureontraining,ContinuousProfessionalDevelopment(CPD)forstaffandeducationoutreachactivitiesagainstcorporationtax.

18.SpecialistrolesshouldbeaddedtotheShortageOccupationList(including,butnotlimitedto,GameAnalyst,SeniorGameArtist,BrandManager,SeniorGameDesigner,LocalisationManager,CommunityManager,SeniorProducer,andEngineProgrammer).Thiswillenablegamesbusinessestoaddressskillshortagesinhighlyspecialisedroles.

19.ThePost-StudyWorkVisashouldbereinstated,initiallyforSTEMandotherpriorityareastudents,toenableUKbusinessestohirethebestavailabletalenttrainedatUKhighereducationinstitutions.ThePost-StudyWorkVisashouldallownon-EUstudentsstudyingatUKuniversitiestoworkataUKbusinessaftergraduationforamaximumoftwoyears,andthenapplyforamorepermanentworkpermit.

20.PolicymakersshouldexaminethecaseforincreasingexpenditureonhighereducationtoensurethatUKtertiaryeducationremainsworldleading.

21.PolicymakersshouldexaminethecaseforreducingtuitionfeesinpriorityundergraduatesubjectareassuchasMathematics.

22.TheSkillsInvestmentFundshouldbemaintainedtoenableUKgamesbusinessestoenhanceskillsinthegamesindustry.

1. POWER UP SMALL FIRMS

2. BUILD WORLD WINNING GAMES BUSINESSES

3. PROMOTE GAMES CLUSTERS TO BOOST REGIONAL GROWTH

4. ENHANCE SKILLS AND EDUCATION, PROMOTE MEASURED MIGRATION

‘Juiced 2’, developed by Realtime UK

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‘Lifelike Head Meshes’, developed by Realtime UK

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1. PROTOTYPE FUNDING

PROPOSAL

TheGovernmentshouldmakeprototypefundingavailableforindependentgamesdevelopers.ThiscouldbefinancedviatheNationalLottery(orviaInnovateUK).

REASON

Gamescompaniesfaceasignificantfundinggapthatisrestrictinggrowth.Lowavailabilityofprivateandpublicfinancerestrictsthegrowthpotentialofgamescompanies,particularlythemanynewgamescompaniesstartingupinrecentyears.Videogamescanbeaverysuccessfulbusiness.However,therevenuegenerationisspreadveryunequallyinthevaluechain.Whilesalesandmarketingofvideogamesisahighlyscalableinternationalbusiness,theactualmakingofgamesisnoteasytofinance.Gamedevelopmentisariskyventureinvolvinghightechnological,artisticandbusinessrisks.Itisconsequentlyrelativelydifficulttoraiseexternalfinance.Thiscanbeaseriousproblemasthedevelopmentoftechnologyandcontentcanbeexpensive.

TIGAproposesthatresourcesshouldbemadeavailabletofinanceearlystagedevelopmentworkinordertocreateplayableprototypes,earlystagedevelopmentworkoreventosupportfullgamedevelopmentprojects.Resourcescouldalsobedeployedformarketinganddistributionofgames;fortraining;andtosupportbusinessestoattendinternationalevents.Prototypefundingcouldbefinancedbyre-deployingNationalLotterymoney(seeSection4below).

ThemainrecipientsofprototypefundingshouldbetheUK’sindependentdevelopersbecausetheytypicallyfinditdifficulttoraisefinanceincomparisontopublisherownedstudios.Thefundingshouldalsobeconcentratedonareaswherecommercialfundingeitherdoesnotexistoronlyexistsinreturnforun-commercialterms,suchasthetransferofalltheIPtothefunder.Fundingofinnovativeprototypes(likethegameLimbo)wouldbeparticularlyusefulbecausethesekindsofinnovativegamesrarelyseethelightofdayasfewpublishersarepreparedtotaketheriskoffundingthem.

TIGA proposes that resources should be made available to finance early stage development work in order to create playable prototypes, early stage development work or even to support full game development projects.

TheUKhasmadesomefundingavailabletosupportprototypedevelopmentinrecentyears.AbertayUniversitydeliveredaprototypefundwhichenableddeveloperstoapplyforgrantsofupto£25,000tocreateprototypegames.TheAbertayPrototypeFundhelpedover70companies,supportingnearly500neworcontinuingjobsandenabledstart-upstoovercomesomecriticalbusinessconstraints19.However,theAbertayPrototypeFundhasnowbeenfullyinvested.CreativeEnglandintroducedaDevelopmentFundin2013,wherebysmallandmedium-sizedenterprises(SMEs)havebeenabletoapplyforgrantsofbetween£10,000and£50,000todevelopanewgameIPforcommercialrelease,butthishasnowclosed.CreativeEnglandintroducedaPrototypeFundforstart-upstoapplyfor£10,000todevelopaprototypegame.ThesearepositiveschemesbuttheyaresmallscaleinnatureandarerestrictedtoassistcompaniesincertainpartsofEngland.20

ThePrototypeFundshouldalsoincludebusiness,creativeandtechnicalguidanceforfundedprojectstomaximisetheirprospectsforcommercialsuccess.Prototypefundingshouldnotbeastand-alonepolicy.Developersneedtobegiventhetoolsandknowledgeforcommercialsuccess.Inparticular,developersneedbusinessandcommercialadviceabouthowtogettheirprototypefullyfundedandreleasedintothemarket.Intheabsenceofthisadvice,theprototypefundingcouldbewasted.21TheAppCampusAwardSchemeprovidesaninterestingmodelofprototypefunding.Inadditiontostrictmilestonefunding,recipientsbenefitfromteaching,formalclassesandintroductionstokeyindustryfiguresincludinginvestors.22

EFFECT

Makingprototypefundingavailablewillhelpstart-upsandsmalldevelopmentstudiossurmountbarrierstoaccessingfinanceandenablemorepromisingstudiostofundprototypedevelopmentandIPgeneration.

Power up small firms


GAMES DEVELOPMENT INDUSTRY 212. DEVELOP A CREATIVE CONTENT FUNDPROPOSAL

TheUKGovernmentshouldfacilitatethedevelopmentofaCreativeContentFund(CCF)inordertoencouragenewstudioformation,stimulatecreativityandco-fundnewcontentdevelopmentandIPgeneration.23

REASON

UKgamesdevelopmenthastraditionallybeenheavilyreliantuponglobalgamescompaniesforfinance.76percentofinvestmentinUKgamesdevelopmentisderivedfromglobalcompanies.24Theremaining24percentisself-fundedbyBritishgamescompanies,wholargelyrelyuponexistingcashresources,includingretainedprofits,and,toamuchsmallerdegree,privateinvestmenttofunddevelopment.25Asnotedearlier,accesstodebtandequityfinanceiscomparativelydifficult.Additionally,thosecreativebusinesses(includingvideogamesdevelopmentstudios)thatarefortunateenoughtosecurefinancetypicallyhavetotradeawaytheirIPforprojectcapital.26

NewIPistheengineofthegamesindustrythatopensnewmarkets,triggersemployment,raisestaxrevenuesanddeliversnewgrowthtostudiosthatowntheIP.RetainingownershipofsuccessfulIPenablesgamedeveloperstogeneratecashflowandsupportmoresustainablebusinesses.27WhilenewIPfinancinganddistributiondeclinedintheyearsprecedingthelaunchofthenewconsolesin2013,newroutestomarket(suchasmobile,onlineandsocialgaming)haveopenedup,therebyreducingorevenobviatingtheneedforpublisherassistanceonthoseplatforms.ThereisastrongopportunityforanewgenerationofBritishgamescompanies,whicharestartingupinrecordnumbersbutusuallyatsmallscale,tobecomedeveloper/publishers,tocreateanddistributenewIP.

TheestablishmentofaCreativeContentFundcouldhelpovercomethesechallengesandexploitnewcommercialopportunities.TheCCFcouldprovidefundingofbetween£50,000and£150,000togamedevelopers.Fundingcouldbemadeavailableintwoforms.Firstly,loanscouldbemadeonapoundforpoundmatchedfundingbasis,wherebyeligiblecompanieswouldneedtodemonstratethattheycanmatchthefundingfromothersources.Alternatively

theCCFcoulddistributefundingintheformofaconvertibleloanoncommercialterms(thusactingwithinEUrulesaboutStateAid).28Recipientcompanieswouldbeabletorepaytheloanorconvertitsvalueintoequityafterasetperiod.TheCCFwouldaimtorecoupthemoneyfromrecipientsoutofsuccessfulsalesoncetheyhadgeneratedacertainamountofrevenue(inproportiontotheconvertibleloan)andoveranagreedtimeperiod(likelytobe3years).TheadvantageoftheconvertibleloanapproachforthegamedevelopmentstudioisthatifitsgamedidnotsellaswellasexpecteditcouldtransformtheCCF’sloanintoequityorashareinthebusiness,andsoremovethedebtfromitsbalancesheet.

Eligiblecompaniesandprojectswouldneedtodemonstratethefollowingcriteria:

• ThecompanyisbasedintheUK.

• Thecompanyexpendsaminimumof80percentofthedevelopmentcostsofthisprojectintheUK.

• ThecompanyproposestodeveloporiginalnewgamesIPwhichisinnovativeintermsofcontent,gameplayand,whereappropriate,businessmodels.

• ThecompanyretainsmajorityownershipoftheIPduringthetermoftheloan.

• Thecompanyshouldhavetodemonstratearobustbusinessplanabouthowitintendstousethematchfundingtoenhanceitsprospectsforcommercialsuccess.

• TheCCFshouldinvestinprojectsthathavethepotentialforcommercialsuccess,notpropupbusinessesthatareindifficulties.29Thisshouldbedemonstratedbycreditchecksandprofessionalassessmentofthecompany’sfinancialstatements.

TheCreativeContentFund(CCF)couldbedesignatedasanNationalLotteryallocationbody,togetherwithartscouncilsandotherdistributionbodies,andgiventherighttodecidewhichgamesprojectsandinitiativesshouldbeawardedwithdevelopmentfunding.TheCCFthen,alongwithitsotherfunctions,wouldestablishanapplicationprocedureforgamesdeveloperstoapplyforthisfunding,evaluateapplicationsreceived,andawardfundingtoprojectsthatfulfilapredeterminedsetofcriteria.TheCCFshouldbeentirelyimpartialandindependentoftradeassociationsandbusinesses.However,theCCFcouldhaveanadvisoryboardwhichpotentiallymightincluderepresentativesfromprivatesectorinvestors.30Acommercialmentoring

businessadvisoryserviceshouldbeprovidedforcompaniesbenefitingfromCCFdisbursements.Thisisnecessarytosafeguardinvestmentsandprovideguidancetonewcompanies.31

Asnoted,theCCFcoulddisburse20convertibleloansof£150,000perannum(£3millionintotal).TheFund’srunningcostsaredependentonthelevelofadministrationandduediligencebutthesuggestedstructuremaycostupto£450,000perannum.32AssumingtheCCFisestablishedtorunovera5yearterm,theCCFisexpectedtocost£17,250,000(excludinganyreturnoninvestment).TIGAnotesthattheseestimateswillneeddetailedfeasibilityanalysistocostmoreaccurately.TheCCFcouldbefinancedviatheNationalLotteryorviaInnovateUK(seeSection4below).

SchemesanalogoustotheCreativeContentFundhavepreviouslybeencreated.Forexample,the2013Budgetsawtheannouncementofanew£15mcompetitionmanagedbytheTechnologyStrategyBoardfordigitalcontentproduction.33However,thisdoesnotfocusoncontentcreationpersebuthasamoretechnicalthrust.34

ArecentexampleoftheefficacyofdirectgovernmentfundingofgamesproductioncanbefoundinFinland.Finland’sTekesgovernment-backedfundingagencyhasprovidednearly$70minfundingtoFinnishgamesdeveloperssincethelate1990sprovidingfinancialassistancetomanyofthecountry’sstudiosatthecrucialhighriskearlystagesoftheirexistence.ThisincludesprovidingearlystagefinancetoSupercellandRovio,twocompaniesthathavegoneontobecomeglobalgaminggiants.Thesuccessofthisprogrammeandtheknock-oneffectofanincreaseininwardinvestmentandvaluerealisationfromsubsequentfundraisingandM&AactivityhaspromptedtheFinnishgovernmenttodramaticallyincreaseitsdirectgamesfundingviathelaunchofSkene,a€70mdedicatedgamesfund.35

EFFECT

ACCFcarefullystructuredbyindustryandtheUKGovernmentwouldimprovedevelopers’accesstofinance,stimulateoriginalIPgenerationandpromotestudiogrowth.ItwouldenhancetheindependenceandcommercialviabilityofgamedevelopersandstrengthentheprospectsfortheexpansionoftheUKvideogamesindustry.Thematchedfundingcriteriawouldhelptodriveinvestmentandjobgrowth.

tiga.org

3. NATIONAL LOTTERY

PROPOSAL

NationalLotterymoneycouldbemadeavailabletofinanceinnovativevideogameprototypesandtheCreativeContentFund(seethesectionsabove).

REASON

Asnotedpreviously,manygamedevelopersfinditcomparativelydifficulttoraisedebtandequityfinance.Additionally,manyofthosevideogamesdevelopmentstudiosthatmanagetosecurefinancetypicallyhavetotradeawaytheirIPforprojectcapital.Thereislittleavailablefundingforthedevelopmentofinnovativeordifferentprototypesorsmallgames,asmanydonothaveanimmediatelycommercialvalueorroutetomarket.

Small,independentfilms,artsinstallationsandprojects,sportsevents,andotherculturalactivitiesareoftenfinanciallyconstrainedandatleastpartlydependentonfundingfromtheGovernmentduetotheconsiderablefinancialrisksthattheytake.Independentgamesdeveloperstakesimilarrisksbutthevideogamingindustrydoesnotenjoythesamesupportenjoyedbytheothersectors.Small,experimentalgamesthatoftentakethegamesindustryforwardarenotalwaysconsidered‘commercial’enoughbylargegamespublishers,inhibitingthedevelopmentofthesectorasanartform.ItistimetorecognisethegamesindustryasanequivalentartsformtoTVandfilm.Indeed,somestudiessuggestthatthemorepeopleplaygames,themoretheyconsumeotherculture,andviceversa.36

Currently,NationalLotteryfundingthroughtheNationalLotteryGoodCausesisonlyavailabletoindustriesandorganisationsthatfallundertheremitofthe12NationalLotterydistributionbodiesthataretaskedwithallocatingthefunding.37Approximately28percentofNationalLotteryrevenuewasreturnedtoGoodCausesintheyearending31March2013,orapproximately£35millioneachweek.38Intotal,theNationalLotteryhasfundedprojectsthroughtheNationalLotteryDistributionFundbyover£31billionsinceitsinception.In2013,40percentoftheGoodCausesfundingwasawardedtoHealth,Education,Environment,and

Charitablecauses,20percenttoSports,20percenttoArtsand20percenttoHeritage.ThedistributionformulaissetyearlybytheDepartmentforCulture,MediaandSport.ThetimehascometoreviewthecaseforinvestingsomeNationalLotterymoneyinthevideogamessector.39

TheCreativeContentFund(CCF)couldbedesignatedasanallocationbody,togetherwithartscouncilsandotherdistributionbodies,andgiventherighttodecidewhichgamesprojectsandinitiativesshouldbeawardedwithdevelopmentfunding.TheCCFthen,alongwithitsotherfunctions,wouldestablishanapplicationprocedureforgamesdeveloperstoapplyforthisfunding,evaluateapplicationsreceived,andawardfundingtoprojectsthatfulfilapredeterminedsetofcriteria.TheCCFshouldbeentirelyimpartialandindependentoftradeassociationsandbusinesses.However,theCCFcouldhaveanadvisoryboardwhichpotentiallymightincluderepresentativesfromprivatesectorinvestors.Alternatively,theBFIcouldbedesignatedanallocationbodywithresponsibilityforvideogames.AnotheralternativewouldbetodesignateCreativeEnglandasafundingbody,whichcoulddistributeNationalLotteryFundstothevideogamessector.Thecrucialpointisthatthedesignatedfundingbody,whetheritbetheCCF,CreativeEngland,ortheBFI,shouldbecompetentandindependentoftradeassociationsandbusinesses.40

SomeNationalLotteryfundingcouldalsobemadeavailabletosupportthelargenumberofimportant,butoftenoverlooked,outsourcingfirmsthatspecialiseinareassuchasaudio,animation,localisation,music,qualityassurance,sound,etc.ThesebusinessesarecriticaltothehealthoftheUKvideogamesindustry.Theyshouldbeeligibleforfundinginrespectofactivitiessuchastrainingandattendanceatinternationalevents.

EFFECT

MakingNationalLotteryfinanceavailabletofundprototypesthroughtheCCFcouldhaveasignificantimpact.Morestudioswouldbeabletodevelopprototypesandonceaprototypeiscompleteandoperational,aroutetomarketmightbecomemoreapparent,allowingthegametobefundedthroughtocompletion.NationalLottery

fundingfortheCCFwouldenablemoredeveloperstoraisefinance,developtalent,stimulateoriginalIntellectualProperty(IP)generationandpromotestudiogrowth.NationalLotteryfundingforprototypesandtheCCFwouldalsoindirectlypromoteskillsdevelopmentinfirms.Finally,itwouldresultinawiderbreadthofinnovativevideogamesinthemarketplace,whichcouldinturnincreasethereachofvideogamesintowiderculture.


GAMES DEVELOPMENT INDUSTRY 234. TAX RELIEF FOR EXPORTERS

PROPOSAL

An‘ExportTaxRelief’shouldbeintroducedtoincentivisemorefirmstoexport,therebypromotingexport-ledeconomicgrowth.

AnExportTaxReliefiscurrentlyprohibitedunderEUlaw.However,theprimacyofUKdomesticfiscalpolicycanbeseenintheUK’sabilitytointroducethePatentBox,andretainthePatentBoxevenwhensomeotherEUmemberstatessoughttohaveitabolishedbecausetheydeemedittobeunfair.Interestingly,GermanyprovidesdrawbacksonlocalVATtaxpaidonexportedproducts.TheUKGovernmentcouldthereforeexplorethecasefornegotiatingandsecuringanExportTaxRelief.

REASON

TheUKneedstorebalanceitseconomytowardsexportsandinvestment.FortheUK,tradecontinuestodisappoint.TheUKhasapersistentcurrentaccountdeficit,exportingfewergoodsandservicesthanitimports.AccordingtotheHouseofCommonsPublicAccountsCommittee,from2000to2012,theannualvalueofUKexportsnearlydoubled,butduringthesameperiod,theannualvalueofexportsgloballynearlytrebled.Additionally,theannualvalueofUKglobalexportshasbeenflatforthelasttwoyears.41Smallandmedium-sizedenterprises(SMEs)playacrucialroleintheUKeconomy,accountingforalmost60percentofemploymentatthebeginningof2012.However,theUKhasaslightlylowershareofexportingSMEsthantheEUaverageandtheshareofUKSME’srevenuesgeneratedviaexportsisalsolowerthantheEUaverage.42OneinfiveUKSMEsexportcomparedtoanEUaverageofoneinfour.43LordLivingston,theformerBTchiefexecutivewhobecameUKtradeministerinDecember2013,hasnotedthatfor60percentofcompanies,exportsaccountforlessthanatenthoftheirsales,andathirddonothaveexportsatall.44IftheChancellor’stargetoftheUKachieving£1trillionannualexportsby2020(i.e.doublingthecurrentfigure),moreneedstobedonetoencourageandassistexporters.

UKTIhelpsexportingfirmsthroughavarietyofusefulschemes(PassporttoExport,TradeAssistanceProgramme,OMIS,etc),butawarenessofUKTIisrelativelylow.45Additionally,themajorityofGovernmentsupportforexportersisfocusedonlargebusinesses.Just£70million–2percent–oftotalgovernmentsupportforexportersprovidedbyUKEFwenttoSMEsin2012.InGermany,46percentprovided

byEulerHermeswenttotheMittelstand,ormedium-sizedbusinesses,accordingtotheBritishExportersAssociation.46Moreover,whileexportinghasgreatpotentialforUKbusinesses,accesstofinanceisrelativelydifficultespeciallyforcreativebusinesses.Also,thecostofexportingintermsofincreasingproduction,payingforinsuranceagainstlatepayment,andresearchingnewmarketscanbeabarriertoexporting.47

Introducingan‘ExportBox’orExportTaxReliefforUKexportingcompanieswouldhelparangeofbusinessacrossmanysectors,includingmanygamesdevelopmentstudios.95percentofUKgamesdevelopmentstudiosexportatleastsomeoftheirgames.ManyUKgamesdevelopmentstudiosareexportfocused.Forexample,theproportionofturnoverfromexportsis100percentforFirebrand,90percentforJagex,80percentforLockwoodPublishing,80percentfornDreams,85percentforNeonPlay,and90percentforRebellion.

ThenextGovernmentshouldconsiderintroducingan‘ExportBox’withacompetitivetaxrate(e.g.15or10percent)ontheprofitsgeneratedfromtheirexports.Thiscouldbeachievedbyapplyinganadditionaldeductiontotaxableprofits,inthesamemannerastheexistingPatentBoxschemetoensurecommonalitywithinthetaxsystem.Thismethodoftaxreliefwouldbenefitfromthefactthatrevenuesfromexportsareeasilyidentifiable,givingcompaniestheoptionofidentifyingrelevantexportprofitsviaapportionmentor‘streaming’methods(dependingonwhethertheexportcostsareeasilyseparable),inasimilarmannertothatsetoutinthePatentBoxlegislation.

Oncerelevantexportprofitsareidentified,acalculationcanbecarriedoutinordertoestablishthedeductionrequiredtoobtainanequivalenttaxrateof15percentfortheseprofits.Any“exportlosses”createdbythisprocesswouldneedtobecarriedforwardforuseagainstthenextavailableexportprofitsofthetrade.48

Keyconditionsshouldbethat:

• Thecompanyhasundertakenqualifyingexports(seealsobelow)forgoodsand/orservicesactuallyproducedintheUK.

• RelevantExportIncomeandprofitsfromexportswillneedtobeprescribedindetailaswiththepatentboxsystem.

• Theinteractionwithotherreliefswillneedtobeconsidered,includingvideoGamesTaxRelief,R&Dtaxcredits,andthePatentBoxitself.Ingeneral,thereshouldbenodouble-dipping(i.e.claimsformorethanonereliefonthesameincomeorcosts).

Therearethreedistinctivegroupsintheexportingprocess.

a)Direct:whereanexporteroperates

NATIONAL LOTTERY GOODS CAUSES 2013

HEALTH,EDUCATION,ENVIRONMENT,ANDCHARITABLECAUSES

SPORTS

ARTS

HERITAGE

20%

20%

20%

40%

Build world winning games businesses

directlyfromtheUKwithitsoverseascustomer.ExportordersaretakenintheUK;manufactureandsupplyofgoodsareorganisedfromtheUK;billingandrevenuesaremanageddirectfromtheUK.ExportprofitsaretaxedintheUK.

b)Branches:whereanexporterretainsaUKbaseandestablishesanoverseasbranchoffice,fundeddirectlybytheUK.TheoverseasbranchisaseparatelegalentityinthehostcountryandisdirectlylinkedtotheUK.BillingisdonefromtheUK,allrevenuesgodirecttotheUK,thebranchofficeisessentiallyacostcentre,andallcosts/revenuesarebroughtdirectlybackintotheUK.ExportprofitsaretaxedintheUK,howeverreliefisusuallygivenforforeigntaxessufferedtopreventdoubletaxation.

c)Subsidiary:whereanexporterestablishesapermanentandseparatelegalentityoverseas.Allbillingandrevenuesaremanagedintheoverseasentity.Profitsaretaxedoverseas,andbroughtbackintotheUKviadividenddistributions.Thesecanbesubjecttowithholdingtaxatsource,dependingonthenatureofanydoubletaxtreatiesinplacebetweenthetwocountries.

Firmsthataredirectexporters(a)andfirmswithoverseasbranches(b)shouldbeeligiblefortheExportBox/ExportTaxRelief.InbothcasestheexportbusinessisundertakendirectlyfromtheUK.49Subsidiaries(c)shouldnotbenefitfromtheExportBox/ExportTaxRelief.Similarly,indirectexportingfirms(i.e.,companiesthatcontributetothesupplychainofanothercompanythatdirectlyexports)shouldnotbeeligiblefromtheExportBox/ExportTaxRelief.

Itisdifficulttoestimatetheprofitsandtherebytheinitiallylostrevenuesgeneratedbyexports(althoughovertimethelowerrateofcorporationtaxonexportsshouldencouragemoreexportsandrevenuestotheTreasury).ItwouldthereforebeprudentforHMTreasurytoinitiallylimittheExportTaxRelieftoSMEsoreventojustsmallbusinesses.50

EFFECT

TheUKhasapersistentcurrentaccountdeficit,exportingfewergoodsandservicesthanitimports.IftheUKistoachieveexportledgrowthinthefuturethenweneedtoassistandencouragemorefirmstoexport.Currently,justoneinfiveUKSMEsexportcomparedtoanEUaverageofoneinfour.IftheUKintroducedanExportTaxReliefforSMEs,wherebyeligibleUKcompanieswouldpayacompetitivetaxrateontheprofitsgeneratedfromexports,thenmorebusinesseswouldhaveanincentivetoexport.ThisinturncoulddriveexportledgrowthandhelptorebalancetheUKeconomy.

AnExportTaxReliefiscurrentlyprohibitedunderEUlaw.However,theprimacyofUKdomesticfiscalpolicycanbeseenintheUK’sabilitytointroducethePatentBox,andtoretainthePatentBoxevenwhensomeotherEUMemberStatessoughttohaveitabolishedbecausetheydeemedittobeunfair.Interestingly,GermanyprovidesdrawbacksonlocalVATtaxpaidonexportedproducts(seeGermany.CountryCommerce2014,TheEconomistIntelligenceUnit,2014,p.44).TheUKGovernmentcouldthereforeexplorethecasefornegotiatingandsecuringanExportTaxRelief.

5. RETAINING AND ENHANCING GAMES TAX RELIEF

PROPOSAL

VideoGamesTaxReliefshouldberetained.DuringthecourseofthenextParliamenttheGovernmentshouldcarryoutacostbenefitanalysisofthemeritsofincreasingtheleveloftherelieffrom25percentto30percenttostimulatefurtherinvestment.

REASON

TIGA’ssevenyearcampaignforGamesTaxRelief(GTR)cametoasuccessfulconclusioninMarch2014,whentheEUCommissionfinallyapprovedthemeasure.NosignificantchangesarelikelytobemadetoGTRforfouryears.In2017theUKGovernmentshouldnotifytheEUCommissionofitsplantocontinuewiththeReliefandtheEUCommissionwilldecidewhethertheReliefcanbemaintainedforanotherfouryearsin2018.DuringthisperiodTIGAwillbeexaminingwhetherGTRcanbeimprovedinanyway.OneareathatUKpolicymakersshouldexamineinadvanceofnotifyingtheEUCommissionisinrelationtotherateofRelief.51TherateofReliefcouldbeincreasedtoensurethattheUK’sgamesindustrycompetesonamorelevelplayingfield.52Thelevelsoftaxreliefavailableforvideogamesaroundtheworldvary,withthemostgenerousincludingSingapore;Georgia,Florida,andLouisianaintheUSA;andManitoba,Ontarioand,PrinceEdwardIslandinCanada.53Significantly,studiosinreceiptofpublicsupportinCanadaarereceivingsupportequivalentto23percentoftheirturnover,givingthemasignificantbenefit.54

TheeffectiverateofrelieffortheUK’snewGamesTaxReliefwillbelessthan20percent.ThisisbecauseGamesTaxReliefiscalculatedbyworkingoutthelevelofadditionaldeductionthatispermittedforqualifyingcosts.Theenhanceableexpenditureiscalculatedby

multiplyingtheapplicablerate(25percent)bythelowerof:

• 100percentofUKcoreexpenditure;

• 80percentoftotalcoreexpenditure.

ThereforeifyouonlyhaveUKexpenditure,the80percentoftotalcoreexpenditurewillalwaysbealimitingfactor.Consequently,themaximumrelief=80percentx25percent=20percent.

Asyouaretestingtotalcoreexpenditureanyexpenditurewhichisnot“qualifyingcore”expenditurewillfurtherreducethispercentage,forexamplefinancingcostsandadvertising.ThereforeinpracticeGamesTaxReliefislikelytoprovideaneffectiverateofonlyaround16–18percent.

TIGAsuggeststhatthenextGovernmentshouldcarryoutacostbenefitanalisisofthecaseforincreasingtheexistinglevelofrelieffrom25percentto30percent.TIGArecognisesthatspecifictaxratesandtaxreliefsarenottheonlyfactorsinfluencinginvestmentdecisions.Theoverallbusinessenvironment,includingthegeneralinfrastructure,theskillsbaseandpropertyrightsarealsoimportant.However,theUK’skeycompetitorsinthegamesindustryincludestatesandprovincesincountriessuchastheUSAandCanadaprovidenotonlyabroadlyfavourablebusinessenvironmentbutalsogeneroustaxreliefsforgamesproduction.Therefore,itisvitalthattherateorratesofrelieftobeadoptedfortheUK’sGamesTaxReliefarehighlycompetitivevis-à-vistheseothercountries.

EFFECT

IncreasingthelevelofGTRto30percentwillincreasetheattractivenessoftheUKasaplacetodobusinessandwillenabletheUKgamesindustrytocompeteonamorelevelplayingfield.

6. SUPPORTING EXPORTERS VIA UKTI

PROPOSAL

AwarenessofUKTI’sofferingshouldbeincreasedtoensurethatmoreSMEsaccessitsexportservices.

UKTIshouldenablemoreUKvideogamesbusinessestomaximisetheirexportpotential:In2013/14just1.4percent(£220,100)oftotalUKTITradeAssistanceProgrammefundingwasallocatedtothevideogamessector.Additionally,just0.18percent(£25,000)oftotalUKTIEventsandMissionsspendingwasassignedtothevideogamessector.tiga.org


GAMES DEVELOPMENT INDUSTRY 25REASON

UKTradeandInvestment(UKTI)55operateanumberofusefulschemestohelpexporters(althoughitsfundinghasrecentlybeendiverted)56:

Passport to Export (P2E): PassporttoExporttakesabout12monthstocompleteduringwhichtimeacompanyattendsa1dayworkshoptospendtimeassessingitsobjectivesandapproachtowardsoverseastrade.ParticipatingcompaniesworkwithanInternationalTradeAdviser(ITA)todeviseaseriesofactionpointsthatformpartofplantoimprovingtheiroverseastradeprospectsbyusingthesupportthatUKTIcanoffer.

Gateway to Global Growth (G3): Thisisfocusedmoretowardsestablishedexporterswithslightlymoredevelopedresourceswhoneedalightertouchandtheprogrammehasalessformalapproach.

OMIS: UKTI,throughitsoverseasConsulatesandEmbassies(Posts)andinsomecasesBritishChambersofCommerceoffersanetworkofsourcesofspecificlocalisedinformationandknowledgethataremadeavailabletoexporters.Onceacompanyhasdecideditwishestoinvestigateamarketwithaviewtotrade,thelocalPostcanbecontactedandaskedtoproduceaspecificanduniquereportonanysubjectmatterthecompanywishes(knownasOMISreports(OverseasMarketIntroductionService).

Outward Trade Missions:UKTIorganisesregularhighprofilevisitstostrategicallyimportantmarketstochampionUKtradeandpromoteBritishcompanies.Missionsenableparticipatingcompaniestomeetwithforeignpartieswhocanaddvaluetotheireffortsinthosemarkets.

Inward Trade Missions: ThesebringgroupsofinfluentialbuyerstotheUKtomeetspecificclientsselectedfortheirrelevancytotheMission’scharacter.Oftenthesearehighlevelmeetingsandeventsfeaturingkeyplayersintheoverseasterritory.

The Trade Show Access Programme (TAP): TAPsupportsUKbusinesseslookingtoexhibitatoverseastradeshowsbyprovidingeligiblefirmswithgrants.Eligiblecompaniescanapplyforupto3grantsinanyoneyeartosubsidisethecostofparticipatinginanexhibition.AspartofanAccreditedTradeOrganisationledpresence,companiescanreceivebetween£1400and£1800perexhibition.

Export Marketing Research Scheme( EMRS) and Published Research:UKTIcanfundbetween33%-50%ofdeskresearchaswellas50%ofthecostsoffieldresearchinthetargetmarket.

TheseschemesarehelpfulandUKTIdoesusefulworkwiththecompaniesthatitsupportsbutisreliantonthecompanycommittingtimeandfinancialresourcestoasustainedcampaigntodevelopoverseas.Itcantakeyears

ofhardworktoestablishanewmarketorfindtherightpartnerthatwillallowacompanytomoveintoalucrativenewareasoUKTIcanonlybeaseffectiveasthecompany’sengagementwiththeprocess.Additionally,awarenessofUKTIislimited.57

WorkingwithtradeassociationslikeTIGAisessentialforUKTItogetthemessageouttothegamesdevelopmentcommunity.GovernmentandParliamentshouldalsosupporttheworkofUTKIandworktoraiseawarenessoftheorganisation.

Aswellraisingawareness,UKTIshouldaimtoenablemoreUKvideogamesbusinessestomaximisetheirexportpotential,particularlythroughtheTradeAssistanceProgrammeandthroughEventsandMissions.Yetin2013-14,just1.4percent(£220,100)oftotalUKT&ITradeAssistanceProgrammefundingwasallocatedtothevideogamessector.Additionally,just0.18percent(£25,000)oftotalUKT&IEventsandMissionsspendingwasassignedtothevideogamessector.UKT&Ishouldexaminethecaseforincreasingsupportforgamesdevelopment,digitalpublishingbusinessesandothergamesbusinesses.Thesectorhasaveryhightendencytoexport:95percentofgamesbusinessesexportatleastsomeoftheirproductsandservices.Enablingmoregamesbusinessestoattendtradeshowsandtohavetheirtravel,accommodationandexhibitionexpensesshouldenhancetheirpotentialtoexport.ThisbenefitsboththegamesindustryandtheUKeconomy.58

EFFECT

IncreasingawarenessofUKTIanditsschemesamongstSMEsshouldleadtomorebusinessesavailingthemselvesofitssupport.ThisinturnshouldleadtomoreSMEsbeingabletodevelopsustainableandrealisticplansforinternationaltradeexpansion.Additionally,otherthingsbeingequal,enablingmoregamesbusinessestobenefitfromtheTradeAssistanceProgrammeandfromEventsandMissionsshouldenhancethesector’sexportpotential.

7. MARKETING THE UK GAMES INDUSTRY

PROPOSAL

MarkettheUKgamesindustryaggressivelyasanattractiveplaceforinwardinvestmentandlookatthedifferentwaysthattheGovernmentcanfullypromotetheUK’svideogamessector.

REASON

TheintroductionoftaxrelieffortheUKgamesindustryhasbeenapositivestepinattracting

investmenttotheUKbutthisaloneisnotenough.ManycountriesnowhavetaxreliefprogrammesinplaceandtheGovernmentshouldbepromotingtheUKgamesindustryasanattractiveplacetodobusiness.

Overseasgovernmentsandagenciesaremarketingtheirterritoriesaggressivelybothtopotentialinvestorsinthevideogamesindustryandtopotentialworkers.Forexample,overrecentyears:

- SouthKorea,arapidlygrowingvideogamesmarket,hascommitted$144milliontothecreationofanagencydesignedspecificallytopromotetheirvideogamesandothercreativeindustries.59

- Japanhascarriedoutastimuluspackagethatfocusesonthepromotionofvideogamesexports.60

Canadainparticularhasbeenactiveinmarketingitselfasaleaderinthevideogamesindustryandhighprofileexamplesinclude:

- BritishColumbia,aprovincewithathrivingvideogamessector,outliningspecificpolicyobjectivesof“InvestmentattractionandtradepromotionsupportbytrademissionstokeyAsianmarkets,marketingmaterialsandin-markettraderepresentatives.”61

- ArecenttrademissiontoJapanbytheCanadianMinisterforInternationalTradewhichresultedinasignificantinvestmentfromJapanesevideogamesmanufacturerNAMCOBANDAIinVancouver.62

ThishasresultedinarecentstudyshowingthatCanadianvideogamesmanufacturerswere‘satisfied’bytheGovernment’smarketingoftheindustry.63

TheUKshouldbemarketedaggressivelyasanattractiveplaceforinwardinvestmentandtodogamesbusiness.UKTI,CreativeScotland,ScottishEnterpriseandScottishDevelopmentInternationalcanworkwithTIGAtodevelopaconvincingpropositiontoinvestorsinordertoincreaseinvestmentintheUKandScottishgamesindustries.

EFFECT

Asaresultofstrongmarketing,Canadaisnow“knowninternationallyforitsverystrongbaseofcreativeandtechnologicaltalent”64and“hasbeennotablysuccessfulinattractinginvestmentandskilledpersonnelfromjurisdictionsliketheUnitedKingdom.”65

Incontrast,alackofstrongmarketingoftheUK’sexpertiseinthissectorhascostinvestmentinthepast.Forexample,DundeelostouttoGalwayasthelocationfortheEuropeanHQorUSgamesmaker‘BigFishGames’.66

EffectivemarketingoftheUKasagoodplacetodogamesbusinessesshouldservetoattractalargershareofinwardinvestmentandtosupportthegrowthofmoreemploymentandbusinessesinthegamesindustry.


GAMES DEVELOPMENT INDUSTRY 2710. BANK FINANCE

PROPOSAL

GreatercompetitionshouldbepromotedinthebusinessbankingsectorandnewentrantsencouragedtoenterthemarketastheUKbankingsectorremainsheavilyconcentrated.

REASON

Themarketforbusinesscurrentaccountsandforlendingtosmallandmedium-sizedenterprises(SMEs)isheavilyconcentratedintheUK.Thefourlargestprovidersofbusinesscurrentaccountstosmallandmedium-sizedenterprises(SMEs)accountforover80percentofSMEs’mainbankingrelationshipsinGreatBritainandaround90percentinNorthernIreland.TheOfficeofFairTradingnotesthat,“ThesupplyoflendingtoSMEsisalsoconcentratedandthetendencyofSMEstoapproachtheirmainBCAproviderwhenseekinglendingappearstolimitthedegreeofcompetitionforlending.”84

Giventherelativelyhighrisknatureofgamedevelopment,banklendingisunlikelytobecometheprincipalsourceoffinancefortheindustry.BankloansandbankoverdraftsarenotcrucialsourcesoffinanceformostUKgamesdevelopers.In2009,just10percentofgamedevelopershadabankloanandonly33percentoperatedabankoverdrafttofundtheirbusiness.In2014just13percentofdevelopersinaTIGAsurveyaccesseddebtfromafinanicialinstitution(e.g.abusinessbankloan).Nevertheless,greatercompetitioninthemarketforbusinesscurrentaccountsandinthemarketforlendingtoSMEsshouldimprovethebanks’qualityofserviceandhaveapositiveimpactonSMEs’accesstobankfinance.85Additionally,policymakersmustensurethattheBritishBank,whichprovidesexpertiseandGovernmentmoneytothesmallerbusinessfinancemarkets,benefitscreativeindustrieslikethevideogamesindustry.

EFFECT

Greaterchoiceandcompetitioninthebankingsectormightimprovebanklendingtosmallandmedium-sizedbusinesses,includingthoseinthegamesdevelopmentsector.

‘Kinectimals: Now With Bears’, developed by Realtime UK

tiga.org

8. SEED ENTERPRISE INVESTMENT SCHEME

PROPOSAL

IncreasetheamountofmoneythatacompanycanraiseviaSEISinvestmentfrom£150,000to£200,000perannum.

REASON

Creativebusinesses,includinggamesdevelopers,finditrelativelydifficulttoaccessdebt,bondsandequityfinance.67Thisisbecauseofthehighlevelsofuncertaintyaboutconsumerdemand,theintangiblenatureofIPandinsomecasesthevagariesoftheworkforhirebusinessmodelwhichresultsindevelopmentstudiossometimesoperatingformonthsbeforereceivingrevenue.Additionally,gamesdeveloperstypicallyhaverelativelyfewassetsandarecomparativelyyoungwithlittleevidenceofafinancialtrackrecord.Whiledevelopersknowabouttheirbusiness,venturecapitalists’andbusinessangels’knowledgeismoreimperfect.Thisresultsinafinancegapaffectingbusinessesthatlackcollateral.Moreover,privateinvestorsaredisinclinedtoinvestinsmallandmedium-sizedenterpriseslikemanygamesdevelopmentstudiosbecausethelargelyfixedcostsofduediligencearetoohighrelativetotheamountofequitysought.68

TheSeedEnterpriseInvestmentSchemecanhelpSMEsaccesscapitalbecauseitprovidestaxefficientbenefitstoindividualsandencouragesinvestmentinsmallandearlystagestart-upbusinessesintheUK.69Overthelastcoupleofyears,theSEISschemehassuccessfullysupportedthefundingofmanynewstart-upgamesstudiosandentrepreneursacrossarangeofgamesplatforms.ButthedevelopmentandmarketingbudgetsrequiredtomakeinternationallycompetitivegamesareontheriseasgamedevicessuchasmobilephonesandtabletPCsbecomeincreasinglytechnicallyadvanced,rivallinggameconsolequality,andconsumerexpectationsofamobilegameexperiencegethigher.

EFFECT

IncreasingtheSEIScapfrom£150,000to£200,000wouldhelpensurethatnewstudioscancontinuetogainfromtheSEISscheme(andgetaccesstoearlyfundingwhichsimplyisnotreadilyavailableelsewhere),whilstensuringtheprojectstheycreatearegoodenoughtocompeteinachallengingmarketplace.

9. SUPERFAST BROADBAND

PROPOSAL

TheUKshouldencouragethedevelopmentandprovisionofsuperfastbroadbandspeedsthatrivalthebestintheworld.

REASON

ThebusinessoperationsofUKSMEssufferasaresultoftheUK’scurrentbroadbandspeeds.70TheFederationofSmallBusinessarguesthatlackofaccesstosuperfastbroadband“reducesproductivity,stiflesinnovationandrestrictstheabilityofBritishfirmstogrowandcompeteinglobalmarkets”71.Smallbusinessesthemselvesarealsoawareoftheproblemsthatlackofaccesstosuperfastbroadbandbring,with14%ofallSMEsintheUKcitinglackofreliableandfastbroadbandasthemainbarriertogrowth72andoverathirdofScottishSMEsfeelingconstrainedbythebroadbandspeedcurrentlyavailabletothem.73

Someofourcompetitorsofferconsumersandbusinessesmuchfasterbroadbandspeeds.MostrecentfindingsbyAkamai’sStateoftheInternetshowthattheUKis14thintheworldintermsofaveragebroadbandspeedswith9.1mbps.74TheUKisalsofarbehinddirectcompetitorsinthevideogamesmarketlikeSouthKoreaandJapanwhoarenumber1and2respectively.75

ItisnotjustintermsofcurrentspeedsthattheUKisbehindbutalsointermsoffuturetrajectory.Thecoalitiongovernmentisstillcommittedtoachieving2mpbsuniversalaccessand95%24mbpsaccessby2017.76Thisisinstarkcontrasttoothercountriessuchas:

- Finland77andDenmark78whoarecommittedtoachieving100mbpsby2015and2020,and;

- SouthKorea,committedtoachieving1,000mbps(1gbps)for90%ofthepopulationby2017.79

MoreMbpsavailableshouldmakepossibletheprovisionofmoreservicesovertheinternetandcouldhelptosustainnewanddifferentbusinessmodels.Theprovisionofuniversalbroadbandatspeedsof2mbps

wouldineffectprovideasafetynet:forexample,thislevelofbroadbandallowsaccesstostandarddefinitionvideoontheBBCiPlayer.Whilethatmightworkforsinglepersonhouseholds,ifthereistobeatruedigitalopportunityforeveryonethenfasterconnectionswillbeneeded.ThisisbecausetheconnectedTVinthelivingroomwillbesharingthatbandwidthwithgamesconsoles,laptopsandsmartphones.Ifeveryoneinahouseholdistobenefitthensomethingmoreambitiousthanasafetynetwillbeneeded.

Broadbanddoesnotsimplyhelpconsumers.ItalsosupportsSMEs.60percentofallnewbusinessesarestartedfromhome.80Verysmallbusinessessometimespurchaseresidentialpackagesbecauseitischeaper.Givingthemmorebandwidthallowsforsmallbusinessestotakeadvantageofamuchwiderrangeofservicesonline.

EFFECT

TheprovisionofandaccesstohighspeedbroadbandcouldhelpgrowtheUKeconomyastheInternationalTelecomsUnion(ITU)suggestthata10%increaseinfastbroadbandpenetrationcanresultinasmuchasa1.38%increaseinacountry’sGDP.81

Indeed,quicktake-upofsuperfastbroadbandislikelytowieldevengreatergrowthinthevideogamessector.ItisarguedthatakeyfactorintherapidincreaseoftheSouthKoreanvideogamesmarketfrom$1.3billionto$4billion82inthe2000swastheriseinonlinegaming,madepossiblebyGovernment’srapiduptakeofsuperfastbroadbandcapacity.83

Theprovisionofandaccesstohighspeedbroadbandshouldfacilitateinnovation,accesstonewmarketsandimprovedconsumerchoice.Itopensupnewcontentforconsumers,butalsounderpinsthegrowthofbusinessessmallandlargebygivingthemaccesstoeveryconsumeronline.Betterbroadbandshouldresultinthedevelopmentofnewcontent.

11. EU FUNDING FOR VIDEO GAMES SHOULD BE REFORMED

PROPOSAL

Gameplay(whichinvolvesart,audio,design,musicandtechnicalcreativity),notanarrativecomponentoragamegenreshoulddetermineifagameiseligibleforEUfundingviatheCreativeEuropeprogramme.Additionally,‘serious’gamesshouldnotreceivepreferentialtreatmentundertheEU’sHorizon2020programme.Instead,‘serious’and‘entertainment’gamesshouldbetreatedequallyunderthescheme.

REASON

GamesdevelopersintheEUcanaccesstwomainfundingstreams:theCreativeEuropeprogrammeandtheHorizon2020programme.

CREATIVE EUROPE

TheCreativeEuropestreammakesmoneyavailabletogamesbusinessesviatheMEDIAsub-programme.TheMEDIAsub-programmehasanannualbudgetof2.5millioneuro.Theprogrammeprovidestwosupportmeasures:contributionsfrom10,000eurosto50,000eurosareavailableforconceptdevelopmentandcontributionsfrom10,000eurosto150,000eurosareavailablefordevelopingaplayableprototype(detailscorrectattimeofwritingbutchangesareimminent).86About20projectswillbefundedperannum.Developershavetoprovidematchfundingtoaccessthesesupportmeasures.Unfortunately,unlessdevelopershavepublishedacommercialgamewithanarrativecomponentduringlasttwoyearsthentheycannotapplyforfundingundertheMEDIAprogramme.Furthermorecertaingenresareconsidered‘noncultural’eveniftheyincludeanarrativecomponent.However,itistoorestrictivetoassumethatagenreornarrativeelementalonedetermineswhethergamesare‘cultural’.Gameplayisalsoanimportantfeatureofgaming.

Additionally,theregulationscoveringtheCreativeEuropeprogrammeneedtobeimproved.Atpresent,theschemewillonly

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providefundingforbidswithaproventrackrecord.ItiscompletelyunderstandablethattheEUwantstodirectitsfundingtoprojectsthathavethebesttrackrecordandthusthebestchancestobecomecommercialsuccesses.However,thecurrentguidelinesaretoonarrowtoreachthisgoal.SomeofthemostsuccessfulgamedevelopmentstudiosinEuropearesecondoreventhirdroundstart-ups,composedinmanyinstancesbyhighlyexperiencedindividuals.Thesearethecompaniesthathavethehighestchangestosucceed.TIGAcontendsthatifthekeyteammembersinabidhaveexperienceinproducinggames,thisshouldbeconsideredaseligibleevidenceofaproventrackrecord.

Moreover,thefundingratesshouldbeupdated.Forexample,150000€isinsufficientfundingforacuttingedgeAAAconsolegameprototype.Gameprototypes,especiallyontheconsolegameside,aregettingmoreandmoreexpensive.Projectbudgetsfinancedbypublisherscommonlyreach20million,andcanbeashighas40millioneuros,andprototypescostatleast1percentofthefinalbudgettomake.Consequently,themaximumEUcontributiontoprototypefundingshouldbeincreasedtoatleast200000€.

HORIZON 2020

TheHorizon2020programmeisnotagamesspecificfundingprogramme,butgamescompaniesmayproposebidsrequesting100,000–1millioneurosunderthescheme.Themajordrawbackwiththisprogrammeistherequirementthatfundingforvideogamesisrestrictedmainlyto‘serious’games.87

EFFECT

Iftherequirementforagametobe’serious’wasdroppedandtheneedtoincorporateanarrativenaturewasreplacedwiththeobjectiveofprovidingambitiousandinnovativegameplay,thenEuropeanfundingwouldfocusitseffortsmoredirectlyoncontentinnovation.ThiscouldhelptopushtheEuropeangamesindustryaheadofitsglobalcompetitors.TheEUcouldthenprovidemoreeffectivesupporttotheEuropeangamesdevelopmentsector.


GAMES DEVELOPMENT INDUSTRY 29TIGAfurthersuggeststhatPEGIexaminesthepotentialfordeliveringitsratingsystemmoreefficiently.Atpresent,PEGIcarriesouttheratingprocessrepeatedlyforgamesonmultipleplatforms.TIGAsuggeststhatinsteaddeveloperscouldbeofferedtheopportunitytosignalegallybindingdocumentstatingthegamecontentisidentical.ThiswouldallowPEGItoprovideasinglemulti-platformagerating,whichinturnwouldsavePEGI’stimeandindiedevelopers’money.TIGAwouldbehappytoworkwithoneofitsmembers,Stevens&BoltonLLPtodraftthislegallybindingagreementandmakeitavailableforfreetoindiedevelopers.

ThemajorityofUKandEuropeangamesdevelopersoperatesmallstudioswherefinancialresourcesarelimitedandcostsneedtobekepttoaminimum.TIGA’spolicyistostrengthenthegamedevelopmentanddigitalpublishingsector,inparticularbysavinggamesbusinessesmoneyandimprovingtheiraccesstofinance(henceTIGA’slongcampaignforGamesTaxRelief).PEGI’spricingpolicyimposesdamagingandunreasonablyhighfees,whichhaveadisproportionateimpactonsmallgamesbusinesses.Itcannotberighttochargeadeveloperafeeforcontentratingeverytimeitlaunchesagameonadifferentconsoleplatformevenifthecontentisexactlythesame.

IftheUKandEuropeandevelopmentsectoristothrivethenweneedapricingpolicyfromPEGIwhichishelpful,notahindrance;isproportionate,notpunitive;andisequitable,notexorbitant.

Tosummarise,itisdisproportionateandunreasonabletochargeadeveloperafeeforcontentratingeverytimeitlaunchesagameonadifferentconsoleplatform,evenifthecontentiscompletelythesame.TIGAproposesthatthefeeforageratingthesamegamecontentfordifferentplatformsshouldbescrappedentirely.PEGI’scurrentapproachrisksharmingstart-upsandsmallindependentdevelopers.

EFFECT

IfPEGIscrappeditsiniquitousandpunitivepricingpolicy,gamedevelopersanddigitalpublisherswouldbeabletosavepreciousresources.Inparticular,smallindiedevelopersandstart-upswouldfinditefficientandeffectivetopursueamulti-platformstrategy.

13. FREEMIUM GAMES AND IN-APP PURCHASES

PROPOSAL

Thereshouldbeacommonglobalregulatoryapproachtowards‘freetoplay’(F2P)gamesandin-apppurchases(IAPs)basedontheOfficeofFairTrading’sPrinciplesforOnlineandApp-basedGames.

REASON

F2Pgamescanbeofgreatvaluetoconsumersanddevelopersalike.ThisisbecausetheF2Pbusinessmodelallowsconsumerstoplayextremelyhighqualitygamesentirelyfreebeforeactuallyspendinganymoney.AreportpublishedbyTIGAin2013showedthattypically95percentofconsumersplayingaF2Pgamedonotspendanymoneyatall.

However,itisimportantthatthevideogamesindustryadherestohighstandards.TheOFThasdevelopedasetofPrinciplesforOnlineandApp-basedGameswithwhichallgamesbusinessessellinggamestoUKconsumerswillhavetocomplybyApril1st2014.TheOFT’seightprincipleshavebeendevelopedafterextensiveconsultationwithTIGA,gamesbusinessesandotherinterestedparties.Theyensurethatconsumers,particularlychildren,areprotectedfromcommerciallydubiouspractices.88

UKpolicymakersshouldaimtoensureacommonglobalregulatoryapproachtowardsF2PgamesandIAPs.ThisisnecessaryinordertoprotectbothUKconsumersandexport-focusedUKgamesbusinessesfromunscrupulouspracticesbycompetitorsfromabroad.

EFFECT

AcommonglobalregulatoryapproachbasedontheOFT’seightprincipleswillprovideaneffectivesystemofconsumerprotection.ItwillalsoenableUKgamesbusinessestocompeteonalevelplayingfield.

The majority of UK and European games developers operate small studios where financial resources are limited and costs need to be kept to a minimum. TIGA’s policy is to strengthen the game development and digital publishing sector in particular by saving games businesses money and improving their access to finance (hence TIGA’s long campaign for Games Tax Relief)

12. PEGI SHOULD END ITS PUNITIVE PRICING POLICY

PROPOSAL

UKpolicymakersshouldputpressureonPEGI,theEuropeangamecontentratingsystem,toenditspunitivepricingpolicy.Atpresent,PEGI’spolicyistochargeadeveloperafeeforcontentratingeverytimeitlaunchesagameonadifferentconsoleplatform,evenifthecontentisexactlythesame.Thisisexcessive,unreasonableandshouldstop.

REASON

Asof1stofJuly2014,PEGIwilleffectivelyhavethreepricingtiers:

• Thelowest,foronlineordownloadablegamesonlywhichmustbeunder250mb,charges€260forcertification,andthesameagainforeachadditionalplatformevenifthecontentisthesame.

• Themiddletierisforgameslargerthan250mb,withaproductionbudgetoflessthan€200,000andcharges€1,155for

certificationand€1,050foreachadditionalplatform,againevenifthecontentisunchanged.

• Thehighesttierisforgameswithabudgetlargerthan€200,000andcharges€2,100forcertificationand€1,050foreachadditionalplatform,evenifthecontentisexactlythesame.

Togiveoneexample,fromthebeginningofJuly2014,theratingsfeefora‘LowerDevelopmentCostProduct’(wherethegame’sbudgetislessthat€200,000euro)is€1,155inthefirstinstanceand€1,050foreachadditionalplatformthereafter.SoifanindiedeveloperwastolaunchthesamegamewithexactlythesamecontentonPlayStation3,Xbox360andPSVita,theywouldbelookingataratingsbillof€3,255.PEGI’spricingpolicyimposesdisproportionatecostsonindiedeveloperspursuingamulti-platformstrategy.

ThePEGIcontentratingssystemshouldbefocusedonprovidinginformationtoconsumersandprotectingvulnerableconsumersfromaccessinginappropriatecontent.Itshouldnotbeburdeningsmallgamesbusinesseswithexcessivecosts.Manysmalldevelopmentbusinessesoperateonaknife-edgeandstruggletoconserveeverypoundoreurotheycaninordertostayinbusiness.

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‘DiRT Showdown’, developed by Realtime UK

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14. ACCELERATING GROWTH IN THE GAMES INDUSTRY

PROPOSAL

TailortheGrowthAcceleratorservicetotheneedsofgamesdevelopersanddigitalpublishersandensurethatmorestudiosbenefitfromtheserviceoverthelifeofthenextParliament.

REASON

TheprincipalchallengefacingtheUKgamesindustryisthattoomanystudiosfail:216newgamescompaniesenteredtheUKgamesindustrybuttherewerealso197closures(2008–2011).In2013,whiletherewere224start-ups,therewerealso107closures.ThefiveyearmortalityrateforUKgamecompaniesis29percent.89Thehighmortalityrateisprimarilyaconsequenceofinadequatecommercialskills(pricing/payment,distributionandmarketing,andcustomerrelationshipmanagement)andlimitedaccesstofinance.

Inthelastfiveyears,theglobalindustryhasexperiencedtremendouschangewiththeadventofnewtechnologies(e.g.smartphonesandtablets),commercialmodels(e.g.micro-transactionsandfreemium),distributionchannels(i.e.retailsvsnetwork)andbusinesspractices(e.g.movingfromgamesasaproducttogamesasaservice).Thesechangeshavecreatedsignificantchallengesforsomemanagersandleadersinthegamesindustryintentonbuildingviablegamingstudios.

TailoringtheGrowthAcceleratorservicetomeettheneedsofgamesdevelopersanddigitalpublisherscouldreducethemortalityrateandenablemorestudiostosuccessfullygrow.TheGrowthAcceleratorserviceisapartnershipbetweenleadingprivatesectorbusinessgrowthexperts,GrantThornton,Pera,OxfordInnovationandWinningPitchandbackedbythecurrentGovernment.GrowthAcceleratorfocusesonbusinessesthatareaimingforhighgrowth(definedasincreasingturnoverby20percentperannum).Participantsintheschemecanaccessupto£2,000matchfundingforseniormanagerstohonetheirleadershipandmanagementskills,networkwithlike-mindedbusinessesandbenefitfromthesupportofaGrowthManagerandGrowthCoach.90TheGrowthAcceleratorServicecouldbetailoredtosupportgamesdevelopmentanddigitalpublishersby

providingparticipantswithaccesstoadditionaladvice.Mentorsfromthegamesindustrywithexperienceofbusinessandcommercialexpertisecouldadviseparticipantsaboutthemarketopportunities(e.g.thesuitabilityoftheprojecttothetargetplatform,audiencedemographics),competitivechallenges(e.g.theproject’sUSP),commercialmodels(e.g.pricing,integrationintogameplay),routestomarket(e.g.funding,publishinganddistribution)andoverallviabilityoftheirgameproject.

EFFECT

Businessesthatseekexternaladviceandinformationare14percentmoreambitiousand50percentmoresuccessfulthanthosethatdonot.91AGrowthAcceleratorServicethatistailoredtotheneedsofthegamesindustrywillhelptoreducethehighstudiomortalityandgivemorestudiostheopportunitytogrow.

15. ESTABLISH DEDICATED GAMES DEVELOPMENT INCUBATORS IN THE REGIONS AND NATIONS

PROPOSAL

Regional/NationalGamesDevelopmentIncubatorsshouldbeestablishedatauniversityoraconsortiaofuniversitiesineachoftheEnglishregionsandineachofthenationswithintheUKtoenablemoresuccessfulstart-ups(theincubatorswouldsupportbothstudentandnon-studententerprises).

REASON

TheUKvideogamesdevelopmentsectorisincreasinglymovingtowardsaself-publishingmodelwhichfavourssmaller,moreagileteamsratherthanlargerandlessflexiblestudioswhichcanoftenbetiedtorestrictivepublishingdealsanddeadlines.Thisisforavarietyofreasons(theadventofeasilyaccessibleonlineretailinsoftware,platformssuchasApple’siOSandGoogle’sAndroid,lowerrisketc.).WhiletheAAAmodelofgamedevelopmentwillremainclearlytheindustryecosystemisrapidlyevolving.

Thenewwaveofsmallstart-upstudiosneedssupportiftheyaretomaximise

Promote games clusters to


GAMES DEVELOPMENT INDUSTRY 33theirpotential.Twelveuniversities(i.e.oneuniversityineachofthenineEnglishregionsandoneineachofthenationsintheUK)couldbedesignatedtoprovideaRegional/NationalGamesDevelopmentIncubatorforstart-ups,enablingthemtobenefitfromaccumulatedexpertiseinbothresearchandenterpriseandaccesstoskilledgraduates.TheUKGovernment,theScottishGovernment,theWelshGovernmentandtheNorthernIrelandExecutivecouldselectanddesignatetherelevantandappropriateregionalandnationaluniversitiesviaacompetitiveprocess.UniversitieswouldonlybedesignatedasRegional/NationalGameDevelopmentIncubatorsiftheymetkeycriteriarelatingtoinfrastructure,industrylinksandiftherewassufficientregional/nationaldemand.

Anexampleofamoreconcentratedeffortforstart-upsabroadisthatoftheDutchGameGarden,92aninitiativeintheNetherlandswhichisfundedbyCityofUtrecht,theProvinceofUtrechtandtheEuropeanRegionalDevelopmentFund(ERDF)oftheEuropeanCommission.Setupin2008,thisiscurrentlythephysicallocationformorethan45start-upgamedevelopmentstudios,showingtheconsiderable-andcontinued-levelofinvestmentprovidedtothisinitiative.TheDutchGameGarden,althoughnotlocatedwithinaUniversity,hasstronglinkswithavarietyofhighereducationinstitutionsintheNetherlands(includingthenearbyUtrechtSchoolofArts).AnotherexampleistheAppCampus,amobileapplicationacceleratorprogrammanagedbyAaltoUniversityinEspoo,Finland.TheAppCampusisan18millioneurojointinvestmentbetweenMicrosoftandNokiatofostermobileapplicationdevelopmentonWindowsPhoneandanyotherNokiaplatform.TheAppCampusprovidesfunding,coachingandgo-to-marketsupport.93TheUKvideogamesdevelopmentsectoroperatesinadynamicglobalenvironmentwherenew,fast-movingbusinessmodelsdemandbothflexibilitybutalsothepassingonofexperienceandexpertisefromexistingbusinessesandestablishmentstofledglingindiegamesstudios.

Universitiesarewellplacedtoprovideincubatorstostart-upteamsofstudents:theytypicallyhavethephysicalspace,somedevelopmentequipmentandtheITsupportneededtosupportstart-ups.The12Regional/NationalGamesDevelopmentIncubatorsshouldbeopentobothstudentsandtonon-studentstart-ups.TheIncubatorsshouldencourageandsupporttheirstart-upstoapproachexternalfundersinordertomaketheirideasandbusinessfinanciallysustainable.UniversitiescouldcarryoutacompetitioninordertoensurethatonlytheteamswiththegreatestpotentialcanbenefitfromtheDedicatedIncubators.

The12Regional/NationalGamesDevelopmentIncubatorscouldliaisewithLocalEnterprisePartnerships,theTechnologyStrategyBoard,theEU–andwhereappropriate,theScottishandWelshGovernmentsandtheNIExecutive-toaccessfundingtocommercialisestart-upprojects.Additionally,TIGA’sprototypefund,theCreativeContentFundandtheNationalLottery(seesections1,2and3above)couldprovidefurthersourceoffunding.

EFFECT

The12Regional/NationalGamesDevelopmentIncubatorsshouldproducenewandmoresustainablecompanies.Additionally,thereputationofUKhighereducationwouldbeenhanced.Theparticipatinguniversitieswoulddemonstratestrongsupportwiththegamesindustryandwiththewidereconomy.Thiscouldservetostrengthentheappealoftheuniversitiesinvolvedtooverseasstudents.ThereputationoftheUKasacentreforgamedevelopmentwouldbegivenanimportantboost.

16. PROMOTE REGIONAL GAMES CLUSTERS

PROPOSAL

TheUKGovernmentshouldpromotehightechnologyvideogamesclustersaroundtheUK.

REASON

Londonisaneconomicsuccessstory.Yetrelativelyfewdevelopedcountriesarequitesodependentontheircapital.London’spredominancewithintheUKisnotabatingandisprobablygrowing.94PolicymakersshouldaimtomaximiseeconomicandemploymentopportunitiesthroughouttheUK.PromotingthedevelopmentofhightechnologyclusterscouldbepartofaprocessofensuringthateconomicgrowthbenefitsallpartsoftheUK.Clustersofgeographicallyconcentratedfirmsfromthesamesectororsimilarsectorsthatcollaborateandcompetewithoneanotheraregoodfortheeconomy.Thisisbecausetheytypicallyencourageknowledgetransfer,promotebusinessefficienciesincludinghigherproductivityandimprovedskillsdevelopment,encourageinnovationandnewfirmformationandenhanceprofitability.Clusterscanalsoattractmultinationalinvestment.95

ThereispotentialtoencouragethedevelopmentofhightechnologyclustersinthedifferentregionsandnationswithintheUK.Universitiescanprovideaccesstohighlyskilledgraduatesandsharecuttingedgeresearch.Localbusinessangelnetworkscanbenurtured.96

CreativeclustersofgamesstudioshavespontaneouslyemergedacrosstheUnitedKingdomincludingBirmingham,Brighton,Cambridge,Dundee,Edinburgh,Glasgow,Guildford,LeamingtonSpa,Leeds,Liverpool,London,Manchester,Newcastle,Oxford,andSheffield.

Weshouldstrengthentheseclustersandsupportstart-ups.Theprovisionof12Regional/NationalGamesDevelopmentIncubatorsatdesignateduniversities(seesection17),strengtheninglocalindustryanduniversitylinks,buildingconnectionswithfinanceprovidersandthroughtheprovisionofbusinessmentoring.Encouragingnetworksandpartnerships,astronginnovationbaseandastrongskillsbasecanalsosupportthegrowthofclusters.97

EFFECT

Adoptingthisapproachcouldhelptoincreasemorestart-upsandhelptobuildmoresustainablehightechnologyandcreativebusinesses,includinggamesbusinesses.Acriticalmassofgamesbusinessesinregionalclustersshouldinturnencourageinwardinvestment.Thisisbecausebusinessesarelikelytobeattractedtoareasthathaveaninfrastructurethatsupportstheirneeds:accesstotalentedstaff;affordablepremises;educationproviders;andgoodtransportlinks.

Policy makers should aim to maximise economic and employment opportunities throughout the UK. Promoting the development of high technology clusters could be part of a process of ensuring that economic growth benefits all parts of the UK.

boost regional growth

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‘Squeeballs’, developed by Realtime UK

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17. SME TRAINING TAX RELIEF

PROPOSAL

ApilotSMETrainingTaxRelief(TTR)shouldbeintroduced.ThistaxmeasurewouldoperateinasimilarwaytotheexistingR&Dtaxcredits.SMEswouldbeabletooffsetexpenditureontraining,ContinuousProfessionalDevelopment(CPD)forstaffandeducationoutreachactivitiesagainstcorporationtax.98

REASON

OftheUKadultpopulation,21%possessA-levelsastheirhighestqualification,21%haveGCSEsastheirhighestqualificationand19%possessunrecognisedornoqualificationsatall.99Thisisrelativelylow.100AlargeproportionoftheUKworkforcealsolacksgoodbasicskills:onereportevensuggeststhat78.2%oftheUKpopulationhavepoornumeracyskillsand43.4%havepoorliteracyskills.101TheUKshouldstriveforoneofthebestskilledandqualifiedworkforcesintheworld.Enhancedskillscanimproveproductivitywhichisgoodforbusiness.102Equally,higherskillscanraisetheemployabilityofindividuals.103

AlthoughmanyUKemployersdoprovidetraining,thedurationofthistrainingismuchshorterthantheEUaverage.104Employersfacethehurdlesofcostandlosttimewhentrainingtheirstaff.ThisisparticularlytrueforSMEs.105Gamesbusinessesinvestintraining.85percentofUKgamesdevelopersprovidesomeformoftrainingtotheiremployees.However,only8percentprovidetrainingleadingtoaqualification.106

TheSMETrainingTaxReliefcouldbepilotedinthevideogamessectorandpotentiallyothercreativeindustries.

EFFECT

ThismeasurewouldservetoencouragemoreworkforcedevelopmentandtrainingbygamesbusinessesinparticularandotherSMEsingeneral.Otherthingsbeingequal,staffproductivityandemployabilitywouldbeimproved.Itwouldenabledevelopersandotherbusinessestofinancemanagementtraining,strategicskilldevelopmentandpromoteinvestmentincontinuousprofessionaldevelopment.Itcouldadditionallyleadtoanincreaseintrainingresultinginqualifications.

Itwouldalsoleadtostrongerbusiness-educationallinks.Inthecaseofthegamesindustry,moredeveloperswouldhavetheincentiveandresourcestoprovideguestlecturerstouniversities,contributetocoursedevelopment,participateinschool,collegeanduniversitycareerdaysandmakeworkplacementsavailable.Knowledgeexchangebetweenindustryanduniversitieswouldbestrengthened.

18. EXPAND THE SHORTAGE OCCUPATION LIST

PROPOSAL

ThefollowingrolesshouldbeaddedtotheShortageOccupationList:

• Analyst:GameAnalyst;DataAnalysts;andBusinessPerformanceManagers(i.e.analystsbutwithcommercialfocus);

• Artists:SeniorGameArtists;UserInterfaceArtist;andTechnicalArtist;

• BrandManager;

• Designers:UXDesigner;SeniorGameDesigner;DigitalDesignandMarketingManager;

• LocalisationManager;

• SocialandDigitalMediaSpecialists:CommunityManagerandVideoJournalist,

• Producers:TechnicalProducer,SeniorProducer,AssociateProducer,LineProducer;107

• Programmers:OnlineProgrammer;EngineProgrammer;UserInterfaceProgrammer;GameplayProgrammer;ArtificialIntelligenceProgrammer;AudioProgrammer;UnityProgrammer;ToolsProgrammer;OnlineServicesProgrammer;MobileGameDeveloperProgrammersincludingC++/Javaskills;PhysicsProgrammer,AnimationProgrammer,GraphicsProgrammer.

REASON

Since2008theUKhasoperatedafivetieredPointsBasedSystemforMigrationtotheUKfromoutsidetheEEA.Tier2isreservedformigrantsqualifiedtoNQF6+,isthemostcommonlyusedtierfortheemploymentofmigrantsinthegamesector,andislimited

Enhance skills & education,

promote measured migration


GAMES DEVELOPMENT INDUSTRY 37to20,700peoplep.a.Tier2isalignedwiththeShortageOccupationList(SOL).TheSOLisafasttrackrecruitmentprocesswhichenablesdeveloperstolookoutsideoftheUK/EUlabourmarketswithouthavingtoadvertisefirst.IfaroleisnotontheSOLthenemployershavetoadvertisefor28dayswithintheUKfirst,includingontheJobCentrePluswebsite.Pointsareaccumulatedonanumberofsetcriteria.

Highlyrestrictiveimmigrationpolicies,unlessimplementedverycarefullyandintelligently,couldhamperthegrowthofoursmallandmedium-sizedenterprises(SMEs),includingspecialisttechnologybusinesses,andthreatentheircompetitivenessinaglobalmarket.

TheUKvideogamesindustryneedsahighlyeducatedandtrainableworkforceinordertocompetesuccessfully.Theindustryreliesonhighlycreative,technicalpeoplewithskillsandqualificationsinareassuchasdesign,programming,artificialintelligence,animation,mathematicsandphysics.UKgamesbusinessesincreasinglyrecruitgraduatesinarangeofdisciplines,althoughemployerstypicallyplacemostemphasisonportfolioworkratherthanqualifications.TIGA’sresearchshowsthatsomestudioshave80percentoftheirworkforcequalifiedtodegreelevel.GamesbusinessescannotalwaysrecruitthestaffthattheyneedfromwithintheUKbecausevideogamesdevelopmentoftenrequirespeoplewithhighlyspecialisedskills.Iftheyareunabletorecruitthetalentrequiredtoproduceagameorpartofagame,theworkwillusuallybetransferredelsewhereifpartofaglobalentityorthecontractlost,ifanindependentbusiness.

InspecialisedtechnologicalfieldsitisnotforeignnationalscompetingagainstUKcitizensforjobsordrivingdownsalaries;itisUKenterprisescompetingagainstbusinessesfromaroundtheworldforthebestandbrightesttalent.Itisalreadyeasierforsomeofourcompetitors(forexample,Canada)torecruitfromoutsidetheirbordersthanitisforUKbusinesses.

InthecaseofsomespecialistroleswearedependentonskilledmigrantstohelphightechnologySMEstogrowandtoactuallyemploymoreBritishpeople.Migrantscanalsohelptoimprovetheskillsofindigenousworkers.Forexample,aUKvideogamesstudiomightseektorecruitsomeonewithonline/multi-playerprogrammingskillsfromoutsideoftheEUbecausesuchskillsareinshortsupplyinthedomesticlabourmarket.Withthiskeyindividual,thestudiocouldthenbuildateamaroundhim/her.His/herrolewouldbetoplantheonlinecomponentandexecutethisplanviahis/herteam,investingtimeinthequalityoftheirworkandtransferringhis/hertechnical

knowledgetothemtoenhancetheirskills.He/shemayfurtherguestlectureatuniversitiesandsetprojectsforstudents,therebyincreasinglecturerknowledge.Inshort,migrationcanhaveamultiplyingeffectonemploymentandknowledgetransfer.108Additionally,theemploymentofskilledmigrantworkerstypicallyresultsinknowledgesharingwithexistingteams.Thisentailsanenhancementintheskillsandknowledgeoftheindigenousworkforce.

Hightechnologybusinesses,includinggamesdevelopmentstudios,arenottypicallyseekingtohirefromoverseastosavemoney.Instead,theylookoutsidetheEUinordertofindrareandspecialiststaffwhoarecapableofdoingthejobthatneedstobedoneandwhowillideallyincreasetheoverallexpertiseofthebusinessoverthelonger-termbyknowledge-sharing.

FewpeopledoubtthattheUKneedssomeimmigrationcontrols.However,iftheUKistoprotectandenhanceitshightechnologysectorsthenweneedsmartpolicythatrespondstothecomplexrealitiesofmodernbusiness.

EFFECT

AddingtheserolestotheShortageOccupationListwillenablemorestudiostorecruitthehighlyskilledpersonnelthattheyneedinordertooperateeffectivelyandefficiently.Itwillenhancetheabilityofstudiostogrowtheirteams,turnoverandexports.

19. NON-EU STUDENTS

PROPOSAL

ThePost-StudyWorkVisashouldbereinstated,initiallyforSTEMandotherpriorityareastudents,toenableUKbusinessestohirethebestavailabletalenttrainedatUKhighereducationinstitutions.ThePost-StudyWorkVisashouldallownon-EUstudentsstudyingatUKuniversitiestoworkataUKbusinessaftergraduationforamaximumoftwoyears,andthenapplyforamorepermanentworkpermit.

REASON

Itisbecomingincreasinglyexpensive,slowanddifficulttoemploytopnon-UKtechtalent,oncetheyhavefinishedstudyingatUKuniversities.In2012,theGovernmentabolishedthePost-StudyWorkVisathat

allowedanygraduatefromaUKinstitutiontostayintheUKforamaximumoftwoyearswithoutaworkpermit.ThePost-StudyWorkVisawasdescribedas“abridgetohighlyskilledorskilledwork”.109Withtheexceptionofamaximumof1,000visasforpromisingentrepreneurs,theTier1Post-StudyWorkVisawasconvertedintoaformofTier2Visarequiringajobofferfromanemployerwillingtosponsorthecandidateandasalaryoverasetlevel.110Thecurrentminimumsalarylevelissetat£20,300,althoughcandidateswithPhDsareexemptedfromthisrequirement.Priorto2012,ifanon-EUstudentwhohadgraduatedfromaUKuniversitywantedtostayintheUK,businessescouldhirethemfortwoyears,andthenapplyforaworkpermit.Ofthetotal273,581workvisasgrantedintheyearending2011,over50,000werePost-StudyWorkVisasgrantedtonon-EUgraduates.111Thishelpedagreatdealasitmeantbusinessescouldhiretalentedgraduatesstraightoutofuniversitywithminimumbureaucracy.ByabolishingthePost-StudyWorkVisa,theGovernmenteffectivelymadetheUKlessattractiveforinternationaltoptalent.ManycompetentandhighlyqualifiedstudentswhowanttoworkintheUKhavenochoicebuttoleaveiftheycannotfindajobbeforetheirgraduation.UKuniversitiesareeffectivelyeducatingandtrainingoverseastalent,andthenexportingthemtoothercountriesthatcompetewithUKbusinessesinattractingtoptalent.Inshort,UKuniversitiesareessentiallystrengtheningthecompetitionforUKbusinesses.112

TheabolitionofthePost-StudyWorkVisahasalsohinderedthepotentialofUKhighereducation.AccordingtoUNESCO,theUKisthesecondmostpopularmarketforoverseasstudentsaftertheUSA.113Highereducationisoureighthbiggestexportindustry,valuedat£8bn.114YetthisexportsuccessstoryisbeingunderminedandthreatenedbythecurrentclampdownonoverseasstudentsstudyingintheUK.ItispotentiallysignificantthatthepopularityoftheUKamonggraduateschoolapplicantsdecreasedbyalmost9percentbetween2008/9and2012/13.115

Meanwhile,countriessuchasCanada,oneofthemostimportantcompetitorstotheUKgamingindustry,welcomegraduates,givingthemworkpermits,andencouragingpermanentresidence.UnderthePost-GraduationWorkPermitprogramme,aninternationalgraduatefromaCanadianinstitutioncanworkinCanadaforamaximumofthelengthofthestudyprogramme.116ThisworkexperiencethenhelpsthemqualifyforapermanentresidencythroughtheCanadianExperienceClass,underwhichamaximumof12,000applicantsperyearcanbecomepermanentresidents.ThereisafurtherschemetoencouragecandidateswithPhDstostay

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incountry.From1June2014,eligibleinternationalgraduateswillbeauthorisedtoworkwhilewaitingforadecisiononthePost-GraduationWorkPermit,makingiteasierforgraduatestotransferseamlesslytoworkinglifeandforCanadianbusinessestohirethebesttalent.

EFFECT

ReinstatingthePost-StudyWorkVisawillenhancetheexportpotentialofUKhighereducationbecauseuniversitieswillbecomemorecompetitiveinthemarketforoverseasstudents.UKbusinesseswillbeabletohirehighlyskillednon-EUstudentsmoreeasily,therebyeasingskillshortagesandstrengtheningtheirabilitytogrowandtocompete.

20. EXPENDITURE ON HIGHER EDUCATION

PROPOSAL

PolicymakersshouldexaminethecaseforincreasingexpenditureonhighereducationtoensurethatUKtertiaryeducationremainsworldleading.

REASON

UKhighereducationisasuccessstoryandasourceofcompetitiveadvantage.Accordingtothe2013ShanghaiUniversityleaguetableofuniversities,theUKhastwouniversitiesinthetop20,andnineinthetop100,secondonlytotheUSA,with17and52,respectively.117ThereisonlyoneotheruniversityinEuropeinthetop20.TheUKhasjustonepercentoftheworld’spopulationyetscientificpapersproducedintheUKwerecitedatleast106,306timesin2012,onlybehindtheUnitedStateswith341,608citations.118AccordingtotheRoyalSociety,Britainachieved8.1percentoftheworld’sscientificcitationsbetween2004and2008,whileourhumanitiespublishedsecondmostarticlesperyearintheworld.119

TheUKisalsosecondonlytotheUSAinthemarketforoverseasstudents,althoughthenumberoffirst-year,non-EUstudentsatUKuniversitiesdecreasedforthefirsttimein2011-2012.ThenetannualcontributiontotheUK’snationalincomemadeby

internationalstudentsinhighereducationisestimatedbytheGovernmenttobe£10billion.Thisisestimatedtoriseto£17billionby2025.120

ManyoftheUK’scompetitorsspendsubstantiallymoreonhighereducation.Canada,SouthKoreaandtheUSAspendbetween2.6percentand2.8percentofGDPontertiaryinstitutions.TheUKspendsjust1.4percentofGrossDomesticProduct(GDP)ontertiaryeducation,121ofwhichapproximatelythreequartersisfromprivatesources.122UnlesstheUKincreasesinvestmentontertiaryeducationandspendsiteffectively,theUK’scompetitiveadvantageinhighereducationcouldbeeroded.

Highereducationfundinghasnotkeptpacewiththeexpansioninstudentnumbersthathastakenplace.FundingperstudenthashalvedintheUKoverthepast20years.123FundingintheUK($15,862)isconsiderablylessthantheUSlevelofinvestment($25,576)andsubstantiallylowerthanCanada($22,475)andSweden($19,562).124

TheUKvideogamesindustrycompetestoacrucialextentonthequalityofitsworkforce.Iftertiaryeducationisnotadequatelyfinancedthenthesupplyandqualityofgraduatescouldbeadverselyaffected.

PolicymakersshouldexaminethecaseforincreasingexpenditureonhighereducationtoensurethatUKtertiaryeducationremainsworldleading.Increasedexpenditureonhighereducationcouldbefundedinanumberofways:bymaintaininginrealtermspublicexpenditureontertiaryeducationatcurrentlevels125andthenincreasingitastheGovernment’sdeficitisbroughtundercontrol;and/orbyeliminatingorraisingthecapontuitionfees;and/orbyincreasingprivatesectorinvestmentinhighereducation.

EFFECT

IncreasingtheproportionofGDPallocatedtotertiaryeducationwillsupporttheUK’sambitiontobealeadingknowledgeeconomy.Moreintelligentpeoplewillbeabletobenefitfromhighereducation,thequalityofresearchwillbestrengthened,therecruitmentandretentionofhighqualityteachingstaffwillbeenhancedandtheUK’sleadingpositioninthemarketforoverseasstudentswillbereinforced.UKgamesbusinesseswillalsobemorelikelytodrawonahealthysupplyofhighqualitygraduatesifinvestmentintertiaryeducationisincreased.

21. REDUCE TUITION FEES IN PRIORITY UNDERGRADUATE SUBJECT AREAS126

PROPOSAL

Policymakersshouldconsiderthecaseforreducingtuitionfeesforstudentsstudyingforpriorityundergraduatedegreecourses,suchasMathematics.ThiscouldbeachievedeitherbyuniversitiesvoluntarilycuttingtuitionfeesforspecificdisciplinesorbyGovernmentactiontoachievethisobjective,eitherbyregulationorbyfinancialintervention.

REASON

Thevideogamesindustryneedshighqualitygraduates(orthevocationalequivalent)inbothSTEM(Science,Technology,EngineeringandMathematics)subjectssuchascomputerscienceandmathematics,andalsoinartandanimation.Thegamesindustryhasexperiencedskillshortagesparticularlyincomputerprogramming.Interestingly,whereasthetotalnumberoffull-timeundergraduateandpostgraduatestudentsincreasedbyover100,000between2008and2013(from1,540,035in2008/9to1,682,145in2012/13),mathematicalsciencesgainedlessthan7,000students(anincreasefrom27,760in2008/9to34,255in2012/13),andthenumberofstudentsstudyingcomputersciencesdecreasedbyalmost500(from71,750in2008/9to71,265in2012/13).127

TheLeitchReviewofSkillssuggestedin2006thattheUKneedstoincreasetheproportionoftheworkforcequalifiedtodegreelevelorthevocationalequivalentfrom29percentin2005to40percentin2020.128By2013,38percentoftheUKworkforce(womenagedbetween21and59,andmenagedbetween21and64)wereconsideredgraduates,accordingtotheOfficeforNationalStatistics.129

YetthenumberofgraduatesinsomeSTEMdisciplinesisindecline.Whilethenumberofstudentsstudyingmathematicalsciencesfull-orpart-timehasincreasedconsiderably,thenumberofpeopletakingComputerSciencecoursesatUniversityhasfallendramaticallyfrom134,035intheacademicyear2002/03to89,505in2012/13.130


GAMES DEVELOPMENT INDUSTRY 39SomeSTEMcoursesarerelativelyexpensiveforuniversitiestoprovideandclearlyneedtobeproperlyresourced.131In2012,ImperialCollegeLondonexplainedtotheHouseofLordsScienceandTechnologyCommitteethatwhileeducatingaHEFCEfundabletaughtstudentinsomeSTEMsubjectsmightcostupto£15,700perannum,educatingahumanitiesstudentatRussellGroupinstitutionsisestimatedtocostapproximately£7,100perannum.MoneyraisedthroughhighertuitionfeesshouldbeusedtoprovideforbursariesandlowerfeesgenerallyforcapablestudentsfromdisadvantagedandminoritybackgroundstostudySTEMsubjects.132Currently,individualsfromthesegroupsarenotwellrepresentedamongststudentsstudyingdegreecoursesingamesandSTEM.133Financialbackgroundshouldnotbeabarriertostudy,hencetheneedforthejudicioususeofbursariesandlowerfees.

EFFECT

ReducingtuitionfeesforprioritydegreecoursessuchasMathematicsandkeepingthemlowerincomparisontootherundergraduatesubjects,wouldprovideastrongfinancialincentivetobrightstudentstostudythisdiscipline.Otherthingsbeingequalthisshouldincreasethesupplyofgoodqualitygraduatesinthisdiscipline,easingskillshortagesinthevideogamesandotherindustries.

Reducing tuition fees for priority degree courses such as Mathematics and keeping them lower in comparison to other undergraduate subjects, would provide a strong financial incentive to bright students to study this discipline.


22. MAINTAIN THE SKILLS INVESTMENT FUND

PROPOSAL

MaintaintheSkillsInvestmentFundtoenableUKgamesbusinessestoenhanceskillsinthegamesindustry.

REASON

TheCreativeSkillsetSkillsInvestmentFund(SIF)channelsindustryandgovernmentinvestmentfortrainingandskillsdevelopmentintoschemestoaddressskillsgapsandshortagesinfilm,animation,high-endTV,gamesandVFX.EverypoundinvestedbyindustryintotheSIFismatchedbyHMTreasuryupto£8meachyearfortwoyears,makingthetotalpotentialinvestmentinskillsthroughtheSIF£32movertwoyears.

FourkeyfundingschemesrelevanttothevideogamesindustryareavailableviatheSkillsInvestmentFund:aTraineeNetwork(toassistgamescompaniestotakeonnewtraineeswithfinancialsupport);aShortCourseProgramme(toencouragecompaniestoprovidecontinuousprofessionaldevelopment);CommissionedTraining;andaChallengeFund.Todate,£1,188,100hasbeenawardedto88differentgamesbusinessesviatheSkillsInvestmentFund.134

EFFECT

MaintainingtheSkillsInvestmentFundwillenablemoregamesbusinesses,particularlysmallerfirms,totakeontraineesandtoinvestintraining.Thisshouldenhancetheproductivityandcompetitivenessofparticipatingfirms.

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‘Total War: Rome II’, developed by Realtime UK


GAMES DEVELOPMENT INDUSTRY 431 Gibson,N.,GibsonR.,andWilson,R,MakingGames

intheUKToday2014(TIGA2014).

2 Gardner,P.,Gibson,R.,andWilson,R.,InvestingintheFuture:aTaxRelieffortheUKVideoGamesDevelopmentSector(TIGA,2009).

3 Seehttp://www.mcvuk.com/press-releases/51488/2009-UK-National-Gamers-Survey

4 Gardner,P.,Gibson,R.,andWilson,R.,InvestingintheFuture:aTaxRelieffortheUKVideoGamesDevelopmentSector(TIGA,2009)p.6.

5 Relentless,theBrightonbaseddeveloper,createdBuzz!TheSchoolQuiz.TheSchoolQuizcreatedaseriesofcurricularvideogamesinconjunctionwiththeDepartmentforEdandSkills(asitwasthencalled).RedRedemptionlaunchedagamein2007called“OperationClimateControl”(withDefraandOxfordUniversity),aimedatGCSEschoolchildrenaged15-16toeducatethemaboutclimatechangeandtostimulatechangesinbehaviour.

6 Gardner,P.,Gibson,R.,andWilson,R.,InvestingintheFuture:aTaxRelieffortheUKVideoGamesDevelopmentSector,p.27.

7 SeeSandford,Richard,Ulicsak,Mary,Facer,Keri,andRudd,Tim,TeachingwithGames(Futurelab,2006).Availableat:http://www.futurelab.org.uk/resources/documents/project_reports/teaching_with_games/TWG_report.pdf

8 Thepotentialmarketforcorporatevideotraininggamesissubstantial.CaspianLearningdevelopedagametotrainVolvo’ssalesworkforce;PIXELearningdevelopedgamesinvolvingdiversitytrainingandcorporatesocialresponsibility;andPlayGencreatedanti-moneylaunderinganddatasecuritytraininggames.

9 Thedeficitisstillhighcomparedwithothercountriesandaverageprecrashlevels.Withborrowingof6.6percentofnationalincomelastfinancialyear,theUKstillcomparespoorlywiththeaverageof4.8percentforalladvancedeconomiesand3percentfortheeurozonein2013,accordingtothemostrecentInternationalMonetaryFundassessment.Seehttp://www.ft.com/cms/s/0/07ebc8b4-cac6-11e3-ba95-00144feabdc0.html#axzz30PAdL1t9

OnJuly25th2014itwasreportedthattheUKeconomyhadfinallyreachedandsurpassedthesizeofitspre-recessionpeaksixyearsago.IthasbeentheUK’slongestslumpformorethan100years.ThecollapseofLehmanBrothersin2008heraldedasavagemomentofreckoningforBritain’seconomy;theshockthatstartedinthefinancialsectorwiped7.2percentoffnationaloutput,wreckingthepublicfinances.OftheG7majoreconomies,onlyItalyhastakenlongerthantheUKtoregainitspre-crisissizeandoutputperheadinBritainisstill4percentbelowitspre-crisislevel.Seehttp://www.ft.com/cms/s/0/27d93aa2-1419-11e4-b46f-00144feabdc0.html?siteedition=uk#axzz3B6pRG8POandhttp://www.ft.com/cms/s/0/bad33d56-13d5-11e4-8485-00144feabdc0.html?siteedition=uk#axzz3B6pRG8PO

10 http://www.ft.com/cms/s/0/5538caf6-0061-11e4-8aaf-00144feab7de.html#axzz36EPbzcGa

11 Thiscomparestoanestimated12.8percentintheUSA,17.6percentinGermany,18.2percentinItaly,19.4percentinFinland,19.8percentinFrance,24percentinCanada,26.7percentinSouthKoreaandaglobalaverageof23.8percentin2012(seehttps://www.cia.gov/library/publications/the-world-factbook/fields/2185.html).Interestingly,accordingtotheOECD,Britainhasforthepasttwodecadesinvestedlessinpublicinfrastructureassetsthanmanyofitsmaincompetitors.In2009-10,theUKinvested3.5percentofgrossdomesticproductinpublicinfrastructureassets.Seehttp://www.ft.com/cms/s/0/ce9e10b0-ca09-11e3-8a31-00144feabdc0.html?siteedition=uk#axzz30PAdL1t9

12 http://www.ft.com/cms/s/0/f9fbfd6c-9ecb-11e3-a48e-00144feab7de.html?siteedition=uk#axzz2udVF7NPO.EdBalls,theShadowChancellor,commentedonJuly1st2014thatbusinessinvestmentisstill£6.1billionayearbelowitspre-crisispeakandisthefourthlowestintheEUasashareofnationalincome,onlyaboveCyprus,GreeceandIreland(http://www.ft.com/cms/s/0/74d7e8d4-006a-11e4-9a62-00144feab7de.html?siteedition=uk#axzz36EPbzcGa)

13 http://www.ft.com/cms/s/0/a2e15f28-f6f9-11e3-8ed6-00144feabdc0.html?siteedition=uk#axzz35Bu0UE9v

14 http://www.ft.com/cms/s/0/cd4f0c40-ab6f-11e3-8cae-00144feab7de.html?siteedition=uk#axzz33bArN4E0.GeorgeOsborne,ChancelloroftheExchequer,acknowledgedinaspeechinFebruary2014thattheUKeconomywas“stilltoounbalanced.”TheUKistheworld’ssecondbiggestservicesexporter,aftertheUSA,butits£79billionannualtradesurplusinservicesisnotlargeenoughtocanceloutits£108billiondeficitingoods(http://www.ft.com/cms/s/0/5ac46826-ff95-11e3-8a35-00144feab7de.html#axzz36EPbzcGa)Seealso:http://www.ft.com/cms/s/0/5ed2e0c6-1edc-11e4-ad93-00144feabdc0.html?siteedition=uk#axzz3B6pRG8PO

15 http://www.ft.com/cms/s/0/852da4fa-0135-11e4-9750-00144feab7de.html?siteedition=uk#axzz36QMsXi00Seealso:http://www.ft.com/cms/s/0/6abcb458-1bde-11e4-adc7-00144feabdc0.html?siteedition=uk#axzz3B6pRG8PO

16 Gibson,N.,Gibson,R.,Wilson,R,MakingGamesintheUKToday2014(TIGA,2014).

17 Gibson,N.,Gibson,R.,Wilson,R,MakingGamesintheUKToday2014(TIGA,2014).

18 IanDavidsonMP,ChairoftheHouseofCommonsScottishAffairsCommittee,said:“TheCommitteestronglybelievesthatthevideogamesinteractivetechnologyindustryispotentiallyaworldleaderfortheUKandtheGovernmentmustdomoretoencouragedevelopmentandgrowthinthesector.”SeeHouseofCommonsScottishAffairsCommittee,VideoGamesIndustryinScotland,SecondReportofSession2010-11,Volume1,February2011,p.10,paragraph30.Indeed,theCommitteerecommendedthat“theGovernmentshouldmakethefutureofthisindustryapriority”.SeeHouseofCommonsScottishAffairsCommittee,VideoGamesIndustryinScotland,SecondReportofSession2010-11,Volume1,February2011,p.10,paragraph30.

19 72percentofrespondentswhohadbenefitedfromtheAbertayPrototypeFundreportedthattheschemehadenabledthemtosurmounttheconstraintontheirbusinessofaccessingworkingcapital.62percentsaidthattheFundhadenabledthemtodeliveremploymentgrowth,53percentstatedthatithadallowedthemtosecurenewcommercialpartnershipsand88percentnotedthatithadhelpedthemtodevelopaneffectivebusinessmodel.25percentofrespondentssaidthattheFundhadenabledthemtoreleasenewIPandafurther60percentsaidthattheIPwasstillindevelopment.78percentsaidthattheywouldnothavesecuredfundingelsewhere(informationfromAbertayUniversity,January21st2014).

20 CreativeEngland’sfundsareprimarilyderivedfromeithertheRegionalGrowthFundorERDF,bothofwhicharemadeavailableongeographicaleligibilitybasedonhistoricsupport(orlackof).ERDFinparticular,isrestrictedtoveryspecificregions,whilstRGFismore“national”andtheaimisforustodeterminetheareasthatwouldmostbenefitfromthefunds.

21 Recipientsofprototypefundingcouldberequiredtoprovidesomeevidenceofhowtheywouldensurethattheirgamegetsfundingbeyondtheprototypephaseandoutintothemarketaspartoftheapplicationprocessforprototypefunding.

22 https://www.appcampus.fi/

23 Interestingly,FrancecurrentlyoperatesaFundfornewIPs,thatprovides50percentoftheproductioncostifthegameisoriginalandinnovative.

24 Publishersfundgameprojectsaccordingtotwomainmodels:(a)workforhire,wherebyapublishercommissionsastudiotodevelopavideogameforafee;(b)royaltyadvances,wherebyastudiopitchesaprojecttoapublisherwithwhomitagreestoshareroyaltiesgeneratedbythegameinexchangeforanadvancethatfundsdevelopmentactivities.Oncethegameisreleasedthepublisherrecoupstheadvancefromthesalesreceiptsofthegameinproportiontotheagreedrevenueshareallocatedtothestudio,afterwhichitsharesroyalties.

25 Gardner,P.,Gibson,R.,andWilson,R.,InvestingintheFuture:aTaxRelieffortheUKVideoGamesIndustry,secondedition(January2011).

26 CreativeIndustriesCouncil:AccesstoFinanceWorkingGroupReport(CreativeIndustriesCouncil,December2012)

27 It’sTimetoPlay.AsurveyontheimpactofataxcreditforculturalvideogamesintheUKdevelopmentsector(NESTA,August2009).

28 TheFundingwouldbewithinEUStateAidFundingrulesandwouldnotneedtobedeclaredtotheCommissionforthefollowingreasons:

-ThefundingwouldencompassseveralGeneralBlockExemptionRegulationssuchas‘AidforNewlyCreatedSmallEnterprises,‘AidforYoungInnovativeEnterprises’and‘ResearchandDevelopmentAid’.Source:CommissionRegulation(EC)No800/2008of6August2008

-Themajorityofthisfundingwouldfallunder€200,000andwouldthereforebeconsidered‘deminimis’fundingandwouldnotneedtobedeclaredtothecommission.Source:CommissionRegulation(EU)No1407/2013of18December2013

-Thecommercialnatureoftheloanswouldalsoexemptthemfromstateaidregulation.AccordingtotheDepartmentforBusiness,InnovationandSkillsStateAidGuide‘IftheStateisactinginawaythataprivateinvestorwouldinamarketeconomy,forexampleinprovidingloansorcapitalonsimilartermstothatofaprivateinvestor,itisnotprovidingStateaidwithinthemeaningofArticle107(1).’Source:TheStateAidGuide,TheDepartmentforBusiness,InnovationandSkills,June2011,p.6

29 Thepreciserepaymentmechanismsshouldbedeterminedafterconsultationwiththeindustry.However,evenif70percentofthenetrevenuewasreturnedtotheCCFthatwouldstillbeabetterroyaltyratethandevelopersreceivefrommosttraditionalglobalpublishersandshouldprovidesuitableon-goingcashflowtosupporttherecipientcompanyinthefuture.Inthecaseofoneoftheseprojectsperformingverywellcommercially70percentshouldallowformultiplecompletefailurestobebornewithoutcompromisingtheFund.

30 Developersmayhavetorescuethemselvesifaconflictofinterestarises.

31 SeetheAppCampusasanexampleofthisapproach:https://www.appcampus.fi/

32 Thisisbasedonthefollowingestimatesof£10,000duediligenceperproject,2financially-trainedadministratorswithinvestmentbackground£200,000+£50,000overheads.

33 Seehttps://www.innovateuk.org/competition-display-page/-/asset_publisher/RqEt2AKmEBhi/content/cross-platform-production-in-digital-media-feasibility-study

https://www.innovateuk.org/competition-display-page/-/asset_publisher/RqEt2AKmEBhi/content/cross-platform-production-in-digital-media-collaborative-r-d

https://connect.innovateuk.org/web/creativektn/funding

34 Thecompetitionhasbeenrunintwostreams:

-Feasibilitystudies:smallprojects,approx.£50k-£100kpart-fundedbyaTSBgrant;intotal£1Mhasbeenannouncedandawardedforearly-stagedigitalcontentproductiontools.SeeattachedpdffromDecember2013withdetailsofthe13winningapplications.

-Collaborativestudies:largerprojects,upto£2MofgrantfundingfromtheTSB;atotalof£14Misavailable;competitionsubmissionshaveclosed,andtheresultswillbeannouncedon11March2014.

Overall,thisfundingisaimedatprojectsaddressingconvergenceindigitaltechnologies,andcoversfilmandtelevision,onlinevideo,animationandvideogames(includingpre-production,productionandpost-productionprocesses,particularlyinvisualeffectstechnologies).

InnovateUK(formerlyknownastheTechnologyStrategyBoard),theGovernmentagencychargedwithpromotingbusiness-ledinnovation,currentlydistributes0.4percentofitsfundstothevideogamessector.FollowingaquestionposedtoEdVaizey,MinisterofStateforCultureandtheDigitalEconomybyLucianaBerger,ShadowMinister,PublicHealthandMPforLiverpoolWavertree,itwasrevealedthatin2013/14InnovateUKprovided0.4percent(£1.9million)ofitscorebudgettovideogames.Thiscomparesto£277,000(0.06percentofitscorebudget)in2012/13,andnofundingatallforthevideogamesectorin2011/12.InnovateUKoperatessomeveryusefulschemesanditisgoodtoseethatitsfundingforthevideogameindustryhasincreasedoverthepasttwoyears.Yetthe£1.9millioninvestedinthevideogamessectorin2013/14palesincomparisontothe£26millionofLotteryFundsprovidedtotheUK’sfilmindustryeachyear.

35 Source:http://www.tekes.fi/en/programmes-and-services/tekes-programmes/skene/andhttp://techcrunch.com/2013/12/03/rovio-supercell-finland/

36 Borowiecki,K.J.,Prieto-Rodriquez,J.(2013)VideoGamesPlaying:ASubstituteforCulturalConsumptions?(TEPWorkingPaperNo.0413,availableathttps://www.tcd.ie/Economics/TEP/2013/TEP0413.pdf)

37 Thesefundingbodiesare:ArtsCouncilEngland,ArtsCouncilofNorthernIreland,ArtsCouncilofWales,TheBritishFilmInstitute,BigLotteryFund,CreativeScotland,HeritageLotteryFund,SportEngland,SportNorthernIreland,SportWales,sportscotland,andUKSport.

38 NationalLottery(2014),WheretheMoneyGoes(availableathttps://www.national-lottery.co.uk/player/p/goodcausesandwinners/wherethemoneygoes.ftl)

39 Encouragingly,someUKpoliticians,includingtheMinisterforCulture,CommunicationsandCreativeIndustries,EdVaizeyMP,hassupportedtheallocationofLotteryfundingtothegamesindustry.SeeInterviewwithTheMarketforComputerandVideoGames,31March2014,availableathttp://www.mcvuk.com/news/read/ed-vaizey-mp-tax-relief-is-just-the-start-for-uk-games-developers/0130403

40 CreativeEnglandcouldbesuggestedasanalternativedesignatedfundingbody,anddistributeNationalLotteryfundingtothevideogamesindustry.PolicymakerswouldhavetoweighthebenefitsofexpandingthescopeandresponsibilitiesofanestablishedorganisationlikeCreativeEnglandagainstthecreationofaneworganisationliketheCCFwhichwouldbesolelyfocusedonthevideogamessector.

41 Seehttp://www.publications.parliament.uk/pa/cm201314/cmselect/cmpubacc/709/70902.htm

TheGovernmentdoesspendresourcesonpromotingexports.Forexample,thePACnotesthatIn2012-13,UKTIandFCOspent£420milliontopromoteexports.

42 Business,InnovationandSkills,TradeandInvestmentforGrowthWhitePaper(February2011),Cm8015.

43 RoadstoSuccess:SMEExports,HouseofLordsSelectCommitteeReportonSmallandMediumSizedEnterprises,ReportoftheSession2012–13

(March2013),HLPaper131,paragraph2.7.

44 http://www.ft.com/cms/s/0/3432879e-9562-11e3-8371-00144feab7de.html?ftcamp=crm/email/2014217/nbe/UKBusiness/product&siteedition=uk#axzz33bArN4E0

45 RoadstoSuccess:SMEExports,HouseofLordsSelectCommitteeReportonSmallandMediumSizedEnterprises,ReportoftheSession2012–13(March2013),HLPaper131,paragraph5.18.

46 http://www.ft.com/cms/s/0/cd4f0c40-ab6f-11e3-8cae-00144feab7de.html?siteedition=uk#axzz33bArN4E0

47 RoadstoSuccess:SMEExports,HouseofLordsSelectCommitteeReportonSmallandMediumSizedEnterprises,ReportoftheSession2012–13(March2013),HLPaper131,paragraph4.1.

48 Taxreliefcanbedeliveredinanumberofdifferentways,andeachhasitsbenefitsandissues.

-Additionaldeduction(e.g.R&Dtaxrelief,PatentBox):Anadditionaldeductionismadefromtaxableprofits,resultinginlesstaxbeingpaid.ThisisstraightforwardtoadministerandwouldnotincludecashcreditsfromtheGovernment,buthaslittlebenefitforlossmakingcompaniesunlessthereisanadditionalopportunitytosurrenderlossesforacredit(suchastheSMER&Dtaxreliefscheme).

-Payablecredit(e.g.newlargecompanyRDECscheme):AcreditpaiddirectlytocompaniesbyHMRC,whichcanbeusedtodischargetaxliabilities,or(ifnoneexist)claimedascash.Thisapproachhastheadvantageofbeingeasytocalculateandexplaintocompanies,asthebenefitisveryclear.ThisdoeshavethepotentialtorequiremorecashoutflowfromtheTreasuryhowever,anditislikelythatHMRCwillwishtotaxthispayablecredit,addingsomecomplicationtothecalculation,inlinewiththeRDECscheme.

-Allowance(e.g.Annualexemptionforcapitalgainstax(whichisavailableforindividuals)):AcompanycouldpaynotaxonExportProfitsuptoacertainvalue,andfullCTthereafter.Thismightencouragenon-exportingcompaniestobegintomakeexportsales,butwoulddolesstoencouragesignificantexporterstoincreasetheiractivity(thoughitwouldreducetheirtotaltaxbill,‘rewarding’themfortheirsubstantialexports),althoughthiscouldbeanexpensiveoption.

-Exemption(e.g.UnitedStatesIC-DISCscheme):Aseparatesubsidiaryissetuptomakeexports,andpaysnocorporationtax.ThisisprobablysomewhatcomplexandabigchangetotheUKtaxsystem.Accordingly,thisisnotthemostattractiveoption.

49 Optionc)provokesrealdifficulties:theprofitsaretaxedinthehostcountry,anydividendsmaybesubjecttowithholdingtax,althoughmaybetreatedasnon-taxableintheUK.AtaxcreditbasedintheUKfortheseoverseasprofitswouldcreatenumerouscomplicationsbecausetheprofitsmaynoteverbesubjecttoUKtaxesandwouldalreadyhavebeensubjecttotaxinthesourcecountry.However,ifthesecompanieswereexcluded,anexporttaxcreditmightcreateartificialdiscriminationbetweencompaniesthatexportdirectly,andcompaniesthatexportfromabaseinthehostcountry.

50 CompaniesHousegivesthisdefinitionofSmallandMediumcompaniesaccordingtothe2006Act:

Companies Act 2006

AccountsExemptionThresholdsforcompanieswithaccountingperiodsstartingonorafter6thApril2008.

Small company

Tobeasmallcompany,atleasttwoofthefollowingconditionsmustbemet:

•Annualturnovermustbe£6.5millionorless

•Thebalancesheettotalmustbe£3.26millionorless

•Theaveragenumberofemployeesmustbe50orfewer

Medium-sized company

Tobeamedium-sizedcompany,atleasttwoofthefollowingconditionsmustbemet:

•Annualturnovermustbe£25.9millionorless

•Thebalancesheettotalmustbe£12.9millionorless

•Theaveragenumberofemployeesmustbe250orfewer

http://www.companieshouse.gov.uk/companiesAct/implementations/apr2008ExemptionThreshold.shtml

InadditiontheEuropeanunionhaveaslightlydifferentdefinitionandalsohasacategoryfor‘micro’companies:

http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/

AsstatedabovethecostofExportTaxReliefisdifficulttoestimate.Toputthemeasureintocontext,in2011‐12,thecostofR&DTaxReliefamountedto£1.2billion,basedon£11.9billionofR&Dexpenditure.For2011‐12,atotalof11,920companiessubmitted12,190returns,making12,550separatereliefclaims.See:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/255617/rd-introduction.pdf

51 Significantly,ratesofreliefalreadyappeartobeincreasingintheEU.Forexample,Irelandwantstointroducearateof32.5percentofreliefforfilmandTVproductions.TheEUCommissionstillhastoapprovethisrequest(informationfromHMRC,June10th2014).

52 Interestingly,TheRtHonGeorgeOsborneMP,ChancelloroftheExchequer,hassaid:“IwanttheUKtoremainaworldleaderinthecreativeindustries,that’swhyIamannouncingtaxreliefsthatwillbeamongthemostgenerousavailableanywhere.”See“UKtogetworldclasscreativetaxbreaks”(HMTreasurypressrelease,June18th2012http://www.hm-treasury.gov.uk/press_48_12.htm).

53 http://www.gamesindustry.biz/articles/2013-05-22-gaming-tax-credits-a-developers-guide-to-free-money.AlthoughQuebecrecentlyreduceditslevelofreliefforEnglishspeakinggames(http://www.gamesindustry.biz/articles/2014-06-13-game-subsidies-cut-as-quebec-government-slashes-spending),Frenchlanguagegamescontinuetoattractahighlevelofrelief:Englishlanguagegameswillbenefitfrom24percenttaxrelief,Frenchlanguagegameswillreceive30percenttaxrelief.SomeCanadianprovincescontinuetoprovideformoregenerouslevelsoftaxreliefforvideogamesthanintheUK(http://www.gamesindustry.biz/articles/2013-05-22-gaming-tax-credits-a-developers-guide-to-free-money.Atthetimeofwriting,ithasbeenreportedthatanumberofgamesbusinessesinQuebec,includingUbisoftandWarnerBrothers,willbeimmunefromanyreductionsintaxreliefuntil2019attheearliest(http://www.develop-online.net/news/ubisoft-and-warner-bros-exempt-from-quebec-tax-relief-cuts/0194614).

54 e-skills,theSectorSkillsCouncilforBusinessandInformationTechnology.TheReport,TechnologyInsights2011:TheGamesDevelopmentSector.

55 UKTradeandInvestment(UKTI)isthegovernmentbodythatisresponsibleforgrowingouroverseastradeandattractinginwardinvestmentfromoverseastotheUK.Itisstructuredacross9EnglishregionsandtheDevolvedAdministrationswitheachregionalcontractbeingdeliveredbyacommercialcontractholder.Whilstfundamentallythesame,eachregioncanalterslightlyhowservicesaredeliveredandadaptthemaccordingtoregionalneeds.AcrosstheregionsthereareInternationalTradeAdvisers(ITAs)whosejobitistohelpcompaniestradesecurelyandsuccessfullyoverseas.TheseITAsarenotcivilservantsandcomefromtheprivatesectorandbringswiththemawealthofexperiencegainedfromtheprivatesector.TheInwardInvestmentServicesTeamisresponsibleforpromotingtheUKregionstooverseasbusinessesandtoattractthemtoexpandanddevelopintheUK.ManyforeignstudiosareinterestedinsettingupbusinessintheUKtocollaboratewiththedepth


GAMES DEVELOPMENT INDUSTRY 45oftalentweproduceandtohelpthemexpandintootherareasofEurope.Farfromthreateningourhomegrownindustry,theseoverseascompaniesprovidenewjobsandbringwiththemanunderstandingofotherculturesandmarketsthatenhanceourinternationalreputationastheleadinggamesdevelopmentcountryintheworld.MostUKstudioswillenagagewithUKTIthroughtheirITAwithwhomtheydevelopapersonalrelationshipandaseriesofActionPlansthatenablethemtoidentifyandsuccessfullyexecuteastrategicgrowthplantohelpthemincreaseinternationaltrade.

56 Overrecentmonths,BIShascutfundingtoUKTIanddivertedthismoneytotheRegionalGrowthHubseachofwhomhaveanInternationalisationprogramme.AseachRegionhandlesit’sbudgetseparatelythereisnostandardprocedurewithregardtofinancialsupport.SomeHubsaremaintainingthe50/50matchfundedgrantsystemwhileothersadopta33/66or20/80contributionlevelwhilstsomeoffernodirectcashfundingatall.HoweverallGrowthHubsarechargedwithencouragingSMEstogrowandthereissupportavailablelocallyforcompaniesthatcandemonstrateaclearbusinessplantodevelopandcreatejobsoverthenexttwoyears.UKTIisworkingcloselywiththeRegionalGrowthHubsandotheragenciestoensurethatallourSMEclientsareawareoftherangeofsupportandservicesthatexistsuchastheGrowthAcceleratorScheme.Itisasadfactthatsomestudiosdonotseethemselvesastraditionalbusinessesanddonotengageaswellas“traditional”companies.UKTIwouldliketochangethatperceptiontoensurethatanyStudio–whetherlargeorsmallunderstandstheneedtoadoptthesamefundamentalbusinessprinciplesasanyothercommercialorganisationtosafeguardgrowthandprofitability.

JusttinyfractionsoftwoofUKT&I’skeyschemes(TradeAssistanceProgrammefundingandEventsandMissionsspending)wereallocatedtothevideogamessector.FollowingaquestionposedtoMatthewHancockMP,MinisterofStateattheDepartmentforBusiness,InnovationandSkills,MinisterofStateattheDepartmentofEnergyandClimateChangeandMinisterofStateforPortsmouth,byLucianaBerger,ShadowMinister,PublicHealthandMPforLiverpoolWavertree,itwasrevealedthatin2013-14,just1.4percent(£220,100)oftotalUKT&ITradeAssistanceProgrammefundingwasallocatedtothevideogamessector.Additionally,just0.18percent(£25,000)oftotalUKT&IEventsandMissionsspendingwasassignedtothevideogamessector.ForinformationaboutUKTI’ssupportforthevideogamessector,see:http://www.parliament.uk/business/publications/written-questions-answers-statements/written-questions-answers/?page=1&max=20&questiontype=AllQuestions&house=commons%2clords&member=4070&keywords=ukti%2cand%2cvideo%2cgames

57 RoadstoSuccess:SMEExports,HouseofLordsSelectCommitteeReportonSmallandMediumSizedEnterprises,ReportoftheSession2012–13(March2013).

58 http://www.parliament.uk/business/publications/ written-questions-answers-statements/ writtenquestions-answers/?page=1&max=20&questi ontype=AllQuestions&house=commons%2clords& member=4070&keywords=ukti%2cand%2cvideo% 2cgames)

59 HouseofCommons,ScottishAffairsCommittee,‘VideogamesindustryinScotland’,SecondReportofSession,2010-11,Volume1,19thJanuary2011,p.93

60 Ibid.

61 http://www.bcjobsplan.ca/wp-content/uploads/TechnologyStrategy2012.pdfp.14

62 http://www.international.gc.ca/media_commerce/comm/news-communiques/2013/04/10b.aspx?lang=eng

63 http://theesa.ca/wp-content/uploads/2013/10/ESAC-Video-Games-Profile-2013-FINAL-2013-10-21-CIRC.pdfp.48

64 http://theesa.ca/wp-content/uploads/2011/08/SECOR_ESAC_report_eng_2011.pdfp.12

65 Ibid.P.24

66 HouseofCommons,ScottishAffairsCommittee,‘VideogamesindustryinScotland’,SecondReportofSession,2010-11,Volume1,19thJanuary2011,p.94

67 Bankfinanceisnotanimportantsourceoffinanceformostgamesdevelopers.Developerstypicallyhavenomainassetsthatcanbeusedascollateralunliketraditionalindustrieswithlotsofplantandpropertyonthebalancesheet.

68 BISandDCMS,AccesstoFinanceforCreativeIndustryBusinesses,May2011(WarwickBusinessSchoolandIFF)(seehttp://www.berr.gov.uk/assets/biscore/enterprise/docs/a/11-898-access-to-finance-for-creative-industry-businesses.pdfandCreativeIndustriesCouncil:AccesstoFinanceWorkingGroupReport(CreativeIndustriesCouncil,December2012).

69 TheSEIS,whichwasintroducedin2012,currentlyoperatesunderthefollowingparameters:

•anyonecompanycanraisenomorethan£150,000intotalviaSEISinvestment;

•SEISinvestorscanallocate£100,000inasingletaxyearwhichcanbespreadoveranumberofcompanies;

•Investorscannotcontrolthecompanyreceivingtheircapitalandhavemorethana30%stakeinthecompanyinwhichtheyinvest;

•investorscanreceiveupto50%taxreliefinthetaxyeartheinvestmentismade;

•thebusinesscompanymustbeaUKcompanyandhaveapermanentestablishmentintheUK;

•inthe2012-13taxyear,taxpayerscanrollachargeablegainonthedisposalofassetsinthetaxyearintosharesqualifyingforSEISincometaxrelief,withafullcapitalgainstaxexemption;

•thecompanymusthavefewerthan25employees(ifthecompanyistheparentcompanyofagroup,thatfigureappliestothewholegroup).

•thecompany’strademustbenomorethantwoyearsold;

•thecompanymusthaveassetsoflessthan£200,000;andthecompanyhastotradeinanapprovedsector–generallynotinfinanceorinvestmenthttp://www.seis.co.uk/

70 ‘Thefourthutility:DeliveringuniversalbroadbandconnectivityforsmallbusinessesacrosstheUK’,TheFederationofSmallBusiness,July2014,p.4

71 ibid

72 ibid

73 http://www.scotland.gov.uk/Resource?Doc/981?0114237.pdf

74 TheStateoftheInternet’,2013Report,Volume6,Number3,3rdQuarter,p.25

75 Ibid,p.13

76 https://www.gov.uk/government/policies/transforming-uk-broadband

77 Thefourthutility:DeliveringuniversalbroadbandconnectivityforsmallbusinessesacrosstheUK’,TheFederationofSmallBusiness,July2014,p.10

78 http://www.businesszone.co.uk/topic/technology/small-firms-hindered-slow-broadband-450000-still-using-dial/57271

79 Thefourthutility:DeliveringuniversalbroadbandconnectivityforsmallbusinessesacrosstheUK’,TheFederationofSmallBusiness,July2014,p.10

80 EnterpriseNation(2007),“HomeBusinessReport”:

http://www.scribd.com/doc/43354992/Home-Business-Report-2007?in_collection=2728400.Seealso:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/39255/12-829-home-business-guide.pdfandhttp://www.flexibility.co.uk/flexwork/location/home-enterprise.htmandhttp://www.btplc.com/Thegroup/BTUKandWorldwide/BTRegions/England/Factsandfigures/EnterpriseNationHomeBusinessReport2009-Nov09.pdf

81 http://www.itu.int/ITU-D/treg/broadband/ITU-BB-Reports_Impact-of-Broadband-on-the-Economy.pdfp.4

82 http://www.ehow.com/info_12036378_country-leads-video-game-industry.html

83 ‘TheVideoGamesIndustry:ExplainingtheEmergenceofNewMarkets,QuentinCucuel,OtagoManagementGraduateReview,Volume9,2011

84 http://www.oft.gov.uk/shared_oft/markets-work/sme-update.pdf

85 Wilson,R.,StateoftheUKGameDevelopmentSector(TIGA,2010).

86 Source:http://ec.europa.eu/budget/library/biblio/documents/2014/DB2014_WD_I_en.pdf(pages239-240).Seealsohttp://www.egdf.eu/egdfwelcomes-the-european-game-development-support-scheme/

87 Seehttp://ec.europa.eu/research/participants/portal/desktop/en/opportunities/h2020/calls/h2020-ict-2014-1.html).Seealsohttp://www.egdf.eu/european-commission-provides-record-funding-for-european-game-developers/

Additionally,H2020providesforasub-programmecalledtheH2020SMEinstrument,Again,thisisnotafunddedicatedtogamedevelopmentbutgamesbusinessescanapplyforfundingunderthescheme.Seehttp://ec.europa.eu/research/participants/portal/desktop/en/opportunities/h2020/topics/2538-ict-37-2014-1.htmlandhttp://www.egdf.eu/eufundingspring2014/

88 ForinformationontheOFT’seightPrinciples,seehttp://www.tiga.org/news/press-releases/tiga-seven-days-til-dday-for-iap

89 Gibson,N,Gibson,R.,andWilson,R.,MakingGamesintheUKToday2014(TIGA2014).

90 Seehttp://www.growthaccelerator.com/

91 Seehttp://www.growthaccelerator.com/

92 http://www.dutchgamegarden.nl/english/about-dutch-game-garden/

93 https://www.appcampus.fi/

94 http://www.ft.com/cms/s/0/1dde4404-f60e-11e2-8388-00144feabdc0.html?siteedition=uk#axzz30V53CMIf

95 Bagwell,S,‘Creativeclustersandcitygrowth’,inCreativeIndustriesJournalVolume1Number1©2008IntellectLtd;Pandit,N.R.,Cook,G.A.S,Beaverstock,J.V.andGhauri,P.N.,‘Anempiricalstudyofservicesectorclusteringandmultinationalenterprises’inJournalofServicesResearch,SpecialIssue,February2008.

96 Onhightechnologyregionalclusters,seehttp://www.ft.com/cms/s/0/034f6fda-8aa8-11e3-9465-00144feab7de.html?ftcamp=crm/email/201423/nbe/InformationTechnology/product&siteedition=uk#axzz2sFKTTU8C

97 http://webarchive.nationalarchives.gov.uk/+/http://www.dti.gov.uk/clusters/ecotec-report/dti_clusters.pdf;seealso:http://www.publications.parliament.uk/pa/cm200304/cmselect/cmtrdind/118/11808.htm.Seealso:http://webarchive.nationalarchives.gov.uk/+/http:/www.bis.gov.uk/policies/economic-development/clusters-in-the-uk.Thereareanumberoffactorscriticaltosuccessfulclusters,including:

•thepresenceoffunctioningnetworksandpartnerships

•astronginnovationbasewithsupportingresearchanddevelopment(R&D)facilities

•astrongskillsbase

•adequatephysicalinfrastructure

•thepresenceoflargefirms

•anentrepreneurialculture

•accesstofinance.

-Seemoreat:http://www.local.gov.uk/economy/-/journal_content/56/10180/3510371/ARTICLE#sthash.Jrx8hfwV.dpuf.Seealso:http://www.ipt.org.uk/the-rise-and-rise-of-uk-business-clusters.aspx.Seealso:http://www.ipt.org.uk/how-can-government-support-business-clusters-in-the-uk.aspx;Seealso:https://www.sussex.ac.uk/webteam/gateway/file.php?name=workpaper9.pdf&site=2

Seealso:http://www.aimresearch.org/uploads/File/Publications/Academic%20Publications%202/Challenging_clusters.pdf

Seealso:http://www.clusterobservatory.eu/index.html#!view=documents;mode=all;sort=name;uid=;id=

98 ItwouldbeimportanttoidentifyandauditbonafidecoursestoeliminateanypotentialforabusingSMETrainingTaxRelief.

99 FullReport–GraduatesintheUKLabourMarket2013(OfficeforNationalStatistics2013)p.3.

100 TheUKfinished22ndoutof34OECDcountriesforeducationalattainment‘EducationataGlance’(OrganisationforEconomicCo-operationandDevelopment,2013)p.32.

101 ConsideredtobelowGCSEgradeD.‘2011skillsforlifesurvey:headlinefindings’(DepartmentforBusinessInnovationandSkills,December2011),p.5andp.8.

102 Improvingthenation’sskillprofileisessentialtothefutureprosperityoftheUK.Thebenefitsofthisinvestmentarefeltbyindividuals,employersandtheeconomy‘EmployabilityandSkillsintheUK:RedefiningtheDebate’(TheWorkFoundation,November2010)p.3.

103 Ibid.

104 TheUKaverageis7hoursvocationaltraining,belowtheEUaverageandhalfthelevelofFrance.‘BusinessInvestmentinSkills’(ConfederationofBritishIndustry,August2011)p.13.

105 SMEsdevotesignificanttimeandresourcestodevelopingtheirstaff.‘BusinessInvestmentinSkills’(ConfederationofBritishIndustry,August2011)p.6.

106 Wilson,Richard,StateoftheUKVideoGameDevelopmentSector(TIGA,2008),p.6.

107 TheroleofProduceriscurrentlyontheSOLbutitmightbehelpfulforboththeindustryandfortheMACtodelineatethepreciseproducerrolesthatthegamesindustryneedsmoreclearly.

108 Takeoneofourmembers,Codeplay,anEdinburghbasedbusinessandaninternationallyrecognisedexpertinadvancedoptimisingtechnologiesforcomputerandvideogamegraphics.Codeplayoperateinahighlyspecialisednichefield,workingwithglobaltechnologygiantslikeARMandQualcommandcreate,forexample,graphicscompilersthatmaketheirchipsetsrunfasterandmoreefficiently.ThisisafantasticexampleofBritain’sintellectualcontributiontotheprogressofbleeding-edgetechnologyaroundtheworld.YetCodeplayisfindingitincreasinglychallengingtomeetmarketdemandforitsservicesandgrowbecauseitcannotfindthetalentlocallyandisinhibitedfromhiringspecialisedtalentfromoverseasbecauseofourimmigrationregulations.

109 Border&ImmigrationAgency(2006),HighlySkilledMigrantsunderthePointsBasedSystem–StatementofIntent(availableathttp://www.bswn.org.uk/resources/law/public-law/New-Immigration-

Rules/tier1statementofintent.pdf).

110 TheMigrationObservatoryattheUniversityofOxford(2012),Britain’s’70Million’Debate:Chapter4–MigrationofNon-EUNationals(availableathttp://migrationobservatory.ox.ac.uk/reports/4-migration-non-eu-nationals).

111 ImmigrationStatistics,JulytoSeptember2011(OfficeforNationalStatistics).

112 AsimilarargumenthasalsobeenadvancedbyJamesDyson.Seehttp://www.ft.com/cms/s/0/34226450-8a76-11e3-9c29-00144feab7de.html?siteedition=uk#axzz33bArN4E0

113 UNESCO(2009),TopDestinationsforMobileStudentsandOutboundMobilityRationStatistics(availableathttp://www.uis.unesco.org/Education/Pages/tertiary-education.aspx).

114 FinancialTimes(27February2014),DataonImmigrationtoUKDealBlowtoDavidCameron(availableathttp://www.ft.com/cms/s/0/051d8e54-9f99-11e3-b6c7-00144feab7de.html#axzz2udVF7NPO).

115 QSTopUniversities(2013),StudentMobility:MostPopularCountries(availableathttp://www.topuniversities.com/blog/student-mobility-most-popular-countries).

116 GovernmentofCanada(2014),StayinCanadaAfterGraduation(availableathttp://www.cic.gc.ca/english/study/work-postgrad.asp)

117 www.shanghairanking.com.AccordingtoQS,theeducationconsultancy,thereare18Britishuniversitiesintheworld’stop100(www.topuniversities.com),whereasTimesHigherEducationWorldUniversityRankingsputsthisfigureat11(www.timeshighereducation.co.uk/world-university-rankings).

118 SCImagoJournalandCountryRank(www.scimagojr.com,accessedon26March2014).

119 www.researchtrends.com(Issue32,March2013).

120 UniversitiesUKParliamentaryBriefing(UniversitiesUK,availableathttp://www.universitiesuk.ac.uk/highereducation/Documents/2013/BriefingImmigrationBillSecondReading.pdf)

121 TheUKspent1.4percentofitsGDPontertiaryeducationin2010(EducationataGlance,OECD,2013),ofwhich0.7percentcamefrompublicsources(includingpublicsubsidiestohouseholdsattributabletoeducationalinstitutionsanddirectexpenditurefrominternationalsources)and0.6percentfromprivatesourcesoffunding.Coretertiaryeducationservicesaccountedfor0.8percentoftheGDP,ancillaryservices0.11percent,andR&Dattertiaryinstitutions0.46percent.Excludingpublicsubsidiesattributabletopaymentstoeducationalinstitutions,publicfundingfortertiaryeducationaccountedonlyfor25.2percentofallfundingfortertiaryeducation.

122 Includingsubsidies.EducationataGlance2013(OECD,2013).

123 LeitchReviewofSkills,ProsperityforAllintheGlobalEconomy–WorldClassSkills.FinalReport(HMTreasury,December2006),p.67.

124 EducationataGlance2013(OECD,2013).

125 TotalfundingforhighereducationviaHEFCEinthe2014-15budgetis£4,091million,downfrom£5,014millionin2013-14(HEFCE,2014).

126 Clearly,thispolicydoesnotapplytoScotland,whichdoesnotchargeunder-graduatestuitionfees.

127 StatisticalFirstRelease197,TheHigherEducationStatisticsAgency(http://www.hesa.ac.uk/index.php?option=com_content&task=view&id=3103&Itemid=161)

128 LeitchReviewofSkills,Prosperityforallinthe

globaleconomy–worldclassskills.FinalReport(HMTreasury,December2006),p.3.

129 OfficeforNationalStatistics(2013),FullReport–GraduatesintheUKLabourMarket2013(availableathttp://www.ons.gov.uk/ons/dcp171776_337841.pdf).

130 Accordingtoe-skills,thesectorskillscouncilforBusinessandInformationTechnology,thenumberofITandcomputersciencegraduatesfellby25%between2004and2008(from20,210to14,920).Seehttp://www.hesa.ac.uk/index.php?option=com_datatables&Itemid=121&task=show_category&catdex=3#subject

131 AccordingtoanestimatebytheCenterforSTEMEducation&InnovationatAmericanInstitutesforResearch,mostSTEMdegreeshavehigherthanaverageproductioncostsforthehighereducationinstitutionsatundergraduatelevel(DeltaCostProjectDataBrief,AmericanInstitutesforResearch,September2013,availableathttp://www.deltacostproject.org/sites/default/files/products/Cost%20to%20Institutions%20of%20STEM%20Degrees.pdf).Furthermore,theHouseofLordsScienceandTechnologyCommitteeexpressedhasreceivedsimilarevidencefromUKuniversities(HigherEducationinScience,Technology,EngineeringandMathematicssubjects,Chapter6:PolicyReforms,2012,availableathttp://www.publications.parliament.uk/pa/ld201213/ldselect/ldsctech/37/3709.htm).

132 Someuniversitiesalreadyhavetheirownbursaryschemestosupportstudentsfromdisadvantagedbackgroundsand/ortosupportstudentsonSTEMcourses.Thesetraditionsneedtobedevelopedfurther.

133 AccordingtoHESA,only21.8%ofmathematicalsciencestudentsand28%ofcomputersciencestudentswereofethnicminorityin2012/13.Overall,accordingtoRaceforOpportunity,only19%ofallSTEMstudentswereofBlack,AsianorMinorityEthnicbackgroundin2009/10.

134 £1,188,100hasbeenawardedfromtheSkillsInvestmentFundto88differentgamesbusinesses.Thebreakdownisasfollows:

• ChallengeFund:£50,872for2companies

• CommissionedTraining:£15,550for1company

• FundedTraining:£37,143for44differentcompanies

• TraineeFinder:£1,084,535for56differentcompanies

‘DiRT Showdown’, developed by Realtime UK


GAMES DEVELOPMENT INDUSTRY 47ENDORSEMENTS OF TIGAFrom MPs, MSPs and government over the last five years:

Alex Salmond MSP, Scotland’s First Minister: TIGAis“anexcellenttradeebody”.

John Swinney MSP Cabinet Secretary for Finance and Sustainable Growth:“IwasveryimpressedbythecasethatyoumadeinrelationtotaxbreaksforcomputergamesandIpressedthispointagainwhenIwrotetotheChancelloroftheExchequeraboutthebudget…I…congratulateyouandTIGAonbeingsuchadrivingforceinachievingit[GTR].”

Fiona Hyslop MSP, Cabinet Secretary for Culture and External Affairs:“IknowTIGAplayedakeyinfluencingroleinbringing[GamesTaxRelief]towhereithasgottotoday…ThecomputergamesindustryspecificallyisaveryimportantpartoftheCreativeIndustriesGrowthSectorinScotlandandwearegratefulforthesupportwhichTIGAhasofferedthroughtheirresearchwhichhashelpedtoprovideabetterreflectionofanindustrywhichmaynotbecapturedaccuratelythroughtraditionalstatisticalreportingmethods.”

Stewart Hosie MP, said:“TIGAhasplayedavitalroleinmakingthecaseforGamesTaxRelief.ThequalityofTIGA’sresearchanditstenaciouscampaigninghaveenabledMPsincludingmyselftomakethecaseforataxreliefforthevideogamessectorinParliament.”

Justin Tomlinson MP, said: “Unlikemanytradeassociations,TIGAhasconsistentlyprovidedstrongempiricalevidencetobackupitscaseforGovernmentsupportandinvestment.TIGAmadeapowerfulcaseforataxcreditforgamesproductionandIwaspleasedtoworkwithTIGAinsecuringthismeasureintheBudget[i.e.2012budget].”

John Whittingdale OBE MP, Chair of the Culture, Media and Sport Select Committee:“IpaytributetoTIGAforplayingaleadingroleinraisingtheprofileofthegamesindustryinParliamentandforplayingacriticalroleinlobbyingforthistaxchange[GTR]”.

“ThefinalapprovaloftaxreliefforthevideogamesindustryisterrificnewsandwillensurethattheUKremainsoneoftheleadersinthedevelopmentandproductionofelectronicgames.TIGAdeservesconsiderablecreditforthesuccessoftheircampaignwhichtheyhavepromotedoveranumberofyears.”

Damian Collins, MP:“InmyroleasanMPIcomeacrossmanytradeassociations.TIGAisdistinctiveinitsfocus,professionalism,andtenacity.TIGAhascampaignedrelentlesslyforGamesTaxReliefovermanyyearsandplayedacriticalroleinconvincingfirsttheUKGovernmenttoadoptthismeasureandthenenablingtheGovernmenttomakeasuccessfulcaseforGamesTaxRelieftotheEUCommission.TIGA’ssuccessfulcampaignforGamesTaxReliefwillbenefitboththegamesindustryandthewidereconomyandIamgladtohavebeenabletoadvancethisimportantmeasure.”

Mark Field MP:“On27March2014,theEuropeanCommissiongavefullapprovaltoUKgovernmentplansforavideogamestaxrelief.Itmarksasuccessfulendtoahard-wonfighttogetthisvitalindustrytheboostitneeds,enablingeligiblecompaniestobenefitfromapayabletaxcreditworth25%ofqualifyingproductioncosts.TIGAhasbeenakeyplayeringettingthisfantasticresult.Throughtheirefforts,videogamesmakersnowhaveasecurefutureontheseshores,providingUKjobsinwhatisayouth-orientedindustryandensuringthatgamersacrosstheworldwillseetheenormoustalent,ingenuityandcreativespiritwehavehereinBritain.”

Rt Hon Stephen Timms MP:“BothasaGovernmentMinisterandfromtheOppositionbenches,IhaveseenTIGAcampaigningprofessionallyandtenaciouslyforGamesTaxRelief.TIGAplayedacriticalroleinsecuringtheRelief,convincingsuccessivegovernments-adifficultjobinbothcases.Ihopethetaxcreditwhichtheirlobbyinghassecured,andwhichIstronglysupport,willprovideapowerfulboosttotheUKvideogamesindustry.”

Jim McGovern MP, said: “TIGAhasplayedacrucialroleinmakingthecaseandwinningtheargumentforataxbreakforgamesproduction.”

Tom Watson MP: “IhavenodoubtthatwithTIGA-theUK’sbesttradeassociation–theissuesthatmattertothevideogamessectorwillremainhighupthepoliticalagenda.”

Don Foster, former Liberal Democrat Culture Spokesman and now Liberal Democrat Chief Whip & Govt Deputy Chief Whip: “IhavewitnessedTIGAcampaignproficiently,persistentlyandpersuasivelyforavideoGamesTaxReliefovermanyyears.AlongthewayTIGAhassuccessfullyconvincedpoliticalparties,governmentsandfinallytheEUCommissiontosupportvideoGamesTaxRelief.TIGAhasplayedavitalroleindeliveringataxreformwhichwillhaveamajorandpositiveimpactontheUKvideogamesindustry.”

Business endorsements:

Gary Bracey, Commercial Director, Kuju Entertainment:“KujuconsidersTIGAaninvaluableorganisationforvideogamedevelopers.NotonlyhavetheircampaignsmadeamassivedifferencewithregardtogovernmentaltaxincentivesandgeneralParliamentarysupportbutalsotheireventsplayanimportantroleinprovidinginformationandanetworkingresourcewhichissecond-to-none.

Jeff Meek, Partner and Head of Forensic Accounting, French Duncan:“AtFrenchDuncanwearepleasedtobeaTIGAmemberandtoworkwiththeTIGAteam.Ourmembershipenablesustomaintainclosetieswiththevideogameindustry,whichinturnallowsustogiveTIGA’sdevelopermemberstailoredaccountancyservicesfromaproviderthatknowstheirterritory.TIGAmembershipmakesperfectcommercialsenseforFrenchDuncan.”

Harald Riegler, CEO, Sproing: “TIGAprovidesnetworkingeventswhereIcanlearnandnetwork,andthishashelpedmeandmybusinessagreatdeal.IalsovaluethelobbyingworkthatTIGAcarriesout.InthisregardTIGAisarolemodelforotherorganisations.IampleasedtobeamemberofTIGAandwouldrecommendTIGAmembershiptootherdevelopersandpublishers.”

Elaine Green, owner, Nellyvision“AsamemberofTIGAwehavebeenabletoattendseveraloftheireventstoourbenefit.Asacompanythatdoesalotofcontractwork,ournetworkiscriticaltousandanycontactswegainthrougheventslikethesearegreatlyappreciated.OurTIGAmembershiphasalsoallowedustoseekoutvitalinformationaboutfundingthroughtheirGrowthAcceleratorevent,aswellasinformationabouttaxesandgrants.WearehappytosayaTIGAmembershipcanhavesomeverytangiblebenefits,whetheritbeinformationyouneedorgrowingyournetwork–orindeedexpandingyourcompany.WeneededanartistanddecidedtoadvertisethepositionthroughTIGA,andwequicklyfoundjusttherightcandidate.Perhapswewouldhavefoundsomeoneadvertisingsomewhereelseaswell,butdoingitthroughTIGAmeantitwastargetedatjusttherightpeoplewewerelookingfor–andit’shardtoarguewithresults!”

Mike Hawkyard, Business Development Director, Amuzo Games:“Networkingwiththerightpeopleisessentialforgamedevelopers,businessownersandthebroadertechindustry,especiallyastheecosystemcontinuestobroaden,whilstthepressuresonourtimeareashighasever.TIGAgoestogreatlengthstoensurethemanygamesindustrynetworkingopportunitiesitprovidesaresimple,effectiveandfun,whichispreciselywhytheyaresovaluable.”

Patrick O’Luanaigh, CEO, nDreams:“AmajorbenefitTIGAoffersmembers,inadditiontonetworkingopportunitiesandmoneysavingoffersfromothersinthenetwork,isthebestpracticecontentandguidanceitprovides.Forexample,TIGA’sGuidetoSelf-Publishingprovidesexcellentexpertadviceforanystudiolookingtoself-publish(aswellasco-publish).I’msurethisresource,andthemanyothersTIGAoffersitsmembers,willbeofgreatvaluetotheUK’sdeveloperanddigitalpublishingcommunity.TIGA’salsodeliveredvaluablePRopportunitiesformybusiness,andrepeatedlytakesastandinconsumermediatoo,defendingthecultural,artisticandeconomicvalueoftheUKvideogamesindustry.”

Oli Christie CEO, Neon Play:“Asanewmobilegamesstudio,itmadecompletesenseforNeonPlaytojoinTIGA.Wesawhugebenefitsfromjoining,notleasttheconsiderableamountofmoneywe’vesavedoneverythingfromservicestoeventsasaresult.Ontopofthis,thenumberandqualityofnetworkingandPRopportunitiesTIGAprovidesreallysetsitapartasasuperlativetradeorganisation.AsNeonPlaycontinuestomatureandgrow,thesebenefitshaveprovedasusefulasever,soregardlessofwhatstageyourbusinessisat,I’drecommendjoiningTIGAforallthesupportitwillprovide.”

Colin Anderson, MD, Denki:“Ifyou’readeveloperordigitalpublisher,whetheryou’rebasedinScotlandoranywhereelseintheUK,there’snoquestionTIGAistherighttradeassociationforyou.Foroveradecadeit’sbeenhelpingdevelopersbuildsuccessfulstudiosandmakevaluablecontactsthroughouttheindustry,especiallywhenitcomestoconnectingwithinvestors&publishers.Allofwhichisontopofthedeterminationandpoliticalsavvytheorganisationshowsyearafteryear,campaigningforafairerbusinessandlegislativeenvironmentforgamesbusinessesacrosstheUK.TIGAhasnotonlyhelpedtodeliverimprovedR&DcreditsforUKdevelopers,butGamesTaxReliefaswell.”

tiga.org

OUR ORGANISATION & OUR INDUSTRYTIGAisthetradeassociationrepresentingthevideogamesindustry.Ourmembersincludegamesdevelopers,digitalpublishers,in-housepublisherowneddevelopers,outsourcingcompanies,technologybusinessesanduniversities.

TIGAhelpsdevelopersbuildsuccessfulstudios,connectwithinvestors&publishers,networkwiththerightpeople,savemoneyandaccessprofessionalbusinessadvice.

[email protected] 0845 468 2330

FirstpublishedJanuary2015