Written evidence from Gamers Voice (UK)
Ltd
1. The Committees' enquiry is to examine
the potential impact on Scotland's video game industry of the
recent announcement by the Chancellor of the Exchequer to abolish
tax relief for this sector and to examine alternative financial
incentives for the industry.
2. Inevitably various reports will be prepared
by other bodies including developers, distributors and undoubtedly
TIGA as one of the industries representative bodies. The purpose
of this report is to provide background narrative to the video
game industry in the UK as a whole and to that in Scotland from
the point of view of the consumer rather than the industry itself.
It is hoped that this report will assist the committee in making
its findings within a broader factual matrix.
3. GAMERS' VOICE
3.1 Gamers' Voice (UK) Limited ("Gamers'
Voice") is a not for profit limited company established to
represent consumers and gamers in the UK. In November 2009, Tom
Watson, MP for West Bromwich defended the content and players
of video games following an attack by Keith Vaz MP on the contents
of the game Call of Duty: Modern Warfare 2.
3.2 Following that event, Mr Watson made
a call for like minded gamers on the social networking site Facebook
which resulted in the company being formed. The group currently
has approximately 17,000 members and has formed close contacts
with members of the industry at all levels. It's purpose is to
promote video games as a form of artistic media and to defend
games and their players from attacks against them by the media
and, where necessary, by politicians.
3.2 While computer game tax relief does
not have a direct effect on consumers in the UK, Gamers' Voice
has become involved in the battle for them to be reinstated as
the abolition was entirely unexpected.
3.3 Our primary concern was that the computer
games industry was seen to be either not worthy or too immature
for the cuts, and that the decision to make those cuts was made
on an arbitrary basis without consideration of the economic and
cultural value of what is one of the fastest growing industries
in the UK.
4. CULTURAL IMPACT
OF VIDEO
GAMES
4.1 Britain has a pioneering history in
the development of video gaming and this has made a significant
cultural impact on the UK. Games developed in the UK which are
culturally significant such as Elite, Lemmings, Sensible Soccer,
Tomb Raider and Grand Theft Auto are now household names. From
the British-made ZX Spectrum to the highest grossing video game
of all time in GTA IV the industry has grown into a multi-billion
pound industry which spans more than 30 years of games and consoles.
4.2 The Nintendo Wii has now transcended
being purely a games console and culturally is as significant
as IPods and is accessible to all members of the family. With
the Playstation Move and Xbox "Kinect" looking to build
upon the Wii success, social gaming has never been more popular
or significant.
4.3 Britain's video game industry is now
recognised by the Ivor Novello awards, for the music scores of
Video Games. The Baftas have been out awards to the Video Games
industry since 1998 and due to the rising profile of Video Games
a separate event was created in 2004.
4.4 Video Gamers are incredible enthusiastic
and proactive consumers; the most recent launch of "Halo
Reach" by Microsoft for the Xbox 360 had more than 400 stores
opening their doors at midnight. UK gamers want to support games
developed in the UK, which is why Gamers Voice wants to support
tax relief.
5. SCOTTISH GAMERS
AND SCOTTISH
GAMES INDUSTRY
5.1 The Scottish Video Games industry is
thriving although recent evidence suggests that businesses are
beginning to struggle.
5.2 Talentscotland.com describes the local
industry succinctly as follows:
"Scotland's Video Game industry has more
than 50 companies based predominantly in Dundee and the Tayside
area, but also in Edinburgh and Glasgow. And it still continues
to create bestselling titles—such as the Grand Theft Auto
franchise from Rockstar North, and 2007's worldwide smash hit
Crackdown, from Realtime Worlds. While these companies are the
two big players in Scotland's thriving industry, there are many
equally innovative smaller studios such as Denki, Proper Games,
Cohort Studios, Dynamo Games and Outerlight.
As a whole, the sector employs 100,000 people
and contributes more than $9 billion annually to Scotland's economy.
This is expected to grow by between 10% and 20% a year. With new
innovative titles constantly in development, the video games industry
will continue to contribute to the wider sector's success."
5.3 Scotland's Games Industry has a worldwide
reputation for being a source of creative and high quality games,
even down to a consumer level. Internationally known names like
Rockstar repeatedly produce high quality "AAA" titles
for distribution around the globe.
5.4 Scotland's video game heritage is, as
with the whole of the UK, firmly established with iconic games
like `Lemmings' being developed within it's borders.
6. GAMING DEMOGRAPHIC
6.1 It is fair to say that decades ago,
video games were predominantly played by pre-pubescent or teenage
boys in the confines of their bedrooms. They were a primarily
a solitary hobby. Those days are firmly in the past. The committee
may be surprised to know that recent research shows the following:
— The average gaming age is now 30+.
— 38.2% of the UK population is an
active computer gamer.
— 51.2% of British men and 25.1% of
British women aged 10-35 play games regularly.
— The average computer gamer has been
playing for over 10 years.
— On average, gamers play for 11 hours
per week.
— 27.2% of all active gamers in the
UK are women.
— The average age of the UK female
gamer is 30-35 years old.
7. WHAT CONSULTATION
WAS HELD
BY THE
UK GOVERNMENT WITH
THE INDUSTRY
BEFORE THE
DECISION WAS
MADE TO
ABOLISH A
GAMES TAX
RELIEF?
7.1 As stated above, the initial concern
of Gamers' Voice was that the decision not to introduce a specific
tax relief for the UK video games industry was a short sighted
move made without any form of proper consultation on the basis
that video games are not a "proper" form of art. To
this end Gamers' Voice wrote to various MPs demanding an explanation.
Mr Jim Dobbin MP, forwarded our correspondence to David Gauke
MP who replied on the 6th September 2010 to Mr Dobbin as follows:
"The decision was taken as a part of
a wider package of reforms to business taxation, including reducing
the main rate of corporation tax to 24% by 2014 and the small
profits rate to 30% from April 2011. One of the principles underpinning
this reform is that a simpler tax system with lower rates for
all is usually the most effective way to support economic growth.
The package of reforms are a step in the Government's long term
aim to create the most competitive corporate tax system in the
G20.
These changes will help companies invest,
attract foreign investment and boost growth. As an industry that
is recognised across the world as a source of great talent and
experience, the video games industry in the UK is strongly places
to benefit from the most fundamental and far-reaching reform of
the corporate tax regime in generations"
8. CANADIAN TAX
RELIEF SYSTEMS
8.1 In 2006, the UK games industry was the
third largest in the world in terms of revenue generation. We
have since fallen to fifth place, arguably because of foreign
jurisdictions creating benefits and incentives for businesses
to be based abroad. The main comparator used is Canada, although
it should be noted that Germany, Japan, various States of America
and now Russia also have similar incentives in place.
8.2 Quebec offers tax credits of up to 37.5%
on labour expenditures, and Ontario offers up to 40%. These are
non-refundable tax credits, so companies receive the benefits
even if the business is not profitable. They aren't refunds on
taxes; companies become eligible for the credits as soon as expenditure
is made. For an industry that has a notable lag between the production
and development phases of its product and the front end sale,
this has undoubtedly assisted in Canada overtaking the UK to become
the third largest development base in the world.
8.3 Clearly these systems are superior to
the changes made by the Government in the recent emergency budget
in that they automatically reduce a huge operating cost by up
to 40%; money which can be dedicated to other parts of the business.
Government's emergency budget simply cuts tax on the bottom line
rather than providing an immediate incentive, or "helping
hand" as had been anticipated before the election.
Summary
— From July 2008 through July 2009
15% of UK games businesses shut down.
— From July 2008 to March 2010 about
7% of the UK games industry staff lost their jobs.
— The average gaming age is now 30+.
— 38.2% of the UK population is an
active computer gamer.
— 51.2% of British men and 25.1% of
British women aged 10-35 play games regularly.
21 September 2010
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