It seems that more and more governments at the provincial/state level are increasingly interested in supporting game development.

Games are a high-growth industry and fit well into the rhetoric of ‘knowledge economy’ and ‘information economy’. The industry requires ‘creative’ inputs, relies heavily on advanced software and information technology, and employs a workforce that are well trained, (relatively) young, and with high discretionary income relative to some manufacturing sectors.

For jurisdictions with waning manufacturing industries, games represent a tool to create jobs, or at least absorb losses (on a net basis rather than directly) from declining industries. Reducing unemployment can not only be a key economic concern, but is often a key target of political campaigns and a tangible measure of a government’s ‘success’. As well as creating new jobs, it has the potential to reduce ‘brain drain’ as locally educated graduates move elsewhere.

A healthy or at least visible games industry in a jurisdiction can also be used by local and provincial governments in their location marketing activities to signal an attractive climate for potential investors. Having games in an industrial portfolio can give a regional economy ‘currency’ and suggest the existence of high growth industries, skilled and flexible workforce, and an advanced ICT infrastructure.

Not everyone looks at games as a desirable industry. Several stakeholders and interest groups such as those formed by parents view computer games, the products the industry produces, as having a negative impact on their children’s lives and on society in general. This prevailing view, while fading, is still present, and as these groups form a potentially large voting pool, governments are no doubt sensitive to their concerns and may not want to appear to be supporting the games industry directly by allocating funds.

The argument for games is seen in the U.S. state of Georgia, where tax credits have been approved for the industry, and local developers see that state as a potential facilitator for attracting both venture capital and major games publishers. The following quotes are from a Georgia Tech News Release.

Georgia General Assembly recently passed tax credits aimed at game developers and film companies that base production activities, such as editing, animation and coding, in the state.

Now, the stats on industry size:

• Sales of video-game software in the United States totaled $8.2 billion in 2004 – not far behind the music industry, which generated $11.4 billion the same year.
• By 2010, U.S. sales of video games are expected to grow to $15 billion.
• Video gaming is expected to generate more than 250,000 jobs by 2009, a 75 percent increase over the industry’s 144,000 full-time positions in 2004.

The industry helping the economy:

For one thing, the industry provides high-paying jobs that could help ease the economic sting of Georgia’s eroding manufacturing base.

with a skilled and flexible workforce:

According to ESA statistics, entry-level game developers earn $67,000 per year. Video-game development is high science, providing white-collar, intellectual jobs, Lowe notes. Today’s game development teams must have expertise in a wide range of skill sets, including 3-D graphics, architectural engineering, artificial intelligence, computer networking, databases, mathematics, physics, digital sound and more.

 

but graduates are leaving for other areas:

Strengthening Georgia’s video-gaming industry would not only improve the state’s economy, but also prevent brain drain. “If graduates are getting into video games, they’re more than likely relocating to the West Coast,” says GGDA’s Lowe. “That’s a tremendous loss of human capital for the state of Georgia. We’re spending tax dollars to educate students and then letting them go.”

So there is the argument for stemming the flow – or the leak – of talent that has been trained locally and moves interstate or overseas, either due to a lack of local jobs or being recruited by major firms. Not to advocate the view, but if education were fully self-funded, there would of course be no argument for reducing the ‘waste’ of tax revenue on walking human capital, and hence no argument to spend more tax dollars in order to retain it. The institute does see itself as a mecca for game training though:

“When game companies hire employees, Georgia Tech is one of three schools that they turn to,” says LCC’s Murray, noting the other two schools are Carnegie Mellon and the University of Southern California. “We’re supplying the next generation of game designers and we’re training them in a way that employers can’t get elsewhere.”

The need for (venture) capital and ‘anchor’ publishers:

To bolster gaming, Lowe would like to see more venture capital flowing toward video-game startups. That’s because the average cost of developing a video game today has soared from about $40,000 to $10 million during the last decade. “One of the things GGDA is doing is to help companies learn to speak the language of capital sources and learn how to approach venture capitalists,” says Lowe.

Attracting a major video publishing company would also be a plus, Lowe adds. Publishers have muscle in managing intellectual property – an area where small design studios typically are weak.

How much in money, tax concessions, subsidies, and other incentives would the State need to proffer to attract a major publisher though? Wouldn’t it be better for an industry-university collaborative effort to provide the first forays for publishers to set-up locally? If the training institute is the ‘selling point’ for Atlanta from a publisher’s perspective, then such an arrangement with Georgia Tech may provide them with better access to graduates.

But regarding industry structure, are local developers all independent? Or are any owned by major publishers? Are they currently doing sub-contracting work for major developers or publishers or are they producing their own IP? How many graduates find employment locally? How many start up their own firms locally? Answers to these questions are key considerations for policy formulation.