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Games Industry

The cancellation of tax breaks for the videogames industry announced in this week’s emergency budget is a loss and disappointment for the UK games industry. The successful case made by UK bodies TIGA and NESTA which evinced support from the Labour government holds no truck with the Coalition.  While this is a body blow for the UK industry, in Scotland it strikes at the heart.  For in Scotland, the games industry is more than just one of the Cool Britannia creative industries.  In a small nation, its an precious indigenous specialism with the potential to achieve exponential returns for Scotland. 

Dundee games companies are now reportedly considering upping sticks  Colin MacDonald, from Realtime Worlds

 We would hate to move away but we’re a business.When Canada is 40% cheaper and France has built-in tax credits, you’re looking at saving millions a year.

Its clear that the games industry in Dundee is a star which, with special support could deliver not only economic benefits  – jobs and wealth  but also enhance Scotland’s reputation in the world.  The video games industry in Dundee follows on the traditions of Scotland’s unique genetic trait of creative and canny innovation, from the telephone to the television. 

Despite raids on talent from Canada and Ireland, the core of the Dundee games industry has remained in the creative cluster of Tayside for reasons of loyalty, pragmatism and pride – and the expectation that fiscal support will come into play soon. 

Support for the Scottish games industry has been a political football for too long now.  While the Scottish games industry made a strong case for support, it was wrapped up in research by the well-endowed UK think tank NESTA and UK games advocacy body TIGA and its particular cultural significance diluted in a UK wide solution.  The Labour UK government planned tax breaks across the UK which Scotland could have enhanced with other financial support. The UK breaks cancelled, what will happen now?  Whilst recognising that it makes absolute sense, the SNP has declared for the last 12 months that its lack of fiscal autonomy prevents Scotland from fully supporting the games industry. The latest rumblings in the Scottish Parliament may herald a grand gesture of providing financial support from the budget underspend.  If that’s the goal the Scottish Government needs, shoot. But its no way to go on. Scotland needs fiscal autonomy to support our cultural and economic winners but until we get it, we need to find other mechanisms to provide steady support for growth.

Creative Scotland is formally and finally launched next week with a full team and board ready to hit the ground running.  With a remit to champion the arts and creative industries in Scotland, and a specific role in leading the coordination of the Creative Industries Partnership – involving  the public agencies charged with supporting the games industry economically and culturally.  One of their first causes surely will be to champion the Scottish games industry, not only for their economic value but for their cultural significance in the success of Scotland’s creative economy.

Last week’s C&binet Forum was, on the surface, dominated by concerns about copyright from those with most to lose from filesharing. The agenda was framed to encourage the most fulsome arguments to be voiced by representatives of big players in music and publishing. And although all recognised the need for carrots to encourage consumers to pay for downloading content, and a campaign to raise awareness that filesharing is theft which could deny a livelihood to musicians and authors, most of the discussions were about the need for sticks. Today only 1 in 20 of downloaded music tracks is paid for.

C&binet is a not-for-profit network, created by the UK Government’s Department for Culture, Media and Sport to link the international creative and commercial communities to grow the global creative economy. At last week’s forum,  business leaders from across the creative and finance industries came together to debate access to finance for creative industries, new business models for online content, developing talent and securing creative rights.

Three cabinet ministers trailed the announcement made by Peter Mandelson on the final morning of the conference, that the Government proposed a new Copyright Strategy for rights management and licensing in the digital age, including the British version of ‘3 strikes and you’re out’, which is two notifications and then ‘proportionate’ action for those who violate copyright.

So with that all important stake in the ground,  other issues which were debated and discussed ..

Its all about the bandwidth, baby

In 5 years time the capacity of the internet will be enormous and with band widths and speeds on a completely different scale from today. So won’t the issue of downloading be redundant?

Mobile is more and more the future

Won’t our devices be ever more disposable as everything is kept in the cloud and as technology becomes embedded in our walls and cars? Notions of disposable Kindles were floated, looking down the evolutionary telescope.

Be Greater with Data

With the exponential extension of cyberspace, the amassing of meta data will form a content –aware network which will be pretty much able to know everything. This will generate multiple issues of licensing and privacy but will be able to be used for almost everything. People/consumers/customers/users will become more and more aware of the monetary value of their personal data as the transaction between users, suppliers and advertisers becomes ever more sophisticated.


Freemium is the business model for tomorrow- make that today

Although there were many references to the need to find new business models, that really was from those who only have old business models.

Taking publishing, Gail Rebuck of Random House told us that within 24 hours of the publication of the latest Dan Brown novel, there were 70 pirate sites offering it for free.

Cory Doctorow, on the other hand, is developing the whole suite of Freemium services with his forthcoming collection of short stories, with free downloadable editions in a variety of formats, pay-per-use audio CD, opportunities for readers to enhance their product, from the $250 hand bound edition to the $10,000 bespoke edition with a unique chapter for the purchaser. These are in addition to buying from a bookseller and his ‘donate’ service where you can buy a book and donate it to a deserving school or library.

This business model nestles comfortably amongst Spotify and Playfish- both of whom use the upselling model as their framework.

Collaboration is king
All of the statistics show that the areas where there is major growth is where people can interact and get involved – games and social networking.

Some of the industry leaders from the games industry, from Spotify and Google were bemused by the focus on copyright and old business models. With a global perspective, they have an eye on what is happening in China, India and Brazil where the growth in creative industries and internet activity is faster than in the UK. The next billion mobiles are projected to be bought in China. And Australia has invested $43bn in fibre networks.

In the words of a games industry leader  “if we don’t get a move on, the UK will simply be trampled on in the gold rush”

But now, with Mandelson’s announcement, we can get beyond copyright. Other areas were aired and discussed at the Forum and with a wide range of leaders of all types and scales of creative businesses attending, this could be the beginning of an effective network in which to influence Government for the success of our creative economy.

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Sir Gerry Robinson’s advice to the Global Irish Economic Forum is to take decisive action and target  4 or 5 games companies from Scotland to relocate to Ireland by providing a package of support including five years of tax incentives.   Ireland built up its film industry by taking action in this way and now boasts  a thriving audio visual sector which now contributes 557m to the economy.

Countries across the world are investing in their creative industries to get out of the recession – even in Iceland

The Scottish and UK Governments are fully aware of the vital importance of the games industry to the Scottish economy. There have been several reports now making a strong economic argument for investment in the games industry throughout the Creative Britain process, the Digital Britain report  and, specifically,  by NESTA and by TIGA, the games industries association.  TIGA’s most recent report:

presents a robust argument for the introduction of a tax break for the UK video games industry, similar to the tax credit which already exists for the UK Film Industry. This report was submitted to the UK Government’s Department of Culture, Media and Sport on August 28, 2009.
Key report findings included:
  • Over 5 years the Games Tax Relief would create 1,400 new jobs in the studio sector
  • 60-80 UK developed titles would benefit per year
  • A tax credit would trigger growth in employment, new game development, innovation and investment, and more sustainable business models for British studios
  • By year 5, for every £100 of investment by government in the Games Tax Relief, the industry will invest £176.
  • Over 5 years the Games Tax Relief would increase investment by games studios by £146m, direct and indirect annual tax revenues by £133m and GDP contribution by £323m
Mike Russell, the Scottish Culture Minister, frequently refers to the importance of the games sector and it will be one where the Creative Industries Partnership will get involved beyond the work Scottish Enterprise already does, it if deems it necessary, which surely it must.  Scotland has watched while France and Canada have invested  in the games industry and stolen a march.
Mike Russell states that full fiscal autonomy is necessary to offer the right package of support.

A spokesman for the Scottish government said to the Herald in its coverage at the weekend:

There is a range of support available for the games industry in Scotland. Of course, our view is that Scotland should have control of key fiscal levers in order to do more. This is a clear example of the need for radical change which at least provides full fiscal autonomy for Scotland. Until we have those powers we’ll continue to make the UK government aware of the implications for the Scottish gaming industry. We’ll also work with the industry to provide evidence of the impact.

If the Conservatives win the next election we can expect progress in this area, if Ed Vaizey has has way.  Perhaps Ireland will wait patiently.  Perhaps its hot air. Perhaps a deal is being done with the games industry while the political points are being made.  Dundee MSPs are seeking action. All the evidence is there.  Its just the action we want now.

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A step forward has been taken to embed a 360 ° system of support for Scotland’s creative industries with the publication of the report from the Creative Industries Partnership Group. The creative industries have an economic, social and cultural value for Scotland and so it makes sense that public agencies work together across the spectrum to provide specialist support across the whole of the creative industries.

The Creative Industries Framework Agreement Implementation Group (“CIFAIG”), jointly chaired by the Scottish Government and COSLA has put some further flesh on the bones of the February  Core Script outlining roles and responsibilities of the agencies which was agreed in February.

The recommendations of CIFAIG are based on the achievement of the following ambition: that Scotland becomes recognised as one of the world’s most creative nations – one that attracts, develops and retains talent, where the arts and the creative industries are supported and celebrated and their economic contribution fully captured.

CIFAIG recognised that to achieve the above ambition an innovative structure for supporting and developing the creative industries is required, led by the Scottish Government, with Creative Scotland the principal co-ordinator for action.  This structure has to be more than the introduction of a credible and properly empowered Creative Scotland. It must also involve the other parties to the Framework Agreement being prepared to adapt their existing processes and procedures to the achievement of the collective ambition. As importantly, it has to involve and engage practitioners in a manner and at a level that ensures that their contribution is both significant and effective.

The Agreement describes in some more detail how the specific agencies will work together and further articulates the role for Creative Scotland in leading the coordination of the Group and providing research and intelligence and being a broker, networker and champion.

The Framework Agreement is a step forward towards embedding a 360° system of support for Scotland’ s creative industries.  The creative industries have an economic, social and cultural value for Scotland and so it makes sense that public agencies work together across the spectrum to provide specialist support across the whole of the creative industries.  All teams need a leader and the Agreement sets out the priority roles for Creative Scotland in leading the coordination of activity through providing intelligence, gathered through research and through strong networking across the 13 sectors and relevant partners.

The devil is in the detail though and the Agreement does not provide the route map for creative entrepreneurs and enterprises recommended last year.  Creative Scotland will need “to provide intelligence and advice about the workings of the sector, including commercial opportunities, talent, market development, structural issues and dependencies” across the creative industries this year to facilitate this.

There is still a way to go but progress will best be made by actions and by actors.  Creative Scotland needs the leaders in place who can command authority and coordinate with credibility across the spectrum.  And Scottish Enterprise needs to signpost its commitments through its promise to have a clearly designated senior person for the creative industries.  And maybe its time to signpost ‘creative industries’ as a sector on the SE website instead of digital markets.

crocs
Although widely viewed as a damp squib, the Digital Britain report should be seen as enabling , with recommendations which will improve the digital infrastructure and enable greater digital access and success. But it won’t do it all, couldn’t and shouldn’t. And, at a time of accelerating change, the recommendations are not future proofed and there will need to be ongoing intervention by the state to support a digital Britain. But what about Scotland?

On the one hand the Digital Britain report did not support the recommendations of the Scottish Broadcasting Commission for a Scottish digital channel and Culture Minister Mike Russell MSP expressed disappointment.

On the other, the report announced the launch of three pilot schemes next year – one in the STV region, one in Wales and one in an English region – where consortia of media organisations will bid for licence-fee money to produce local ITV news. This represents the loosening of the BBC state monopoly and no one can predict where this will end. Things are moving.

This should also be seen in the light of the report of the  Calman Commission this week which recommends Scotland have more tax raising powers – albeit at the cost of losing its block grant.

So we are on a journey towards Scotland making key decisions with regard to the success of our creative industries in a digital world and backing them.

I have banged on  about the need to  support Scotland’s video games industry and the Digital Britain report alludes to cultural tax incentives to support the sector and we can hope that it actually happens. What will Scotland do for our team?

machine3

Comments on yesterday’s post  focussed on the machinery we have built – and what it costs, its cost effectiveness and general usefulness now.

I’ve never seen a problem that wouldn’t be easier to solve with fewer people, or harder, and ultimately impossible, with more. 

David Attenborough yesteday

And when we come to look at the opportunities presented by the recession, it is worth looking at the fitness for purpose of our current machinery in our changing world.

NESTA has called for innovation in the public sector, to cut costs and find innovative ways of delivering public services and suggests involving more ‘players’, parcelling up services to social enterprises for example.

We  have the great advantage in the arts now of having a developed infrastructure, many skilled professionals (some of these are volunteers) and venues as part  of our machinery nowadays.  We also now are able to engage collectively as the arts community and connect through networks in new ways through technology.  So, if we wanted to look at reducing the amount of machinery, we are in a good place to start. We could do things differently, moving more of the support and services to groups, venues and local agencies.  In the arts and creative industries, many of us are the pebbles not boulders – small and agile – that we need to be to successful in a digital Britain (Charles Leadbetter’s response to Digital Britain).

But machinery, and structures, are only there to support delivery of priorities.  And in, out and through the recession, we are re-evaluating priorities.  On the one hand, going back to basics, core values and on the other, backing winners and dropping losers.

If you had to choose 3 priorities for support in the arts and creative industries which would see us through the recession, what would they be?

Lets assume that the Government deals with the critical policy interventions identified in Digital Britain in terms of broadband, rights and PSB.

My 3 elements would be:

1. supporting artists for all the great things they contribute

2. ensuring a network of venues, creative hubs which create the conditions and connections for creative experiences

3. crowding in investment and support to back the games industry, which has the potential for high economic growth

The current recession offers an opportunity for us to review our priorities in the arts and creative industries.  Many people, audiences and participants, have less money and there is less public sector subsidy available for the arts and culture.

This is a time when the role of artists and arts are invaluable, both in intrinsic and instrumental dimensions;  making sense of the changing world, transcending the mundane, contributing towards social and community cohesion.

 

This is also a time when, to attack recession and achieve economic growth, picking winners in the creative industries is a good idea.

 

To deliver priorities such as 1 and 2 -in the context of less public susbsidy.  we would want to get more cash out of the machinery to support good quality raw materials, processes and products.

 

 And what would we need our intermediaries to do?

 

 

1.    In  supporting artists, providing financial support and advocating the role and value of the artist and art in society

 

2.     Connecting artists with parts of the public sector where they can make a major contribution, through social services for example

 

3.     Supporting a network of creative hubs, venues which are enabling spaces

 

4.     Championing sectors and making interventions which have the potential for high growth and crowd in investment around these – videogames and interactive technology (NESTA reports UK and Scotland)

 

 

sims

In a previous post  I highlighted the NESTA report for the UK government recommending a range of interventions to support the games industry. This is an area for Scotland where our world leading talent should be supported and where Scotland can be a global leader and achieve economic growth while promoting cutlural identity.

Mike Russell MSP, the Culture Minister, has recently visited Canada where the state does support its games industry and indeed gained competitive edge over Scotland through some of its fiscal interventions.

In an encouraging letter in today’s Scotsman Russell states:

We have seen an explosion of creative talent and recent notable success of gaming developers based in Scotland but I believe the industry’s potential is not fully realised. Clever, strategic support in the form of joint agency collaboration and tax incentives would give our gaming entrepreneurs that extra edge.

We have already set ambitious and realistic parameters to widen support and improve opportunities for success for our creative industries. Creative Scotland will work closely with the enterprise agencies and the local authority umbrella organisation Cosla to enable and develop business for creative practitioners – gaming is a key strand.

Excellent

He then goes on to say

 Currently, the Scottish Parliament does not have the full fiscal powers to offer incentives and stimulate business. Such powers are vitally needed; with them we will deliver a stronger, more productive creative industry landscape

Additional tax raising powers would allow Scotland to make specific fiscal interventions like tax breaks. But, given we dont have these at the moment, there is ample opportunity to achieve tax incentives within the UK. Tax incentives in film which apply in Scotland are administered through the UK Film Council . The specific tax inventives suggested by NESTA would give the UK games industry support through a range of tax incentives. That, combined with other interventions and support made by Creative Scotland and Scottish Enterprise, could deliver the package of support we need.