This week Activision joined TIGA in an effort to help put pressure on the UK Government to reconsider recently axed plans for tax breaks for the UK videogame industry. Now, speaking to the Financial Times, Activision CEO Robert Kotick has said that they need incentives if they are to continue to invest in UK-based developers.
Activision currently own two UK developers – FreeStyleGames, makers of DJ Hero, and Bizarre Creations, makers of Project Gotham Racing and Blur. Kotick admits that the UK has some of the best talent in the world, but talent may not be enough to secure future investment.
For us to continue to invest in the UK there needs to be an incentive provided for us to do so…
He continued by mentioning the incentives that places such as Canada, Singapore and “eastern bloc countries” are providing. And Activision aren’t alone.
Sony have also voiced concerns about the government’s decision to scrap tax relief with Sony Computer Entertainment’s UK managing director, Ray Maguire, stating:
The existing plans will continue but any further new developments would have to be looked at. Maybe something that was planned for the UK would go abroad now.
Looking at the SCE Worldwide Studios website, Sony currently have 5 studios in the UK and have also recently acquired the Guildford-based LittleBigPlanet developer, Media Molecule.
The UK is full of developers creating games that regularly see success on a global scale. London-based Rocksteady Studios, devleopers of the critically acclaimed Batman: Arkham Asylum (recently acquired by Warner Bros. Interactive). Brighton-based Black Rock Studios, makers of Split/Second: Velocity. Splash Damage, makers of the highly anticipated FPS Brink. The list could go on.
The UK videogame industry generates a substational amount of revenue, 70% more than the UK film industry, which, by the way, does receive tax relief. It also provides thousands of jobs. What are the risks of a continued lack of support? Are UK developers going to move abroad? Are publishers going to cut/reduce funding to UK-based developers? Either way, the situation looks bleak.
Thanks, GI.biz
cc_star
Bobby Kotick knows a thing or two about making money, his company turns over a billion or so a year, and is the only major publisher to be showing a profit rather than a loss… He has made this money without receiving handouts from taxpayer support.
Specific industry tax relief is bad, very bad – it is not like farming, where everyone needs to eat food at affordable prices and farmers need to grow unprofitable crops on expensive to maintain land, its a feckin’ videogame for christ sake, one of life little luxuries, for when you get a bit of time spare, kick back, put your feet up and enjoy some escapism is this something you’d like to see tax payer money go towards when at the current time the pressing things to worry about are schooling, health, and emergency services.
I find it abhorrent that companies turning over billions are after handouts from taxpayers, if this was to ever happen I would like to see their full internal auditing turned over for inspection, so as we can make sure they isn’t any bloat or waste in the company that we’re funding.
Just because Canada and Singapore does it, isn’t a reason for us to throw money at a currently unprofitable industry – in fact we should be putting pressure on those countries to stop doing it. Bobby needs to realise the world is in recession, everybody is tightening their belts in effort to find more pennies to put food on the table, and he might just need to go without a yacht or two during this period as well.
It is far better for a country to have low taxation across the board and to be a very attractive place to business, this will come through the continued lowering of taxes on companies profits (lowering of Corporation Tax) ensuring highly skilled professionals aren’t better off working elsewhere (reversing the 50% tax rate) making it as cheap as possible for companies to employ people (reducing employers National Insurance liabilities) these things are all happening, but crucially they are happening in every single industry so the whole country will be able to benefit, in the LONG run and not just go toward funding Bobby’s fleet of luxury yachts.
It also isn’t possible to compare to the film industry without qualifying why the UK film industry is in receipt of tax payer money, the only films which do receive tax breaks are those which are culturally British in their nature, from stuff like documentary movies (which are unprofitable, but are a necessity) to the type of films which Channel 4 are involved from stuff like Brassed Off to East is East, which do go on to be ‘blockbusters’ in their own right, the same can’t be said for videogaming PGR Racing, Split/Second, Burnout Paradise, Batman Arkham Asylum & Brink, all of which are culturally American, both in subject-matter and attitude.
I cannot believe the games press (& in particular C&VG) is becoming a mouthpiece for TIGA & ELSPA, these are trade bodies with an agenda! just because we like their mesage it doesn’t mean what they’re saying shouldn’t placed under scrutiny and factchecked, especially when our very hard earned tax money is at stake.
Gastos84
But POTENTIALLY it’s putting thousands of jobs at risk at a time when unemployment is already off the charts and POTENTIALLY putting billions of pounds of revenue at risk.
Also, whilst the UK Film Council does provide funding based on cultural content and cultural contributions, it also awards ‘Points’ based on British staff. Director/Screen Writer/Producer etc etc. How can this not be seen as a worthy cause?
I realise the government’s attempt to cut debt and spending is an attempt at getting the UK back on track but at this moment in time they seem to be cutting their noses off to spite their face. Say they reconsider the plan in 5-10 years (if they stay in that long), could this be too late?
BrendanCalls
But there are larger scale and more important industries and services in the UK that need secured first. NHS, Fire Service, Armed Forces etc..
Far be it from me to know how much money giving tax breaks to the games industry would cost but i do know it would cost millions, wouldn’t those millions be better invested in securing the above mentioned services before we secure our video game industry
cc_star
There isn’t any money, it doesn’t exist – it needs to be borrowed by the Government and then paid back with interest…
Although there is a chance the Tories will have got borrowing on an even keel by the end of this Parliament the actual debt that the continued borrowing has built up will take until 2040-2050 to pay off (assuming a future Government doesn’t add to it) again all of this is with interest
It’s not putting jobs at risk, that aren’t already at risk from the decline in the videogame industry.
I don’t get how an industry can decline 25% in one year, and then decline a further 20% the following year and then expect to get handouts from tax payers without putting their own house in order.
We keep hearing about how there’s billions of pounds in revenue from videogames how its bigger then Film, Music & maybe even film & music combined, and yet not one single one of these companies is making profit off these billions…. there isn’t a feckin’ chance tax payers money should be poured into their business without having their books looked through with a microscope, because something is massively wrong.
Just because Canadian tax payers are being taken for a ride by multi-billion pound companies it doesn’t mean we should.
Gastos84
No, I totally agree that NHS etc also need looking at and they do and will always take priority. Over 5 years the planned Tax Breaks for the Games industry would cost the government £192 million but it would generate over £450 million in investments and it would secure the jobs already there and create more jobs.
@CC – your comment at the time was: “So the Government could invest £192m which in turn attracts £450m of investment creating gawd knows how many jobs, but chooses not to – tells you all you need to know about their financial competence, or indeed how interested they are in working people.”
Just because the Con-Dems are heavily focused on tightening the purse strings doesn’t change the situation, does it?
cc_star
yeah, but who says the £192m will create £450m?
The very same people who are lobbying for it, how do we know this is true and why are so called journalists taking one side of the argument at face value and pouring scorn on what the Government says just because they like one message more than the other?
If the Government was to give me £500k, I could make a business which overtime generated more than that, if you were you could too – there are millions of business all around the country that need Government money – what’s so special about videogames? Why are they more worthy than retail, manufacturing, engineering, technology, education, pharmaceuticals, automotive, accounting, advertising, insurance, mining, hospitality the list is endless… if you give them all money – they will all make money,as long as they are ran carefully which is more than you can say about the videogame industry every year looking at their financial as we have become accustomed to doing.
Why should taxpayers fund a luxury, which despite turning over billions loses money? they are obviously either poorly ran, or just plain & simple to bloated & wasteful to turn a profit on the vast number billions they make, should tax payers money be added to this waste? or should they get their own house in order before they start lobbying again?
It is better for the Government to concentrate on making the UK a better place to do business, developers are business’ so the lower taxes they have & the cheaper it is for them to employ people the better it is for them and they will flock to countries where the tax burden is the lowest, it is only highly taxed countries which need to offer tax incentives.
What’s the point of receiving £192m when all that happens is it is spent on an inefficient tax system.
Also, all of these are foreign companies which report their financials to either the US or Japan, therefore they won’t even have full UK tax liability, they’ll just shift the money around the group endlessly re-investing it so tax is never paid on the earnings which are generated by tax incentive schemes.
BrendanCalls
Well put Mr Star.
I agree with you larger picture view on the issue. Do I want tax breaks on the video game industry in the UK – yeah
Is it more important than ensuring the financial stabilty of the country and its key services – hell no.
bunimomike
cc – an even playing field is going to be tricky but I agree. We’ve seen it cripple other industries in the UK too. The coal industry wanted subsidising when Germany was subsidising theirs. Per ton of coal we simply couldn’t compete (if memory serves me).
How the hell we can force the other countries to take away their subsidies is beyond me but I’m up for it.
cc_star
Everything is subsidised somewhere, we can’t go round handing out money every time the great ‘vested interest’ comes calling and says “look the Philippines are incentivising sock making” “New Zealand is subsidising picture frame making” “Iceland is subsidising candle making”
All industry bodies will be able to put together some similar figures to what TIGA/ELSPA has done and make a business case for investment
Can we pay them all?
No, course not.
Uhyve
Actually, that’s the very reason for subsidizing, cutting taxes for all companies is irresponsible and unfair on people in the country, who would be the ones picking up the slack. The only reason to offer tax breaks for companies is in order to stop our industries at risk of having work move out of the country and to bring in new work in profitable industries. Some industries are not either of those, so why would we want to give them tax breaks? There’s no reason, at all.
Uhyve
Just so you know, it’s a tax break that they’re after, not hand-outs, I keep seeing you stating it that it would be our tax money going to these companies but that is incorrect.
You’ve really got to look at the maths of it. Do we think that the lowering of taxes on Game Developers would bring in enough extra work for it to bring in the amount that we’re no longer getting in taxes. If you also factor the fact that people without jobs are on job seekers allowance (there’s a fair amount of them recently, even in the games industry) and that the people who would be working at these new developers would still be taxed normally, it’s not a huge leap to think that these tax breaks might not have a huge hit (maybe there would be a hit in the short term, since these jobs can’t be created overnight, but I think we’ve recently witnessed what short sightedness can cause).
cc_star
A tax break is an incentive, is effectively a subsidy, is a handout – there may be a return on it, although no one actually knows for sure, as we only have one side’s input and they are the side with the vested interest.
Like you say doing the maths from both sides of the fence is the only way to know, but morally is lining the P&L sheets of multi-billion companies the right thing to do, when the money is being borrowed, and could be better spent saving education, health or public services jobs – all of these people will live in the UK, pay tax in the UK, buy goods in the UK which in turn supports other UK jobs
The problem with industry specific breaks/incentives/subsidies/grants/handouts is that once we offer it, whats stopping Canada offering more, will we then need to offer more, are we being held to ransom by these multi-billion companies?
As far as I can see it is a slippery slope where the country who gives the most away is both the biggest winner and the biggest loser simultaneously, and the only winners are the chairmen of the boards & the shareholders they represent, then what happens when every single other industry comes lobbying for their share of tax payers cash?
Perhaps if Activision/Sony/Ubisoft & other multi-national companies weren’t on the receiving end of the potential breaks, and it was limited to companies which are not only UK based, but also UK owned and report their earnings solely to Her Majesties Revenue & Customs, then at least we can be sure that the money is staying in the country and will provide benefit to us taxpayers rather than the boardrooms in California, Tokyo & Paris
Someone like Just Add Water for example, who don’t employ a team of bean counters to shift money around various countries looking for loopholes, maybe then games industry tax breaks would be acceptable to the Chancellor and the British public at large (away from trade bodies & gaming websites)
Uhyve
Heh, that’s true. It would be nice if the money actually stayed in the country. Maybe they could just offer the tax break to upstarting developers (maybe even developers that are being founded by big companies, if it’s just a limited time kind of thing). I’ll admit that on this subject, I am kinda biased since I just got out of programming course at Uni, and am now looking for a job. :D
theDAZBOMEGATRON
Our tax money could be better spent. We give the European Union nearly £100billion each year, so ffs stop paying! Give the games industry a tax break, and there’s also the added benefit of not needing to lay off hundreds of thousands of public sector workers to save a small amount of money. Also make the banks pay back the money they borrowed with interest. We (UK) borrow from them and pay them interest. Or better yet, dont pay the bill for borrowing from the banks!
France will still sell us their wine, Germany their cars, Spain their fruit and veg, in short, the EU will just carry on as is.
theDAZBOMEGATRON
Zeitgeist Addendum, watch it and see what money is all about.
jikomanzoku
I’d add a book to the list for the readers out there “wisdom of Crocodiles” by Paul Hoffman.
jikomanzoku
I’m more opposed to the spending of ridiculous amounts of money on pointless nuclear deterrents than our membership of Europe, whose European Court of Human Rights has helped overturn countless Draconian laws that successive British govts here have tried to impose. That has led to fairer working time directives for employees, and vastly improved workplace health and safety.
a inferior race
The nuclear weapons have done more to stop war between major powers then any other act in history.
YOURMUMANDME
Where’s my points for the football Lewis !?! :D
Isn’t Move a British made peripheral as well ?
YOURMUMANDME
Cheers Gastos !! :D
BIGAL-1992
Trying to get people to invest in a country that’s going to hell in a handbasket is the first step towards financial ruin. That’s why Kotich is looking for the incentives, otherwise he risk losing cash.
mcduff1979
i agree with the uk games industry getting a tax relief, they are more financially worth the investment as opposed to british film… problem is this current government is a waste of space.. the country will go deeper and deeper down the pan while they are in power. i give a year til there is a vote of no confidence in parliament.
jikomanzoku
I’m curious as to in which constituency CC is gonna run for Conservative MP in the next election ;p