Train2Game students will be aware that the government announced games tax relief in the March budget, but what does it actually mean? At Gadget Show Live, Train2Game News sat down with TIGA CEO Dr. Richard Wilson who explained in-depth what games tax relief is, the campaign behind it, how it’ll help UK game developers, including Train2Game students, and more.
In part two of our extensive three part interview, Dr. Wilson tells Train2Game News how games tax relief will benefit the UK games industry, and smaller studios in particular, and discusses the benefits of digital distribution. Part one of our interview is available here.
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How is games tax relief going to fundamentally improve things for UK game developers?
I’m glad to say the benefits are manyfold. The first benefit is that it’ll create a more level playing field in terms of attracting inward investment into the games industry. Over the last few years the UK has been competing on an unlevel playing field, with our competitors in Canada, the United States, France, Singapore and elsewhere have had tax breaks for games production while the UK hasn’t. Over the last four years we lost 10% of our workforce, we roughly lost around £50 million in investment each year, quite a significant drop.
So, the first thing is it’ll make the competitive playing field for international investment more even. That means that Activision Blizzard , Microsoft, or Square Enix, when they’re looking to invest, they can look at the UK and see that not only do we have a fantastically skilled workforce, but they’ll also see really good tax incentives in place as well. It makes the decision of where to invest much more about the skills of the workforce than the financial incentives.
The second thing is that it will lead to more investment coming into the games industry. Not just from global publishers, but also from venture capitals, private equity investors who will be looking to invest in the games industry in the UK because of this tax treatment. Those investors are not only global investors, but also indigenous investors as well, so there’ll be more money coming into the games industry.
The third really good thing is that it’ll enable UK game development studios to take on more staff. The cost of game development, in essence, will be lower next year than it has been for the previous two, by quite substantially. That’s fantastic because UK game development businesses will have more money to spend on hiring more staff and making more games.
I think we’ll also have a further positive effect on learning providers, because they’ll be able to say ‘study games courses and get into the games industry.’ It’s great for Train2Game as a key provider of training for the games industry because so many more students will now have an opportunity to get jobs in the sector.
Then I suppose the final point is that it’ll give more scope for more game development studios to set up and grow. So I imagine many Train2Game students won’t simply want to work in a studio, they’ll want to set up their own businesses. And when you have an environment where you have more people coming into the industry, training and learning and coming into the sector, you now have an opportunity for those students to set up their own companies, which is excellent. So, we’re going to have more investment, more jobs and more studios being set up.
Tell us more about games tax relief will benefit smaller and start up studios?
When we were campaigning for the tax break on games production, we were specifically weighted the proposal to help smaller and startup companies, so we suggested to the Treasury that there should be two levels of tax relief. One should be a 25% level of relief on any game between £50,000 and £3 million, then a 20% relief for any game with a budget of more than £3 million, so we’ve disproportionally weighted games tax relief on smaller and startup studios.
So in essence, smaller studios will be getting more money, they’ll be getting more money back in tax relief. It’s worth emphasizing that the companies that’ll benefit from the tax relief won’t simply have a lower tax burden to pay, because games tax relief doesn’t just reduce the cost of cooperation tax. If your company is loss making, but your game qualifies for the tax relief, you actually get money back from the Treasury. How cool is that? You actually get money from the government which is brilliant. So, all those startup companies that are unprofitable in year one, or even year two, they stand to get more money from the Treasury they can invest in their studio and make it more sustainable.
This goes hand-in-hand with TIGA encouraging UK developers to distribute games digitally too.
TIGA, to emphasise, is focused on making the UK the best place in the world to do games business and we’re working really hard to help smaller start-up studios. So many of our members now are start-up studios who’ve only been around for a year or two, so it’s really important for us to help those companies.
As part of that process, we have been helping studios through best practice information advice to grow their companies and move towards digital distribution. So we’re very shortly bring out a guide on self publishing which has been co-written by fifteen members of TIGA including people like Patrick O’Luanaigh from nDreams, Jason Kingsley from Rebellion, companies that are already involved in digital distribution.
Digital distribution is obviously creates many opportunities for start-up and small studios. Sometimes they’ll have to rely on other people to help them, distribute or PR their games successfully, but it does give studios a much greater sense of control over their own destinies because they are self-publishing, they are moving towards digital distribution. The tax break will help us in that process because it’ll help to create more sustainable studios.
In essence, would you suggest to a Train2Game student studio, say the winners of Make Something Unreal Live, that digital distribution is the best way to attempt to become successful?
I generally think it depends on the circumstances of that particular studio and the type of game they’re making. But I do genuinely believe, other things being equal, it must be better to control and own your own IP and move into digital distribution. That’s the way the market is moving. Retail sales of physical games have fallen for four years in a row in the UK, its digital sales that are increasing.
The trauma that’s taken place at GAME confirms the challenges for physical retailers, and 80% of all the new companies that were set up in the UK last year are making games for digital distribution. The trend in the UK is towards digital distribution, so by and large, I’d encourage the winners of Make Something Unreal Live to go into digital distribution to be a self-publisher and I hope at TIGA we can help them achieve their dreams.
Part three of the Train2Game News TIGA CEO Dr. Richard Wilson is here. For more information about TIGA and their involvement with Train2Game, see the official website. And for the latest TIGA news, keep reading The Train2Game Blog.