No Tax Rebate For Australian Videogame Industry

When the Australian Government decided to introduce a new media funding scheme this year. For some reason videogames weren't included and it seems the Liberals are determined to keep it that way. As Helen Coonan, Minister for Communications, Information Technology and the Arts (now that's quite a portfolio there) explains:

The Screen Media Support Package announced in the Budget has the potential to benefit screen content producers of all kinds. While games will not be eligible for the tax offsets announced as part of the Package, the introduction of a Location Offset is expected to have positive indirect flow-on effects for screen businesses, as digital and visual companies develop larger and more skilled workforces.

Now this issue shouldn't be seen as life or death for the Australian videogame industry (on a side note, the movie industry has established business models – which is also due to the nature of movie production – something the game industry still has to achieve). Considering the potential for Australian game industry (taxes! Employment!) it's quite hard to understand why it wasn't included. As one commentator on Sumea put it:

Interestingly enough, both Firemint and Torus picked up a Commendation at the Governor of Victoria Export Awards on Tuesday night, which is an official recognition that games companies contribute to the export economy. Didn't see any film makers get a mention.

One could of course argue that this is exactly the reason why the movie industry needs help and the digital games industry doesn't. But this view would of course neglect the political economy of the games industry and the long term perspective (= higher production values) respectively the fact that other governments, such as Canada, highly involved in funding games (which created more than 10,000 new jobs). As I already pointed out what the Australian developers need to get over their work-for-hire status is original IP. And this is where investment gets crucial. When I asked Kevin McIntosh of Torus Games if he supported the claim of the games industry to be eligible for Federal government funding he explained:

I believe so. I mean I think… it's not… I don't want to say that it's necessary to move forward because, you know, other studios are saying "We go out of business without it". I don't think that it's the case that the government is coming and save us like a white knight. But it will… it will take us to the next level. Because right now we're work for hire companies and we're hired to do other people's work you know. But what this other money needs to do is help us create our own IP. And take it to the world. Because that's when you can really start to, you know,  generate some, you know, proper attention, proper income. And it let's you bring some revenue into Australia from that. Right now all the money is going out of Australia. You know, we get enough in to do the games; but the most… most return on the games is going to the Americans… and, you know, to the French…

The Game Developers Association of Australia (GDAA) naturally holds a similar view: 

We have advised government that based on our current industry standing and projected earnings, we conservatively estimate that if they were to extend a 40% rebate to the game development industry in Australia it would lead to an additional $25 million in new investment into original Australian titles each year.

THey even started a petition. And it seems to work with the movie industry (it actually already did back in the 80s with the 10BA tax concession which led to the golden era of the Australian movie business and the emergence of the mini series). As Greg Coote, the Los Angeles-based former head of Channel Ten and Village Roadshow Pictures puts it:

... I think it will cause a production explosion down there.

Bioshock and the Australian Videogame Industry

Internet! Finally! But then again the opportunities of me contributing more to this blog remain marginally slim because I'm playing Bioshock, "the ultimate rarity: not only does it live up to its lofty promise, but exceeds it through simple, old fashioned talent and imagination - not to mention verve, style,class, wit, and sheer bloody-minded ambition. It takes the tired, worn-out FPS genre by the scruff of the neck, reinvents and bend it out of shape in such a breathtaking fashion that it's going to take something very special to top this in the months and years ahead" (Eurogamer). Well that – and it skillfully disguises its linearity. It's not only one of the best games of the year, or the last years for that matter, but also exactly what the Australian videogame industry needs. For the uninitiated: The studio responsible for the game, Irrational, is based in Boston and Canberra where the core technology team resides. One of the problems of Australia's games industry is that it's mainly a work for hire industry. While this reduces the risk for the developers and can help to build infrastructure, respectively to enhance the skills base it goes together with a smaller revenue stream for the studios – and most of the profits are going abroad – the consequence being that this procedure doesn't build value onto the business. Furthermore the question remains if this model is viable under a long term perspective. Regions in Eastern Europe skill-wise rapidly catch up but are able to deliver their work at much cheaper rates. Then there're India and Asia which already provide reliable outsourcing services albeit still suffer from a cultural barrier that make their games not too appealing to the Western markets. But maybe it's just a matter of time until this problem is overcome (which I doubt). Also: If you as a publisher are looking for a studio to work on your IP why not choose a country like Canada; it offers generous state incentives and, not matter where you're operations are based, it's closer than Australia.

The answer: Own creative IP. As Mark Fludder from Queensland Government explained to me in an interview: "We're going to need to see local IP developed and again […] Otherwise: why not move it to the Czech Republic?... We need to be saying, well, you know… Pandemic's Destroy All Humans is a really good example, it's their own make and was all developed and scripted here. It was a big hit, so when whoever owns Pandemic at any given moment on the continuum is going to say: 'Do we continue to invest in Australia? Well, hey... they're making good games'. And I think that's important, I think Australia is going to have to do that".

Tom Crago of the GDAA holds a similar view (from the gamenews.com.au newsletter): "“To have such a high profile title come out of a local studio not only shows the world what our talent here is capable of, it also draws attention to the broader Australian industry, which is an extremely positive thing… [It] shows Government and the media that we really are on the cusp of becoming a global hub for game development” adding that “Australian-made games are mixing it with the very best in the world.”

So the potential is there – and with more incentives from federal government (which until now, for some reasons solely known to Peter Costello, only generously supports the indigenous movie industry) it indeed might elevate Australia into the first league of game development.

-Jens