Improbably, the British government has been persuaded to engage in some forms of tax assistance for games. Quite how it will work is as yet unknown. Who will get the money and what will it cover? What kinds of project will favour the scheme, and to what extent? Will tax assistance involve cultural tests, as film subsidies do? Will it focus on small projects or grand productions? Will it apply to multinationals who set up studios in the UK, or only domestic companies?
Perhaps the biggest question is what the objective of the scheme should be. Should it be used to right a perceived wrong, or is there a chance to use it as a way to build the industry anew?
Although there is a fiercely creative history of game making in Britain, the reality for many studios is that those days are gone. Most are service companies and what they deliver is US product while trying to do so more competitively than American, Canadian, French or Chinese developers. Tax breaks for those studios are about making it cheaper to do business with pre-existing clients. Ultimately what they want is to be able to make the same sort of product that they have been making for 15 or more years, but more cheaply.
Maybe big studios do need some help to make themselves more attractive to Activision or Microsoft, but is that really what the industry needs? How does that kind of assistance foster growth in the long term? How does it stop the games industry becoming another version of the film industry, perpetually reliant on handouts? Where does the explosive growth come from if all it is used for is to make EA's or Sony's latest shooter just a little more sparkly?
The primary advantage of tax breaks is that they can make investments in original projects more attractive, particularly projects like Moshi Monsters where the game maker is proposing to create a franchise rather than an individual title. For a startup a tax incentive or grant can make a serious difference in their ability to deliver, getting their staff level (particularly of programmers) up to a point that they have some momentum to make those worlds a reality. It can lower risk by dropping the amount needed to get started by 20-30%, which in turn makes further investment more likely.
Therefore it helps people like my friends Andrew Smith (an independent producer trying to create a world of retro-themed games) or Alice Taylor, whose company (Makielab) is trying to figure out how to make 3D printing and toys come together. It can help the sorts of projects that might become the next Moshi, generating thousands of new and sustainable jobs over time rather than enabling an existing studio to hire a few more animators on temporary contracts to meet a deadline.
One leads to growth, the other does not.
Tax breaks can also help foster talent clusters.
Silicon Valley benefits hugely from proximity. Developers are close to investors, who are close to bigger companies, bloggers who cover the industry, and new talent from universities. It’s a virtuous cycle that delivers results exponential to its size because everyone knows everyone else, helps everyone else (to an extent), funds each other and so forth.
The British games industry could benefit from kind of clustering. Historically it has always been fragmented because studios start in the local business park of the town where the founders grew up and stay there. Often they are encouraged to do so by regional grants and assistance. They pull in staff slowly, growing a series of service projects until they become large silos of knowledge. Staff really only know their own internal culture and have little broader awareness, and so the studios just sit in their local communities, increasingly struggling to find work. Sooner or later they either exit or implode.
There is no incentive to change that way of working, and in many cases it is actually reinforced by the current raft of grants and other schemes available. A startup studio is far more likely to obtain government help if it locates in a region outside of London, for example. Regional funds are set up to create employment, but the net effect is that there is no concentration of talent. So when regional studios eventually do go bust, there are not enough alternative opportunities for staff and so a great deal of talent leaves the area. This is why the industry has such a hard time retaining talent or learning from its mistakes.
It's a well-meaning but ultimately fraught cycle, and one that tax breaks could help to change if they were tied to geography by establishing one or more 'green zones' around the country. In order to qualify for tax breaks or other grants the company would have to have a functioning studio within a green zone. As an example, the intended technology hub in East London that the government wants to promote in the wake of the Olympics could be one such zone.
The idea is to try and foster a Valley through bribing companies to set up or move there. This would not be an easy change for many existing studios, but it would be an exciting opportunity for new studios. Companies would be founded in those zones, publishers would set up offices in them, existing developers would open studios within them, and cross-networking would start to happen. Investors would get to know the scene better. Journalists would be able to cover more. And maybe there would be an academic angle too, with internships among many studios all being feasible. The key benefit is the retention of learning and the Valley-style virtuous circles that would form.
Essentially it boils down to whether tax breaks will be about promoting the industry as-is or rebuilding it. As in film, there is a tendency for big budget games to scale their budgets to infinity if allowed, but as teams grow they become less effective and more bureaucratic. They burn money, and yet often produce a product that sells no more units than Minecraft (which was initially developed by one guy). So are tax breaks best served by helping that which has structural issues, or that which needs seed funding? In my opinion, the latter.
What's often forgotten in the debate is that competing regions like Quebec already have a large head start in terms of attracting production to their cities, and so to simply get into that game is probably a fool's errand. If all the scheme does is establish a level playing field then there's still little incentive for the big publishers who have already poured millions into their studios elsewhere to change. It might be unfair, but simply matching a competitive advantage would likely not be enough.
So the choice before the government and industry trade bodies has to be about change and innovation, so that the industry is not trying to chase yesterday's dream. Big-budget Hollywood-style games may simply not be feasible for third party British studios any more, but that does not mean the British industry is dead. It means there is a chance for metamorphosis.