To be published as HC 743-vii

House of commons



Culture, Media and Sport Committee

Support for the Creative Economy

Tuesday 26 February 2013

Greg Dyke, Amanda Nevill, Adam Singer and Andrew Chowns

Dr Jo Twist, Ian Livingstone, Dr Richard Wilson and Vincent Scheurer

Evidence heard in Public Questions 520 - 597



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Oral Evidence

Taken before the Culture, Media and Sport Committee

on Tuesday 26 February 2013

Members present:

Mr John Whittingdale (Chair)

Mr Ben Bradshaw

Conor Burns

Tracey Crouch

Paul Farrelly

Mr John Leech

Jim Sheridan

Mr Gerry Sutcliffe


Examination of Witnesses

Witnesses: Greg Dyke, Chair, and Amanda Nevill, Chief Executive, British Film Institute, Adam Singer, Chairman, British Screen Advisory Council, and Andrew Chowns, Chief Executive, Directors UK, gave evidence.

Chair: Good morning; this is a further session of the Committee’s inquiry into support for the creative economy. Can I welcome the Chairman of the British Film Institute, Greg Dyke, and the Chief Executive, Amanda Nevill; the Chairman of the British Screen Advisory Council, Adam Singer; and Andrew Chowns of Directors UK? Jim Sheridan is going to start.

Q520 Jim Sheridan: Thank you, and good morning. Can you give a brief flavour of how you see your roles and what you are doing in terms of supporting the creative economy, in particular film, and also how can the Government help you become more effective? I do not know who wishes to start.

Greg Dyke: We have spent some time trying to answer exactly that for ourselves, and produced this last year, which basically says, "What do we think we can do? What are we trying to do?" You can say you are going to do everything but you obviously can’t, therefore there are constraints. We have decided to concentrate, as the BFI, in three areas-three priorities. One is expanding education and learning opportunities about film; so, to try to get kids interested, build audiences and develop quite a small number of talented people to come through as part of that, because what we were interested in was audiences.

The second was supporting the British Film Industry, as we do with the Lottery money, so that hopefully it can grow-and it has grown-but also it is pretty obvious that basically it is still a cottage industry and we could build something bigger.

Thirdly was unlocking the film heritage. We have the best film library in the world, which no one can see, and it makes sense to try to use some money at some stage to unlock that, particularly in the digital world where there are all sorts of ways people could access it if you can digitise it. As a board and as an executive, that is what we decided our priorities should be over the next five years.

Q521 Jim Sheridan: In terms of what the Government can do to support you-

Greg Dyke: The Labour Government-the last Government-was very supportive by introducing the tax break for film. This Government has been equally supportive in continuing that and now expanding it to high-end television, to games and to animation. That is a significant move, which we obviously welcome. It does mean that those industries will expand; particularly, high-end television I think will expand quite far in this country. You will begin to see some of the Americans making big series over here because it is quite a significant tax break-so, the HBOs and the producers you could attract in. That requires further investment in skills. The Government has given some, but we would like to see some more in training in skills because I think the demand for those skills is going to go up quite quickly. If you do not do something, what happens is the price goes up and then you become uncompetitive again. We think quite suddenly there will be quite a demand for a whole range of people with particular skills. This is going to come in the next 18 months to two years.

The tax breaks are interesting because, if you look at their impact, there are those who would argue that you should not give tax breaks, particularly to creative industries. But these tax breaks have been successful in terms of the growth of the industry, but also enormously successful to the Exchequer in terms of what it is getting back. We think that Government has been-both the last Labour Government and this Government-quite supportive of the growth of this industry. Obviously we can all come up with some ideas, but we cannot sit here today and say, "The Government hasn’t helped". I think they have.

Q522 Jim Sheridan: That has been extremely helpful, but what would you say are the main threats or, in particular, the main opportunities for the industry just now?

Amanda Nevill: I don’t know about threats, but things that are on our agenda-I think, picking up on the skills, it is almost about a national psyche really, in that across the nations there is still this feeling that the creative industries, and obviously including film, are not as hard-edged as some of the other arenas. For example, one of the things that we have been talking about at the BFI is the whole funding for skills training and film schools, in particular, which are still not regularised in the same way, for example, that engineering might be, and we think that is definitely worth looking at; ditto, I think within the curriculum. One of the areas-and we saw it again with the Oscar wins yesterday-is our ability in this country to deliver great films, but also to do a lot of the work behind the cameras; for example, Life of Pi, which was such a great success. You don’t necessarily see it as a British film, but a lot of the post-production was done here.

What we are finding, especially in the special effects arena, is that the people with the right mix of skills are not coming through, and there is some evidence to suggest that you need people who can marry well the creative skills with programming and more computer skills, so I think a deeper look at how you can bring those together right in secondary schools would be very good.

I think access to finance would be really helpful because, notwithstanding the great support that the Government has given with tax relief and things like the EIS scheme that do work for film, nevertheless the whole recent furore about the lack of clarity has had a very negative effect on investment in film. Film is complicated enough to raise the funds for. It obviously delivers to the bottom line and is clearly a growth area within the economy, so getting absolute clarity to encourage investors into film would be really good.

Greg Dyke: I think it would be very good, because of all the fuss at the moment about what is a genuine tax scheme and what is a fiddle, if your Committee were to say to Government, "Look, this is a perfectly valid tax break". The EIS scheme is a classic example where people are now so nervous of getting hauled before one of your Committees that they have stopped investing, yet the Government has just expanded the EIS scheme. It seems to me that the Treasury could easily make it very clear: "These are perfectly legitimate schemes, and these we do not like". That would help a lot.

Q523 Jim Sheridan: I think the question of education and skills is something that we can explore perhaps later on. Can I ask one or two questions about independence in the industry, in terms of market access issues in the film industry? How do the independents get into these markets? How do they access the markets, or what role do they have in it? Rather than the big moguls, how do the independents break in?

Amanda Nevill: Into the international market?

Jim Sheridan: Yes.

Amanda Nevill: That is a very good question. The third point I was going to bring up was in terms of not necessarily barriers but opportunities we must be very careful not to miss. Again, we are looking at the international strategy across the BFI. If you look at the health of film, we have a very good relationship with the US, and we should not knock it; there is a huge symbiosis. The amount of inward investment that comes into this country puts money on our bottom line, employs people and also creates an infrastructure. That means our emerging British film talent have an infrastructure to create in, which we would not be able to support if we did not have that inward investment.

Hopefully the US market will remain very strong, although, by and large, there is a trend towards films with smaller budgets, and if you are in the US, they will tell you that. The foreign markets for those films are much more important than the domestic US market, which is a real shift in the economy and the way in which films are funded. From our perspective-and I keep saying this, and we have started to look at it-we need to start identifying the markets for British films. We did a forensic piece of research with a company called Olsberg because we wanted to identify which of the two countries we should develop a long-term strategy for to woo them, so we needed to look at things like exhibition potential, investment potential, export potential, but also we needed to marry that with things like, "What is the environment for piracy like?" and whether they are buckling down on that. What floated to the top were two countries that we really need to strategy-invest in long-term: Brazil and China.

In the Metro you probably saw there was a double-page spread about Hollywood into China. One of the things that we have to do-and we won’t see the results for quite some time-is woo China with all the weapons we have in our arsenal-cultural exchange, skills, co-production, everything that we can-because it is a vast, growing market.

Q524 Chair: Adam and Andrew, do you want to chip in on any of that?

Adam Singer: A couple of comments, if I may, please. Good morning, I am from the British Screen Advisory Council. To answer the first part of your question, our members include broadcasters and companies like Google, independent producers, a range of tech companies. We are a pretty broad church. We are essentially a crossroads between the audio-visual sector and Government and also a think-tank, in terms of how the techno-economics of this industry are affecting us collectively. That is essentially what BSAC sets out to do.

You asked a question, "What more could Government do? How could it be even more supportive?" I suppose I have a tendency to turn the question around and ask myself, "What would our creative sector look like if it was even more supported by Government?" That is a hard question because, of course, one of the key issues is that this is a highly successful creative sector. It is phenomenally successful. I suppose there are two elements: there is the micro way you can help and the macro way you can help. There are lots of small things in the micro. We have a creative sector that provides skills, in terms of packaging, design and the ability to articulate a message, which would benefit any country. We have a creative sector that generates more GDP for the country than our defence sector, and yet we do not have the kind of support in terms trade missions and delegations that they get. This is not a moral comment about arms; it is about a return on investment. All we are saying is that we could probably provide a better return on investment given that kind of support.

One of the issues that perhaps you should be thinking about in terms of support is, convergence is not done with us yet; every single industry becomes a subset of digital code. If it is digital code, it is easy to copy. If it is easy to copy, how do we protect it? It is not just to do with piracy on music. With the arrival of 3D printers, the biggest issue you are going to face is the cutlery manufacturing industry coming to you complaining about the theft of their fork designs. That will come with 3D printers. I make a light point here, but it is purely to show that this is still travelling through the industry, and we need one Ministry that is looking at what happens when everything is converged, because when everything is converged it is all a subset of digital code. That is where we need help.

To sound a little like the slave and the chariot, the other thing I need to remind you, of course, is that one of the sad things is that there is a limit to what you can do, because in the end-I mean no offence to this place-in the context of a global economy, this is a minor Legislature and we are dealing with a totally global industry, and it is about how we go out to that global industry. So, anything on the micro would help.

To echo Amanda’s point, another area in the micro is the fecundity of our culture. Where we are particularly rich and diverse is in the ability to have this highly fecund creative culture that has created this very powerful creative sector. So, if I were you, these are the areas I would be looking at to help us.

Andrew Chowns: Good morning, everybody. I am Andrew Chowns. I am the Chief Executive of Directors UK, and our members are film and television directors. They are in an interesting position because they are one of the two copyright owners in an audio-visual work and they are copyright owners as individuals, the other party being the production company that records the work to be created. We operate in two ways: we operate a collecting society, which collects royalties for directors, mainly in Europe, but we also operate as an extended collective licensing body in the UK-and I suspect we may come on to that a bit later-by which I mean that our members assign their copyrights to British broadcasters and producers in return for a licence fee that we then distribute to them. We have evolved in the last two or three years into more like a professional guild, housing the collecting society within it, so we have the interests of our members at heart.

I suppose there are three issues that I want to highlight to you. We have a clear interest in seeing the maximum possible investment in the creation of great British content. Our members want to work, they want to express their creativity and they want to see that work widely disseminated. They want to ensure that the business and the rights structures mean that there are fair rewards for directors and effective incentives, so that they will continue to create and forge their careers in the UK. We are very interested in career development for directors. In that context, I suppose the difference between me and many of the people you have seen is that we are representing creative individuals rather than creative businesses. There is a huge amount of support that the Government has given to creative industries through businesses. We often feel that there is insufficient attention paid to individuals in the creative industries. The significance of that is that a huge amount of the creation and the production of the content takes place by people who are freelance, who are not full-time staff employed by businesses. Those businesses, I think because of that disconnection, sometimes find it difficult to direct the creative work force and to marshal it effectively. In turn, the creative work force feels rather isolated and disconnected from some of the big policy initiatives. So I think the biggest single thing that you could do to help those individuals is to have them at the heart of policy making, in the same way you have the creative businesses. That will reflect itself in rights policy, tax, employment, investment, training, career development and the whole spectrum of policy initiatives.

Chair: Thank you. Obviously we are going to come back to look at each of those in a bit more detail in due course.

Q525 Mr Sutcliffe: I want to pick up on the skills gap. You said in the next 18 months there will be a wide need for people. How can you convince somebody that to be in the film or creative industries is a long-term ambition and something to be sure of? You talk about the defence sector, and you can be sure of careers in different sectors, but in the creative industries it could be up one minute and down the next. How do you secure people’s long-term vision for being involved with the sector?

Greg Dyke: I think it was Oxford Economics that produced a report that said if the tax break disappeared for film, 70% of the industry would go with it, which is your point to some extent. You change the Government, you have a different view of the world and suddenly it has changed. I am not sure that anybody has that view of industries any more, do they, apart from the professions? I think most people go into industries these days expecting that life changes quite rapidly over time. It seems to me that there are a lot of people who want to come into film, there is no doubt about that. The point is making sure you get the right talent. It is embarrassing that half of the people at the National Film School at Beaconsfield are still living in portacabins. Whereas, if you go to the average university-a sector I am involved with-you do not see that at all. It seems to me that it is time to invest in the film schools through HEFCE so that there is real money. It is ridiculous that the lottery money is being used to fund training for film, which is not what it was intended to do at all, but that is where a chunk of it goes. It seems to me that that should be down to the Department for Education.

We need to look in the next two years-and it is an audit we are trying to do-and say, "Where do we think the skills are needed and how do we get people into those skills quite fast? How do we train people up?" There is a demand for people to go into it all the time. The film industry is still a sexy industry, isn’t it? People want to work in the film industry. Everybody wants to be a director, don’t they? I don’t quite know why. But you are looking at where the gaps are going to be, and how we make sure we can fill them in a world that is suddenly going to expand. That is what we are trying to do.

Amanda Nevill: We are doing a really interesting initiative funded by the DfE. It is a pilot, but it does address what you are asking, which is, first of all, how can we attract young people into it from all over the country, so widening participation and equal opportunity, because it is not just about attracting people in. Actually, if you want the best business in the world you want to get the elite, the really good people, and they can be found anywhere.

We have this scheme funded by the DfE. It is only for the first two years, but hopefully it will be good enough that we can roll it out. We have mirrored the idea of the National Youth Theatre, but doing it for film. So, in every region of the UK there are courses being run over Easter, and getting into them is competitive. Then, from those courses we are taking the top tier and they are having a residential course, which we are doing with Pinewood and BAFTA as partners. We are, sort of, percolating down people. I think the value of it is: one, we should start to pick up some of the stars of the future; but also-to come back to your question-there might be some people who think they want to be in the industry and then, through this, determine that they do not want to be. I think that in itself is also helpful.

Andrew Chowns: I want to supplement that. A lot of these conversations are about gaps and bringing people in, but we must not lose sight of the fact that there is a valuable incentive of inspiration to be at the very peak. That is at the front of my mind at the moment, because the introduction of the TV tax credit-if it succeeds-is designed to bring in productions at the most inspiring level of the kind of work that we can produce. We want to have young people joining the industry, but we want them to be inspired to operate at the best level and to feel that they have a career that can take them right through to the top. I sometimes use the analogy of sports performance. Young people who join an athletics club, in the end they want to be at the Olympics and they want to win a gold medal, and they want to see a prospect that their career can take them on that trajectory and draw inspiration from the great practitioners in the industry.

Adam Singer: I used to be asked to attend a media group at a college in southern England where they were training young people in the skills of camera, sound, how to write scripts, and I always used to turn up and say, "Why do you want to come into this industry, because the skills you are learning are slowly becoming deskilled and of less value?" One of the points that we ought to be picking up on is that, looking forward in terms of a career for young people aged 18 or 20 now, we are moving into a post-broadcast age. In seven years’ time every single set is going to be internet-connected. The nature of broadcast television supported purely on mass advertising will change, and then the nature of creativity is not just the ability to tell a story, which will be equally as important, but the ability to harness and use that data creatively. It is also about being cool.

When I was young, I was with Greg on this: all I really wanted to do was direct. All my children wanted to do was make Angry Birds, the Finnish product. So the creative industry should not be thought of as just this narrow music/audio-visual sector. The sector we are going forward into is going to be very different, and creativity is about how you harness data in this sector. It is about how you tell stories; it is about how you tell stories using augmented reality. It is about the intersection between the games, and how you use your games brand and move it into a movie brand and a music brand. The nature of creativity is changing. So I think we should be careful about trying to encourage people into the creative version of the steel industry circa-1980s.

Greg Dyke: You always were cheerful, weren’t you?

Adam Singer: Yes. It has done me well.

Q526 Chair: We are coming on to Angry Birds in our next session. Looking at the creative industries across the piece, there are two or three issues that affect all creative industries. As we have already heard from different sectors, the first one is a pretty universal problem. It is the difficulty of raising investment finance. The normal lending institutions seem to regard the creative industries as somehow more risky and, therefore, less attractive for investment. Do you see that as a serious problem, and what can we do about it? Amanda?

Amanda Nevill: I think one of the things that is a truism, and we do not know whether it is a problem or not, is that investment into film or the whole of the creative industries has not resulted in companies of scale, for example, like they have in the States, and there has been the oft-repeated refrain as to, "Why can’t we build companies of scale?" One of the things that we are going to be looking at in the BFI-because of the world that Adam has just been describing to us and the new digital era, and because of the consolidation of a lot of the screen-based creative industries-is whether in fact there are different ways of levering investment to encourage companies of scale. So, I think it is a question mark as to whether it is possible. I don’t think we know the answer at this moment, but we are going to have another look at it.

Greg Dyke: Yes. It is a question that has been asked on numerous occasions over the years. We have taken on the job of having another go and saying, "Look, why isn’t it possible?" It interested me, Adam, when you saw the growth of independent production in television, that one of the safe things-and it certainly is applied in games, as you can ask your neighbours-is: why do we sell out for £10 million when Americans don’t do that? They want to build a multi-million-pound company. We don’t. It is just an observation. I have no idea why it happens and all the rest of it, but the number of people you have seen build a company to a certain level and then sell it, often to another British company and then to an overseas company-the games industry is a classic case. Is it something about the whole psyche? Is it that you think you have done so well to make your £10 million and that will do you in life? I don’t know. But we do sell out. That is what is interesting; even in film the most successful film company in this country, Working Title, is not British. It sold out. The games industry all sold out. The television industry is increasingly getting to a stage of selling out.

It is a question that is worth asking: quite whether you, we or anyone else can come up with why this is the path.

Mr Bradshaw: We will abolish the City, then, shall we?

Greg Dyke: I am not sure-you could argue the other way around: that the City does not make it easy for these companies to go from being £10 million companies to being £2 billion companies.

Q527 Chair: It is probably a separate issue, but I do not think this is unique to the creative industries, is it? It is a national problem. Adam?

Adam Singer: It is a national problem in that it is very much to do with scale. If you look at the major global companies, leading global companies of the last 100 years, by and large they all came out of the major leading global economy, which was the United States, where it happens to be the first international company like Singer Sewing Machines-not related; wish I was-through to General Motors, through to IBM, through to Microsoft, through to Apple, through to Google. It reflects the scale that they bring to bear.

I hesitate to talk about football metaphors, especially as I am sitting next to somebody who understands the business, and I am not very hampered by knowledge when it comes to football. But it does strike me that there are two kinds of clubs: there are those at the top, and then the clubs further down do seem to make a living out of selling players as much as anything else. I knew this was going to be a mistake.

Greg Dyke: If you want to get into that-

Adam Singer: No, I don’t. Retract all that. We do not want to get into football economics. The point is that to get the kind of global growth that you need, you need a major piece of investment, and the major piece of investment often comes from outside. It is capable of coming from within the UK, but more often than not it comes from the outside. They then have the ability to drive this business forward. Greg is absolutely right: the Americans do have a higher horizon than we do.

Andrew Chowns: It may be Amanda and Greg’s modesty, but there is one thing that is happening in the film industry that I think is a step forwards here, which is that one of the channels of recommendations from the film review conducted by Lord Chris Smith, for the first time, is to create an opportunity for filmmakers, producers, directors and writers to receive a channel of revenue from the success of their films. This is really important, because at the moment you are dealing with production companies who survive simply by being able to produce their next film. They are moving through the sea of production simply trying to get to the next point. They are not building up an asset base that they can then exploit or expand into different areas. So, it is a small step but I think it is a crucial first step to take, and I commend both the review and the BFI for doing it. From the filmmaker’s community point of view, we see this as absolutely transformational and it will energise filmmakers to think about what they do in a different way, to think more about what audiences want, and to invest more of their talent in making their films successful. I think that is absolutely vital.

Adam Singer: Can I come back on two points? If you look at investment in something like film, tax breaks and encouragement have all been helpful and are to be welcomed, but let’s just look at it from an individual investor’s perspective. If somebody comes to you with a film, essentially you have a one in seven chance of that being a success if you are lucky. It is pretty similar with games. So if you want to make an investment-a shrewd investment-you are more likely to invest in the commissioner or the aggregator because they are playing across the piece and getting longer odds, so you are much more likely to get a return. As soon as you are investing in the aggregators or the commissioners to move that needle of that investment, to be significant within that investment, that automatically means quite a lot of money. So, you have a single issue there.

It is worth noting that our independent sector is really vibrant. Most of the independent companies that sprung into existence when Channel 4 started are no longer here. They turned over with a gold crest and so on. Where we have been really successful is in our commissioning structure, because our commissioning structure has managed to keep feeding independents long enough until some of them do get out into an international market; companies like Shed, which have offices in Los Angeles. So there are real issues about how you get return on investment and how you mitigate your investment. The thing that I will be looking at very carefully is the new generation of crowd-source funding. This is beginning to generate a lot of money. It allows people to make small investments. It is going to be very important, and, doubtless, there are going to be one or two huge scandals, but we need to encourage it because there is an opportunity here. This is a new Savannah-the Americans are scratching their heads about it as much as we are-where we could get a lead and secure lots of investment. Recently somebody put up on a crowd-sourcing fund, "Looking for an investment for a pen that draws in three dimensions". They were looking for about £75,000. They raised over £1 million immediately. Crowd-funding is a new way of doing this. It is brand new. Look at the new; try to reinforce that.

Q528 Chair: I saw your submission about this, but could you tell us a little more about how you think we can make this happen? Is there anything we can do to encourage the development of this, or is it just going to happen naturally?

Adam Singer: I would make two comments. One, invite somebody with much greater expertise than me here-and there are several-on that. So, let’s be honest about that up-front. Two, it is going to be an issue that is going to cause tremendous anxiety, and natural levels of paranoia, because you are dealing with individuals putting up money into strange organisations they have not done that much due diligence about. Some will succeed and some will lose, and, sooner or later, there will be a natural conservative reaction to say, "How do we control this?" That is absolutely right, but I would look at trying to find a way of pushing it forward as fast as possible, to get the people who are doing the crowd-funding. Who are the crowd-funding people? [Interruption.] Oh good; they are here.

Greg Dyke: We will move out, then.

Adam Singer: Yes, I would talk to them. Am I on commission?

Q529 Chair: We are going to be coming on to them in a minute in the next session. Just before we move on, let us consider three or four people coming to you and saying, "We’ve got this great idea for a movie. We’ve got the script. We’ve got everything. We need some financial backing", and BFI does a bit, Film4, even the BBC. But where is the private-sector lending capacity because, to varying degrees, all of those that I mentioned are state organisations?

Amanda Nevill: It is not in a very good state at the moment. I think most producers will tell you that it is extremely difficult to raise private money, particularly for British independent films at the moment.

Q530 Chair: Is there anything we can do about that?

Amanda Nevill: One of the things that would really help are schemes like the EIS, which are fantastic vehicles-and Greg can talk you through it much better than I can-and they are very good vehicles that would work very well for film. But they require investors into those schemes, and at the moment I think investors are anxious about whether these schemes are bona fide and reputationally sound.

Greg Dyke: I think there are five ways we can work out that you can get some public money. It is possible to get the tax break, the BFI, the BBC or Film4, but I am not sure you would call Film4 public money. It is an interesting discussion, but BBC or Film4-you can get EIS, which brings in private investors. The advantage of EIS is that it is an incentive for private investors to come in, and then there is some European money. If you have a £2 million to £3 million movie, you can probably get well over half the budget through those. But the only one that is bringing in any private money is EIS. People have taken fright because of quite legitimate concerns about tax breaks, but we just have to sort out which are legitimate and which aren’t.

Chair: We are coming on to that.

Q531 Mr Leech: Mr Dyke, you have already highlighted this morning how important the tax reliefs and breaks are. Yet the BFI argue that we should see how well the four tax reliefs will work together before possibly extending it to other creative industries. If we know that it works, why shouldn’t we be doing it now?

Greg Dyke: There are two parts of it, aren’t there? The big impact of it is for foreign movies, particularly American movies, to be made here. In other words, they are not movies that are out to reflect our culture, our society and the rest of it. They are industrial productions moved here because there is a good tax break and we have very good technicians. We have the skills and we have a tax break. Do the same tax breaks work in other creative industries? I could not tell you. I do not know. But the major impact is the bringing of American movies to be made here. That has been the big change.

Amanda Nevill: The other thing is that on a global stage it is a very competitive arena. Our main competitors are Australia and Canada. I think it is about staying ahead of that and getting that investment into the UK rather than into those countries.

Q532 Mr Leech: Are you suggesting that the new tax breaks may not be as successful as the ones that are already in place? Is that part-

Greg Dyke: If you look at the tax breaks the Canadians have been giving for years on games-I used to be chairman of a children’s animation company, and in the end most of our animation in this country moved overseas. It moved to China and it moved to Canada, because one was offering cheap labour and one was offering tax breaks. So, I am very hopeful for what the Government are doing. I think it will be effective. Of course there is always the European issue, which Amanda has done a lot of work on. There are those in the Commission who do not like the tax breaks.

Q533 Mr Leech: If we know it works, why do we need to make an assessment of how successful they are, because we already know it works? Why shouldn’t we just extend it to other creative industries?

Greg Dyke: You could try to see what happens. Why the figures are pretty spectacular is because it brought American films to Britain.

Amanda Nevill: The new tax breaks that are coming up-obviously Treasury signed them off because there was a very tight economic plan that proved that the level of investment that would come through the tax relief would bring major net benefit back into the UK. For the record-you need to check this, but I think for every £1 of tax relief it brings in a further £12 of investment. There is a multiplier effect that has worked with film, which has been shown based on what the expectations are for games, animation and high-end TV. So, creative industries-beyond that, whether they could benefit from the same sort of fiscal model, what I am saying is I don’t think Greg or I would know enough about those industries to be able to say.

Greg Dyke: I am chairman of Ambassador Theatre Group, which is the biggest theatre group in this country, so I do know about theatre. A theatre production, everybody gets sold on the basis that they could have Cats. A bit like movies; at the moment everyone gets sold on the basis, "This is the next The King’s Speech". There is a limited number of Cats and there is a limited number of The King’s Speech. I am sure you could look at theatre production and at tax breaks very easily.

Q534 Mr Leech: Is there a danger that we introduce these tax breaks and other countries go that bit further? You talked about the expertise here. What is it that keeps people coming here, even if other countries go further with the tax breaks?

Amanda Nevill: Again, it is a very good question. Tax relief is very important, but it isn’t the only factor in the equation, by any means. The infrastructure and skills are absolutely vitally important. So, if you are making a film, the more you can do in one place with all your skills, the cheaper it is to make that film. The exchange rate is also a really important factor.

The other thing we are seeing at the moment is that almost intangible sense that filmmakers are being drawn to the UK because of the sense of creativity. They are very interested in the writers and the stories. As I said earlier, the US recognise that their international market is much important than their domestic market now, therefore they are looking for stories that appeal to that international market, and they do see the UK as a place that has writers who are able to deliver that.

Lastly, if you are going to make a huge film and you are negotiating some of your big costs for your cast, for example, then you are more likely to have an easier landing with the cast you want if you are coming to London than if you are going to some other countries, because people like being in London and in the UK.

Q535 Mr Leech: Changing tack slightly, Directors UK have said that anomalies in the tax system adversely affect creative individuals. Can you expand on that a little and explain how the tax system could be improved to take into account the freelance nature of the industry?

Andrew Chowns: I think I mentioned two specifics in my note. One is a rather technical thing. The HMRC have a set of film industry tax guidelines that govern how the tax regime applies to people in the film industry. One component of it is called "the nine-month rule", but this is basically a way of HMRC working out whether somebody is genuinely freelance and self-employed, as opposed to somebody who is effectively a staff person and should be on PAYE. I think those guidelines were originally introduced at a time when there were some instances of people, who quite manifestly were staff, trying to look like they were self-employed and then getting an advantage under the tax system. The reality is now that most creative people are freelance and have absolutely no chance of being staff because of the employment rights situation, and their employers will do everything they can to avoid them becoming staff. HMRC say that if you have an engagement that goes on beyond nine months, you will then be treated as PAYE. So, we have a very strange situation now where directors, who will quite often be working on a long-running series, are given a contract that finishes after nine months and, effectively, they have to sit at home for three months unemployed in order to go through this pretence that they are not a member of staff. It would be an easy thing to fix. At the moment it looks like freelance creatives are being discriminated against by this peculiar piece of tax legislation.

Q536 Mr Leech: Is there a danger that if we make it easier to deal with that problem, we encourage more of it, so that more people become effectively self-employed as a bit of a tax fiddle?

Andrew Chowns: It would be hard to see how that could happen in TV, because they already are. In any case, I think a more important driver for it is employment rights legislation. That will govern it. In my opinion, this tax rule is only having a perverse effect of creating three months’ forced unemployment.

Q537 Mr Bradshaw: I want to go on to intellectual property, but very briefly, from what you said about the importance of creativity in the education system, did you lobby for and welcome the recent U-turn by Michael Gove on the EBacc?

Amanda Nevill: Yes, we did.

Greg Dyke: There is no doubt, if you talk to anybody in a digital society about what skills they now want, the games industry wants people who can do art and understand mathematics. Well, we have an education system that still divides the two and always has done, ever since I was at school.

Q538 Mr Bradshaw: Great. On intellectual property, could we have your views about the pace and drive of the Government’s implementation of the Digital Economy Act and the measures in it to tackle piracy?

Amanda Nevill: What is interesting at the moment is we have a scenario where we need to balance the expectations of consumers, which are moving faster, arguably, than technology or the financial model that feeds film are able to keep up with. So, we have the Digital Economy Act, and we have the ER Act. So, the ER is within it, and we have had loads of discussions with BFI, particularly when it is the private-copying exception, which as a consumer I can completely understand. If I buy a film, I want to be able to look at it on my iPad, which at the moment is illegal. So, from a consumer’s perspective, we need to be able to do that. There is anxiety in the industry because the Digital Economy Act is moving quite slowly. If you free up that private-copying exception, it will make it a lot easier and better for the consumer. On the other hand, if you haven’t ensured that the Digital Economy Act has enough teeth, it won’t be able to come down on people who abuse the system. So, I think that sense of trying to get those two things moving in parallel would give greater certainty. So, one of the things that we have looked at, at the BFI board, is this notion of, with the private copying exception, whether the timing of that being introduced could perhaps be marked a bit more closely to the speed at which the Digital Economy Act is coming through.

Mr Bradshaw: Anyone else?

Andrew Chowns: The pace at which it is being moved forward is painfully slow. Like Amanda, I am also interested in copyright reform. I contrast the way that that is being undertaken with the way that the film review took place. The film review was a model of inclusion, where all the different sides of industry were brought together to come up with modern proposals. I think the review of copyright has been very adversarial, and one cannot escape the feeling that its conclusions were rather set out at the start and also what has followed from it. There has been a missed opportunity, particularly in private copying, because I think where we are now is that the Government has felt that it should make a step towards liberating private copying by individuals to regularise what are quite clearly some anomalies in the way that individual behaviour takes place. But they felt very constrained because they don’t want to create a fair reward to rights owners for allowing that use. So, we have made teeny, tiny steps towards liberalisation without any remuneration, and that is going to end up with no party feeling satisfied.

The alternative would have been for the industry to look at a more liberal private-copying expansion, which creates more opportunities for digital businesses to move into that space with clear rules and a fair reward for creators. If that had been set out as a proposition, you would have had all parts of industry and the consumers coming together to work on it. It would have been a tricky one to get through, but the outcome would have been positive for everybody, and I fear we have got ourselves to a point where limited ambition will result in something that doesn’t satisfy any of them.

Q539 Mr Bradshaw: What are your views about the process for a digital copyright exchange, if any?

Andrew Chowns: I am a supporter of it. It is a modern way of licensing a certain kind of use. I often hear criticisms levelled at collecting societies that people don’t know who owns the rights for certain works. If something will facilitate that, it is a very good idea. If it facilitates identification of orphan works, it is a very good idea. I don’t think most rights owners have much to fear from it, frankly. It is a very positive development.

Amanda Nevill: I would echo Andrew. The only thing is, it does feel such a big, complicated beast, doesn’t it? Just from a common-sense perspective, if it was easy to achieve, there would be a huge benefit and an economic benefit. At the moment I can’t quite see my way through how it is going to be. It is a big ambition, without the business plan or the budget behind it, to make it work at the moment.

Adam Singer: I would just echo that I think it is a very worthwhile experiment.

Q540 Chair: Can I ask Andrew Chowns a question specifically? You have a very interesting background. You have worked as a commissioner at ITV. You have worked for Pact, representing production companies, and you are now representing the creative individuals we talked about at the beginning of the session. You oversaw the imposition of the terms of trade, which are generally thought to have been the big catalyst for the growth of independent production companies in this country. From what you were saying at the beginning, I had the impression that you almost felt there needed to be a second terms of trade to benefit the creative individuals against the big companies. Can you say a little more about that?

Andrew Chowns: That is a very interesting way to characterise it, John. There have been huge benefits accruing from terms of trade. At the heart of it is a principle that, if somebody is fairly incentivised to be successful, that is what they want. They want an opportunity to get out into the market and make something of their own work. If they feel their own work has been expropriated by somebody else, they lose that interest in an incentive to make it better. The terms of trade have been fantastic in independent production companies in that respect. You can see that reflected in export earnings, DVD sales and expansion into digital markets and so on. That has not trickled through to creative individuals yet. I expect it will and we are determined that it will because the same process is at work, particularly when you note that an individual is one of the other two copyright holders. Directors always say to me they are fired up by that sense of owning their work, seeing it become successful, seeing it connect with audiences. I think there is a stage two to go through. We are a little way down the road, but there is a fair way to go.

Q541 Chair: When we talk to the music industry, the whole of the industry agrees that piracy is a huge problem. But you then discover that, if you talk to some individual composers and performers, they are very unhappy about the proportion of royalties they get, and they think the big record companies are taking too much. The Featured Artists Coalition are very much making that view. Are you saying that the creative individuals, directors particularly, have a similar resentment of the production companies?

Andrew Chowns: No, I don’t think they do, but, to be frank, it is hard to find individuals fired up with the same sense of fury or injustice about IP theft as you will get from big businesses. I attribute that to the fact that many of them see little by way of trickle-down of the value of their work. If that were fairly reflected, they would be standing shoulder to shoulder, absolutely.

Chair: Interesting.

Q542 Tracey Crouch: Ben touched on this issue already, but I thought I would just probe a bit further on education and skills. We started the inquiry before the Government made its U-turn on marginalising the creative subjects from the EBacc, but do you think this is enough in the UK to develop the skills and education that is needed in the creative industries? Do you think more should be done within, certainly, secondary education?

Greg Dyke: One of our ambitions in this document is to put the ability to get involved in film clubs into every school in the country. We looked at how much we feel it would cost, and that is what we have put aside and that was the aim. Now, that isn’t film in the curriculum. Part of the other work that we are doing is: how do you begin to get people to use the moving image and film in teaching in schools and the rest of it? Some of them are obviously very good and some are not, and there is some resistance. We are certainly of the view that the moving image is going to be the means of education in the 21st century, and it seems odd to us that it doesn’t have a bigger role, both in the creation and in the curriculum itself. But then everybody who comes from any part of anything in this country goes along and wants their bit of the world represented in the curriculum, and yet there is another whole argument that says no. What we are trying to do is say, "Okay, we think that fight is too hard", so we are going to try to introduce film in every school in the country, through film clubs and all that sort of thing, and try to find talent. A lot of the people you think are going to get involved in a film are not people who are ever going to work in the film industry. The vast bulk of them are not going to work in films, but you can find the talent in that process as well. So, it is a dual approach. You could say that we weren’t ambitious, but we thought, "Hang on, we have the money. We can do this now, as opposed to a five-year campaign to get it into the curriculum that we might not win".

Q543 Tracey Crouch: Is it a cunning way to get people watching film rather than getting them involved in the film industry?

Greg Dyke: It is a cunning way of getting people to watch film, yes, to get involved in film and a wider choice of film than just Hollywood blockbusters. That is the point. That is what we are trying to do. All the evidence shows that people who have become involved in film clubs at that stage in their lives stay involved in film for the rest of their life.

Amanda Nevill: I want to add one big win, if you were looking for some big wins. Film is the communication medium of the 21st century. It isn’t something that is just an entertainment medium. We learn more about the world and ourselves and the environment we live in from the moving image than arguably we do from the written word, or just as much. Just as we need to get film into schools, I think a huge win would be, at teacher training level, to have at least one module to give teachers the confidence to be able to talk about and use the moving image within the classroom itself. It is something the BFI has argued for and has helped teachers to use film in the classroom.

If you contrast the sort of environment that young people have at home, and the sort of environment they have in the classroom, I am not sure one is always keeping up with the other. My plea would be that including teaching using moving image in the classroom, at teacher training level, would be a huge modernising factor.

Adam Singer: To offer a slightly different perspective, I don’t think we are looking for any specific skills in the classroom in that sense. What it is about-the question one needs to ask is: what do we mean by literacy in this day and age? Education is about literacy. Education is the ability to give people the ability to encode, decode and get a message across. Those skills in this century have now changed significantly. What we need are people who know how to communicate. That isn’t just about being felicitous with words; it is also to do with the ability to enhance those words with other forms of changing the message, be it picture, be it music, be it interactivity or be it the engagement of games.

For example, if you want to do games, then you need to be grounded in science and maths, because there is no point in doing a ball across a screen unless it is following some form of physical law that we all recognise. You need those kinds of basics in there. So, what we will be arguing for is we want to see the word "literacy" incorporate all those things and, within that, increasing the vocabulary of said literacy. At which point, films in schools is an excellent idea. Also, as you go forward, we are dealing more and more in a probabilistic world where the ability to sift and gain data from vast amounts of numbers also changes. That changes the nature of the kind of maths syllabus that we need everybody to have. It is a broad education that is providing that kind of literacy. Once they come out of school we can give them the specific skills they need for that piece of media du jour, as long as it survives.

Q544 Tracey Crouch: Andrew, you obviously spoke about the gap in skills in your written submission. I wonder if you have anything further to add to that.

Andrew Chowns: That was more to do with professional training rather than schools.

Q545 Tracey Crouch: Can I ask: do you think that the sector does enough to showcase itself and highlight what it does? An example that I can give you locally is that quite a few movies are being made down at Chatham Dockyard at the moment, and yet there is no outreach to local schools to bring them on to the set to show them that, "Yes, you can go off and be an electrician but, hey, you could also be an electrician to a major movie company", or, "This is what it is like to be a carpenter and build an entire set in your local surroundings". Do you think that enough is being done to showcase the talent that is the creative industry sector?

Greg Dyke: When I first got this job as Chairman of the BFI, I said at my interview, "Look, I don’t think you are the British Film Institute. I think you are the London Film Institute". Chatham-I would say yes, in the London and surrounding area there is access to all sorts of things that there isn’t in the rest of the country.

One of the things we have done in this document is to try to say that now, we are going to be the British Film Institute. Now we are going to start doing an awful lot of things in an awful lot of cities, and that is what we are trying to do. The problem is if you are making a film in the Chatham dockyards, your major job is to make the film. Your job is not to go and involve the local community and the rest of it, because you are working on a pretty tight timetable, you are working on a budget and you are probably behind anyway. So, as you say, it almost has to be another agency that does that, to involve that, because the producer will not do that. That is not what the producer is trying to do. The producer is trying to make a film, to make it work, to make a great film that might make the money back.

I think in theory you are right. I don’t see how you can easily do that in practice, but if you can do it through what we are doing in the schools, and what are doing in these regional hubs that we are setting up for film, you have some chance of beginning to get what you are talking about in those sorts of hubs. I don’t know how you describe Chatham. I suppose it isn't really London, but the problems are greater outside of London than in London.

Amanda Nevill: Apart from in Bradford, of course, where there is a fantastic pilot going on in all the schools there to use film, and also Bradford College, which has brilliantly just done a deal with Whistling Woods Film Studio in Bombay. They are putting up a film school in Bradford financed out of India, which I think is real pioneering stuff.

Q546 Chair: Amanda, I am most impressed that you know exactly how to press the buttons.

Greg Dyke: Some people could call it sucking up.

Amanda Nevill: For a Bradford girl, it is an easy one.

Andrew Chowns: I used to be on the board of a charity called First Light, which was designed to fund projects among groups of young people, schools and externally to make films. It was not just observing a film being made and being inspired by that, but doing it yourself. That was pretty effective in its own right, because it was clearly and demonstrably having an effect on those young people, in terms of the skills that they could then adapt, and working with teams, being creative and so on. But it was potentially a step on a career ladder that would get people drawn more into it by giving them the chance of first-hand experience of that.

Adam Singer: One of the things we should be looking at is not how we get children "into film" or "into television". I understand why we are there, but one of the things that I find difficult to deal with is this kind of ghettoisation of the creative sector. There is this creative sector and then there is, "You poor drooling audience lot over there who are not part of the creative sector". I don’t think that is quite how it is, because there is no such thing as a successful business that is not creative. Vacuum cleaners are not part of the creative sector. Mr Dyson would say he was creative. If we are teaching creativity in schools, one of the things we should be teaching is how you can apply that form of creativity in absolutely every single thing you do. There is not some greater glory about being in movies than in vacuum cleaners. If you can do something brilliantly wonderful in vacuum cleaners, like Mr Dyson-and I have to say I prefer to have an investment in him than in most movies-then that is what you should be following.

Q547 Mr Bradshaw: I am so sorry. I have already moved on to the second session, Chairman. Yes, you have been quite critical of the make-up of the Creative Industries Council, and I wonder what your reasons for that are and how you feel it could be improved.

Amanda Nevill: I don’t think that we have been necessarily critical of it. The only criticism that we have is that we would like to be part of that.

Greg Dyke: On it.

Amanda Nevill: We would like to be on it because film is represented there. There are some very good film representatives but there is not one body representing film, and we think we are a very major part of the creative industries.

Q548 Mr Bradshaw: What is the history here, just to remind us?

Amanda Nevill: For it being set up?

Mr Bradshaw: Yes, and the role of film on it and its predecessor.

Amanda Nevill: I think my history lesson here is a bit jaded, but there was a Ministerial Film Forum, which I think was set up by Ed Vaizey and the Creative Industries Council was set up by Vince Cable and-I am looking for some help here-with DCMS.

Greg Dyke: Jeremy Hunt.

Amanda Nevill: Jeremy Hunt. Why the BFI has been excluded from it we don’t quite know, but I think it might be because the thinking was that there was the Ministerial Film Forum. But from a joined-up perspective it would make sense to include film formally.

Q549 Mr Bradshaw: Andrew, did you want to add anything?

Andrew Chowns: The thing that struck me, looking down the list of people on it, is, with the possible exception of David Sproxton from Aardman, there are no practising eminent creative individuals on it. It is mostly "suits" and regulators or legislators. To me, that simply looks like there is a whole section of the creative industries that is simply not on there, and part of it must be about seeking inspiration and ideas from our leading creatives. You think, "Why isn’t there a place for someone like Danny Boyle or Paul Greengrass?"

Q550 Mr Bradshaw: But as it never meets, does it matter? It has never met as far as I am aware. Has it ever met? Once?

Greg Dyke: My point to Amanda: do we really want to argue to be on something that might not do anything? There are lots of things like that, there are a lot of organisations that meet to meet, and that is it; and is there any evidence that this is going to do anything?

Q551 Paul Farrelly: Greg, could you answer your own question there, please? It is pretty fundamental.

Greg Dyke: That is true. No, I think if Amanda, as the Chief Executive, thinks it is of value for us to be on it, then I think she should go on it. But don’t put me on it, because I do think there are an awful lot of meetings and committees and the rest of it, and you just think, "Is this really achieving anything? Are we really getting anything done here, or is this just another meeting that is in the diary that comes up every so often?" But then I am getting old and cynical, perhaps.

Q552 Chair: If it did not exist, would you not be equally critical that you-

Greg Dyke: I would expect so. We would demand it, I expect, yes.

Amanda Nevill: Is the answer: at the moment the jury is out, but it seems like a laudable idea to get together the creative industries, as a whole, to see what might come out of it? Indeed, there is some good thinking coming out in terms of access to finance. Having the different industries round the table, so we can start to understand where the cross-over is, is a good thing. Is it value at the moment? It is probably too early to tell.

Q553 Paul Farrelly: Is it good, Andrew, that this particular body full of suits has not met substantially or if ever because, therefore, they cannot do any damage? Would it be a good idea if a different body full of different people did meet?

Andrew Chowns: You might be right about that. If it is there to try to harness a diverse range of brain power to apply itself to some big issues, like achieving growth or promoting British creativity, then I would be prepared to give it a shot. But if it is simply neglecting one crucial element of creative industries, it seems misconceived to me, and, until it produces something of merit, I am going to carry on being critical of it for that.

Paul Farrelly: We are grateful.

Chair: I think that is all. I thank all four of you.

Examination of Witnesses

Witnesses: Dr Jo Twist, Chief Executive Officer, Association for Interactive Entertainment, Ian Livingstone CBE, Life President, Eidos, Dr Richard Wilson, Chief Executive Officer, and Vincent Sheurer, TIGA, gave evidence.

Chair: Good morning. Can we now move to our second session, which is focused specifically on the games sector? Can I welcome Jo Twist, the Chief Executive of the Association for UK Interactive Entertainment; Ian Livingstone, longstanding supporter of the industry but currently Life President of Eidos; Richard Wilson. the Chief Executive of TIGA; and Vincent Sheurer, also representing TIGA?

Q554 Jim Sheridan: Good morning. If you could perhaps give us a flavour of what you see your role as in helping the games sector succeed, and, in your opinion, what are the main challenges that perhaps Government could assist you with?

Dr Wilson: TIGA is the trade association that represents UK game developers and digital publishers, in particular independent developers and digital publishers. It was set up back in 2001. We see our role as helping the UK games industry to be the best in the world. That is what we are aiming to achieve.

We have three broad activities. One is ensuring the industry is properly represented at a political level. The second is to raise the profile of the industry, particularly in the mainstream media, so that people understand how important the industry is, particularly economically. Thirdly, we try to help our members commercially, providing best-practice information advice, networking and enhancing their commercial opportunities. Those are the various ways we try to support the industry.

In terms of the key challenges, over the last few years the key challenge has certainly been the unlevel playing field that the industry has been competing on in the UK. Our key competitors have tax breaks against production; the UK hasn’t. Skills have been another issue. I would also single out the need for managers and leaders in the UK games industry to continually enhance the skills. Many of them are moving into self-publishing now, publishing their own content, and this creates new challenges for them. So, I think tax and skills are particularly the key challenges facing the sector.

Q555 Jim Sheridan: What do you mean by "unlevel playing field" and your competitors; who are they?

Dr Wilson: For example, Canada and the United States have had tax breaks against production, which have effectively reduced the cost of game development in those jurisdictions. The UK has not had a tax break against production. Fortunately, one is going to come into effect from April this year, assuming the European Commission gives the green light to that. Once we have a tax break in place, the competition will be fairer. There will be more of a level playing field between different countries.

Dr Twist: My name is Jo Twist. UK Interactive Entertainment exists to represent the entirety of the games industry, from the smallest of developers in one-person studios to the largest multinationals and publishers in the country; again, to try to support, grow and promote the industry, to make sure that the UK is the best place to make and sell games and interactive entertainment. As we heard from the previous session, convergence is a major factor in terms of what games can do and the expectation of interactive entertainment as a whole.

For us, there are six main issues. The first is obviously the supply of skills. That includes creative, artistic as well as technical skills into the industry and as well as immigration issues. We already had one big policy win thanks to the Government and thanks to the work of the Next Gen Skills Coalition campaign, which Ian led on and did magnificent work on, and which UKIE members paid for. We got success with the disapplication of boring ICT and instead-in its place-computer science. It is very important that we continue to support teachers and to support educators, to make sure that that is implemented in a rigorous fashion.

As Richard has already said, the tax breaks were the second big policy win, and we are very grateful for that because we do want to be recognised as one of the key cornerstones of the creative industries and the digital economy future for this country. We want to make sure-and we are working very closely with Government colleagues in order to ensure-that the tax breaks implementation and the cultural test recognises all parts of the industry, from the smallest developers to the largest multinationals who will be making inward investments.

The third is access to finance, and we have particularly done a lot of work on crowd-funding, as you heard from the previous session as well. We believe in innovative access to finance as one of the keys to the ecosystem, and we want to consider how we can boost the take-up of SCIS and EIS schemes. Crowd-funding is extremely popular with developers. Late last year, Kickstarter-the most successful of crowd-funding platforms-launched in the UK. In the first months, £2 million was pledged in donations to support various projects; £1.2 million of that was for games projects. In 2012, Kickstarter called 2012 the Year of Games.

We also want to do much more work and seek support from Government to help to grow clusters outside of London. Tech City is not the only cluster in the world and in the UK, and, in fact, in the games industry we have other key clusters, including in Dundee, Leamington Spa and elsewhere.

In terms of IP, it is very important that we do seek to protect and exploit the IP creation, which is very important and a backbone to our industry. As an industry, we are very innovative and agile in terms of coping with different forms of IP exploitation, including the premium model on mobile phones, which has basically made piracy very much redundant in terms of mobile space. However, it has brought up other IP protection issues.

Finally, we do want to work closely with Government to help measure the size of our industry. Currently, the statistics don’t match up to what we think is the economic impact of our industry, which is in great transition.

Q556 Jim Sheridan: Could I confirm that you are still based in Dundee, because there was some talk earlier about moving on, wasn’t there?

Dr Twist: Sorry, say that again.

Jim Sheridan: There was some talk earlier on about the games industry leaving Dundee for various reasons.

Dr Twist: The games industry will not be leaving Dundee, as far as I understand. There is a lot of support for growing companies and for a talent pipeline. That is one of the key successes to growing an ecosystem that creates a cluster.

Ian Livingstone: I would just like to try to put the games industry into perspective, into context with the other creative industries. The games industry is the largest entertainment industry in the world. It is worth $50 billion a year in software sales alone. That is going to rise to $90 billion by 2015. The UK historically has been very good at making games, and yet, without help, it has been successful.

What I would like to see more of is a number of items to help the industry across the board. One is raising the profile and the perception of games, making people, parents, teachers, Government and media understand that it is a really strong and viable career option. On the back of that, it becomes an investable industry for external finance. We are very good at creating intellectual property in this country. We are not so good at retaining it. We often have to give away our IP in return for project finance. Just parking the copyright issues, we do happen to have a very good copyright law. But we are so often a work-for-hire nation in this country in all our creative industries. While we get the Oscars, the BAFTAs, most of the revenue derived from our content is often banked overseas. How can we create a competitive and yet fair tax regime linked to UK production that allows for intellectual property to be retained in this country?

Two of the most important things, of course-well, three of the most important things, including broadband. It is not games that make people violent; it is latency. What we need is to get people to be able to not only download, but for content creators to upload content to global audiences via super hi-fi broadband. The two most important things, of course, are access to finance and people. We are delighted with the announcement of production tax credits. It is going to make the UK a level playing field. Of course, we are delighted that schemes like SCIS and EIS continue to help the games industry, but the most overriding thing for me has been a skills base.

You may be aware of the Next Gen Skills campaign. The Next Gen report led to Michael Gove changing the ICT curriculum. Historically, ICT had been teaching children how to use technology but gave them absolutely no insight into how to create technology. We were effectively teaching children how to read but not how to write. The skills of computer science and computer coding are transferable. It is not just about making the next Angry Birds in the UK-of which there has been 1 billion downloads by the way, and there is a great opportunity for anyone anywhere in the world to make those games in this country-it is also about transferability. Whether it is fighting cyber crime, designing the next jet propulsion engine or building financial packages, computer codes are everything: the heart of the industrial world in which we operate today. So, we have to turn our nation of digital literates into a nation of digital makers, not just for using technology but making technology. Digital manufacturing is our future, not traditional manufacturing, I would say, at this moment in time.

Vincent Sheurer: That is interesting. My day job is as a lawyer representing SMEs who create video games. For the first time in the last 15 years I am more positive about the video games industry than about the wider economy, although that is partly a reflection of the wider economy rather than the games industry.

There are three things that have happened that have been extremely relevant for us. The production tax credit is going to have a major impact on the UK industry. The advent of crowd sourcing-particularly Kickstarter coming to the UK at the end of the last year, as Jo mentioned-is a very, very important development as well. We will probably talk a bit more about that later. But also, the advent of Apple and Google as distributors, so that a small company can create a game made for £100,000 and sell that game directly to the entire planet-there will be 1 billion smart phones soon-and take 70% of the margin, with the other remainder going to Apple and Google, is an industry-changing development.

In terms of what TIGA is doing, other than assisting its members generally to navigate those things, the big challenge we have is going to be taking the production tax credit, when it is hopefully implemented, and making sure that the industry is able to use it. When TIGA was set up, the R&D tax credit was already available, but no one knew it existed or that it applied to the video games industry. Accountants did not know that it applied to the games industry, because there weren’t broken pipettes or people buying stuff, so people did not claim for it. One of the things TIGA did right from the beginning was to make sure that everyone in the industry who made games understood that there was a tax credit for R&D. That took a lot of work, going to see people, running events. I remember a number of events in Dundee to encourage people to take up that tax credit, and I think we will have the same job. We have already started it. We had an event in Dundee last year and in other hub areas, explaining to people what the tax break was going to be. Making sure people implement it and use it is going to be a big challenge of ours in the next few months.

Q557 Jim Sheridan: On the question of SMEs, how easy is it to start up an SME in the industry, and what is the composition currently in terms of SMEs and multinationals?

Vincent Sheurer: It is extremely easy to set one up. We lose track of this in the UK, in that it is extremely easy to set up a company in the UK. I was at an event in Switzerland where we met games companies and small companies. It is very hard to set up a company there. Also, there isn’t the entrepreneurial mindset of people wanting to-of families saying, "Yes, go into business because it’s great"-rather than being employed by someone else. In that respect, the environment here is extremely positive. It is much, much closer to Silicon Valley than it is to anywhere in continental Europe. If I was anywhere in continental Europe and looking to set up a game, I would be coming to the UK.

Q558 Jim Sheridan: What is the composition of SMEs, multinationals-

Dr Wilson: The vast majority of studios in the UK will be SMEs. As of December 2011, there were 329 studios in the UK. Almost all of those-some 96% or 97%- would have had fewer than 250 employees and would have been classified as SMEs. We will be updating those numbers within the next month I hope with some new data. But the vast majority of development studios will be small companies. For example, in Scotland, with the exception of Rockstar, the vast majority will have less than 50 staff.

Ian Livingstone: It is all about being able to empower creative people with the right skills and access to finance to be able to start their own business. There aren’t many jobs out there. So, if you have a skilled work force that has content, that is valued by the investment community, by Government, by media, they are more likely to be able to build studios with small, agile teams that can scale to global markets. It is very important to have that encouragement into our industry, because it is the largest entertainment industry in the world. Yet it remains largely a hidden success story, especially for the UK.

Q559 Jim Sheridan: Overall, how many jobs are there in the industry?

Dr Wilson: There are about 9,000 currently.

Jim Sheridan: Nine thousand?

Dr Twist: In development alone; much more in terms of the entire games industry and sporting companies.

Ian Livingstone: But the whole industry is moving. It is going through an incredible transition period at the moment. It is moving from boxed product to a digital service. It is moving from analogue to digital consumption and creation; therefore small, agile teams are able to create content and serve it to global audiences via high-speed broadband. The supply chain has been completely reduced. Historically, you used to have to extend incredible amounts of production money, investment in the tens of millions of pounds, to make a physical product that is put on a truck, put in a shop, with distribution costs before you reach the end user. Today there is a direct communication between the content creator and their consumers, and they are able to iterate and serve content and monetise that often free content at extraordinary rates. There is no barrier, other than skills and access to finance and a willingness to do so.

Dr Twist: Can I make a point on the figures? This is one of the biggest issues that we face, particularly as we welcome the tax breaks and the change in terms of mending the skills pipeline. We need a benchmark to start with and then an understanding, as the film industry has, of the economic impact of the tax breaks, and understanding how we do that is critical. Skillset estimate that there are 485 companies in the games industry. DCMS says there are 200 development studios. DCMS says the games industry employs 28,000 people, including 9,000 developers, but these are old figures; they need updating. Many of our companies are not represented in the right SIC codes, and we welcome the consultation on SIC codes.

We are such a fast-changing industry that we need help to understand who is starting up and who is clustering. We did a recent business model survey of 50 games companies, and nearly 40% of them alone had fallen since 2009, which is a factor of the lower barriers to entry to game creation, which is a fantastic thing. In terms of start-ups and SMEs, a lot of the companies do need plain English help in understanding. Again, I would welcome this starting at school and in further education, in terms of learning how to run a business, learning more about those soft skills and entrepreneurial skills, which I know TIGA are very supportive of as well.

Q560 Jim Sheridan: Finally, am I correct in assuming that your industry is very much dependent on the film industry, a number of which-I mean films-are very violent? There is a certain school of thought among some people, none more so than the Chair of the Home Affairs Select Committee, who is concerned about the influence that your industry has on young people?

Dr Twist: Our industry is an extremely mature industry, a mature media, and we welcome the implementation of PEGI. The industry has worked very hard to ensure that parental controls on all the major consoles exist, that we have information in guidance for parents, just as the film industry does. Violent games and 18-rated games only constitute 7% of the total box games market. There is a huge diversity of games that are suitable for all audiences, and parents need to be educated about the tools that they have at their control and the maturity of the industry that caters for all audiences and tastes.

Q561 Jim Sheridan: I have the impression that you anticipated that question.

Ian Livingstone: The positive aspects of games is not often reported in the media at all, or understood by Government. In fact, when you are playing a game you are solving puzzles and problems. You are learning about choice and consequence. You are learning about intuitive learning. You are learning about technology; social aspects. Games communities are learning to teach mathematics. Games can be used as a training tool for training pilots, the Armed Forces and surgeons in a very friendly environment. Games technology is all-pervasive. President Obama said this week that games could make education relevant for young people, and cited Mark Zuckerburg’s interesting games as leading him to want to learn to programme, which in the end, in turn, led to him making Facebook. In this country, how are we going to use games in a positive way to send out a great message that it is not just about making the games; all the creative industries could benefit from interesting games and turn that interest in playing games into a career of making them?

Getting back to the violent aspects, games are often cited or blamed for the evil of society, most recently with the shootings in the United States. The facts are that $13.6 billion is spent on games in the United States, $7 billion spent in Japan and $3 billion spent in the UK. Japan’s spending is probably twice that per capita on video games, and yet, if you look at the number of firearm deaths in the United States per 100,000 people, there are 10 in the United States. There is 0.7 in Japan and 0.025-so there is a 100 multiple of firearm deaths in the United States. Clearly, it cannot be linked to games. Any time anyone tries to link anything heinous to games, they never have the facts. It is just an emotional thing put out there by people who have never played a game in their lives.

Vincent Sheurer: Our perception is that that argument is largely going away anyway. In fact, the people who are now running it are mostly the head of the NRA, who was desperately trying to deflect attention from the firearm sellers. He was the only person in the United States-at least on TV-to say, "It’s all the video games industry", rather than, obviously, his members who are providing the assault rifles and the ammunition to American citizens. It is part of the industry growing up. One hundred years ago it was the novel, then it was the violent comic book, and then it was Elvis Presley. Every so often-it is the whole of the video games industry growing up-someone else will be blamed afterwards. I assume Facebook or someone else will be blamed, and people will leave us alone.

Ian Livingstone: As a measure, in terms of the film industry, we are only in the 1930s, yet we have achieved so much in a relatively short period. We are growing up as an industry, and I think that has been witnessed by your interest here today.

Jim Sheridan: Apologies, but Elvis Presley will be leaving the building.

Q562 Chair: You have been quite positive about the prospects for the industry, but you have said it is a huge transition. For some people, the perception is that games have peaked. There was a time when there were three stores on every high street; now they have all gone. HMV is disappearing. You are moving into streaming online distribution. But also it seems sales have slowed down a bit, platform sales are slowing down.

Dr Twist: This is another significant point about data in our industry. At UKIE we have a PC digital download chart from BETA. At the moment those kinds of stories are based on the boxed product sales. As we transition, as every other industry, following the needs and the changing behaviour of the consumers in the 21st century, we are moving towards digital. Again, it is up to us as an industry to try to capture those sales figures and try to capture those figures in order to represent the industry fully, so that we don’t hear those stories. The high street market is extremely important for the games industry, in terms of the visibility of games as a mainstream form of entertainment, but the market looks after itself at the end of the day.

Vincent Sheurer: The high street is largely finished. The concept of a digital product being delivered to people’s homes via a shop is on its way out.

Dr Twist: Unless you like shoes.

Vincent Sheurer: It will not be gone totally.

Ian Livingstone: We are following the music industry. Clearly, they have much smaller files. We have much larger data in our files. But the fact is the games industry is technology-driven like no other industry. Facebook is now a games platform. It was 400 million people playing games on Facebook. There are hundreds of millions of people playing games on smart phones. Everyone is carrying a games platform around in their pockets, and if they are not playing Angry Birds, they are playing social games, like Words with Friends or chess online. The games industry is evolving all the time now. It has now become a mainstream entertainment industry.

Q563 Chair: It is, but there is the problem. I play Words With Friends, I play Angry Birds. I play Mafia Wars, all sorts of games. It is research. All the ones I have mentioned, I don’t pay a penny for.

Ian Livingstone: You don’t, but enough people do for games. Clash of Clans gets $500,000 a day in revenue from the sale of virtual goods inside those games. Between 1% and 5% of people have either got an ego problem or impatience and are willing to spend money inside those games for a more rich experience or a faster experience, and that is the growing market for you to play.

Q564 Chair: Yours is not like the music industry, where physical product is disappearing; it is all going into downloads, but they are not making any money out of it.

Ian Livingstone: It is an addition to.

Dr Twist: It is a mixed economy and a really diverse range of business models: from Paymium-i.e. you still pay that upfront fee, but you might get it delivered digitally as opposed to from the high street-to, as Ian said, the free-to-play model, on which micro-transactions play a strong part. Ultra fans and people who love the features of that brilliant game are willing to pay incrementally for that.

Ian Livingstone: There are great examples of the UK doing well in the free-to-play model, whether it is a company like Playdemic up in Manchester with its Facebook games or Village Life. There are subscription models like Jagex and Mind Candy with Runescape and Moshi Monsters, Boss Alien with racing games; extraordinary numbers. We just have to recognise that and make sure that the world understands what we are doing and we are very good. We are, perhaps, the most creative nation in the world. Look at our film, our fashion, our music and so on and of course our games. But it is a marriage of art and science that drives our ability to make games. It is just that we have never had the support from anyone, from Government, from finance, from the media, to help drive this industry bigger than it should have been today.

Q565 Chair: There is a view, particularly among the younger generation, that things they get off the internet should be free. You are confident that despite the demise of physical product and its replacement by download or streamed content, nevertheless you can still achieve the same returns that you did?

Dr Twist: Yes.

Ian Livingstone: Zynga are a case in point, IPO'd at $9 billion. All their products are free to play; they monetise in-app purchases inside those games. There are millions of people playing these games. If 1% of those players are spending several dollars a day on that game for an enhanced experience, then it is a successful thing. You don’t physically buy a film when you go to the movies. You are buying an entertainment experience. Similarly with a game, you are paying for some entertainment additional to the basic offering.

Dr Twist: The industry is being very good at having a fantastic relationship with its fans, the players. It is extremely important to protect that relationship. When you price something right, you make it accessible at the right time in the way that people want it, your fans want it; then people are willing to pay.

Ian Livingstone: You cannot fight the market, and you can monetise free, either through in-app purchases or through advertising, or you can pay not to have the advertising. There are ways of monetising.

Vincent Sheurer: There are definitely losers in this thing. We used to be very good at making very large-scale console projects as well as small projects. Since the cost of making a big game has gone from nearly £250,000 when I started off, to up to £100 million, those projects are simply no longer being done by independent companies any more. That was somewhere where we were very big in the UK in the past. So companies that really focused on large console developments for external publishers are struggling a lot, and they are going to struggle a lot more when we make the transition to the next console.

The other issue is if one looks at price points, one might play a game on a smart phone, and the price is usually perhaps £1. People will balk at paying £2 or £3. On any other model, an entry-level price will be £10, and in the end it will go up to £40 or £50. We don’t know yet how that is going to play out, but the consumer is okay paying out on smart phones. The consumer will view £3 as being a horrifically high price, and yet traditionally for PC games £10 was the entry-level impulse buy; "I’ll just get it for a tenner. That’s nothing". Yet, on iPhone it is now too high.

Dr Wilson: On the IF point, it is interesting that there was a survey last year, based on about 250 companies and their games on the IF platform and, of those, 50% made less than $3,000 per game. I think 25% made more than £30,000 per game, over the lifetime of that game. So, there will be some break-outs that will be very, very successful, but, in many ways, because it is so easy to launch games, obviously the marketplace is extremely competitive, and that probably drives down the price to an extent.

Dr Twist: Vincent makes an extremely valid point, in terms of large major development studios and companies setting up in the UK. Obviously, what we hope is that the attraction of lower corporation tax, of the tax breaks as well as the skills gap being fixed, will encourage more companies to locate their businesses in this country, not just in London, significantly. We are doing a lot of work. We are embarking on quite a large promotional campaign, one, to educate developers about the tax breaks and how they will work for them, but we are also working very closely with the UKTI and No. 10’s GREAT campaign in order to highlight the fantastic businesses and talent that we have here. I think that is extremely important.

The music and film industry have had a lot of support and strategic agency help, in order to do that and to do trade missions and to sell the UK abroad. That is the next step that we need to really tackle as an industry.

Ian Livingstone: We are delighted with what has happened in recent years with the Government’s approach to the industry. In particular, Ed Vaizey has been a great supporter of the industry. He has been behind the Next Gen Skills Campaign. He is behind the production tax credits, and he is sending out a great message beyond these walls.

Q566 Paul Farrelly: Obviously John is either so skilled or so pure that he has never felt tempted to buy a Mighty Eagle or Millennium Falcon on Angry Birds, just to blast your way through to the next level.

On what you were just talking about, about Ed Vaizey and some of the things that have been going on in Government, from some of the evidence it would be quite easy to get the impression that the industry felt itself somehow the poor relation of film, TV and music within Government. But what you have just been saying has changed that impression and, Vincent, what you were saying was the industry is very confident in itself. Jo, I can imagine you going into BIS and jolting them into the 21st century, those civil servants, by bowling the minutiae of standard industrial classification codes at them as well. Where do you think the Government is not getting it right for you? Are the civil servants behind the Ministers now? Is there still a-

Dr Twist: I think they are. I have only been in this job a year, so I am coming in from the outside, from Channel 4 and BBC worlds that are quite different. I sense an enormous positivity and understanding. Part of that is because your children and grandchildren, perhaps in some cases-not around this table of course-are playing games. So there is a greater understanding as the widening audience for games increases. More than one in three people play games in this country. The average age is 30-something. It is not just a kids’ thing. It is mainstream entertainment, and it is the expectation of entertainment in the future generations. So we have had a lot of support for UKIE, and we have met with three Cabinet Ministers in the past few months and a range of MPs. We have constant support from BIS and DCMS, and I do sense there is a shift in recognising that everything we ask for as a games industry makes us fit for purpose in terms of what the digital economy requires. So, I will use crowd-funding as the example there.

Paul Farrelly: I am going to come on to that.

Dr Twist: We will come on to that. I will use that later.

Q567 Paul Farrelly: We are going to come on to the details of the tax credit. Do you feel there is anywhere where the Government, the civil service, the advisers are lagging behind in any way, where they could do some more for you?

Ian Livingstone: The civil service tends to be slow, in that they don’t like change because change is a risk. In this country we are not always great at risk, whereas when you are making games you have to make mistakes to learn from those mistakes and move on. The creative industries themselves have often been seen as fluffy industries run by a bunch of luvvies, so I welcome the Creative Industries Council as being a good thing to put the sector on the map, to be seen on an equal status as pharmaceuticals and the financial sector. I do sit on the Creative Industries Council, so I would say that, I guess, but it has already produced two reports, Access to Finance and a skills report, which have been well received, and I am sure a lot more is to come. It is good to be seen to have a good seat on that table.

Q568 Paul Farrelly: It got a bit of a pummelling in the past session, where it was stylised as never having met.

Ian Livingstone: The point that nobody creative is on that Council.-well, I make games for a living and I am on that Council, and there are other people who are part of the craft process as well. The only thing that is slightly odd is that the definition of the creative industries needs to be looked at, because it is 13 disparate industries, some relic, like arts and crafts; some service, like advertising; and some content companies, like content industries, film, TV and games, to name but three.

Q569 Paul Farrelly: Where and how could it be sharpened?

Dr Wilson: Future investment could still do things to support the industry more effectively. They are helpful. They do do things to help the sector. They run the Trade Assistance Programme through trade associations. On a number of occasions, we have suggested to UK Trade Investment that they should use the tax funds more flexibly to help cover the combination of the travel costs and not just simply for exhibition costs. When the Trade Assistance Programme was originally set up, I think it was primarily being used to help manufacturers to display big products. But in a digital world, where video games obviously don’t take up a huge amount of exhibition space, I think you could look to use the grants more flexibly. Especially now, as we have so many small and start-up companies that operate in the UK games industry, it could help more than to travel to overseas trade shows. It would be a useful and effective way of using the money, without increasing the total budget of UK Trade Investment. Using the grants more effectively would be more useful.

Going back to your point about how Government and civil service support the industry, compared to five years ago there seems to be much more universal support for the sector, whereas five years ago we were still making the case. That does not seem to be the issue any more.

Vincent Sheurer: I would like to just put my penny in for the civil service. There is a team based at BIS, with a Liam Kilpatrick who is now at DCMS, who were very strongly supportive and who helped found TIGA in the first place. They have always been very supportive. Part of the difficulty was that, from a political level, there was always the fear of a Daily Mail headline, "People bludgeoned to death because of video games", and one can date that change to the release of Grand Theft Auto IV, which is a British-made game. I think the Daily Mail gave it five out of five rather than a terrible headline, and it grossed $500 million in seven days. That really put the British games industry into the mainstream. It was not just that we were bad people any more. It was we were creating things that can be commercially very successful and that people very much liked.

Ian Livingstone: If people understand the cultural, social and economic contribution of the games industry to society-and it is a main component of the British economy, going forward-with traditional manufacturing dead-flat and financial services in disarray, surely these are the industries that should be promoted at all levels.

Q570 Paul Farrelly: Before we go on to finance, can I finish off the conversation about the Creative Industries Council, which has had praise from you and a walloping in the previous session? I asked the question: how could the Creative Industries Council be sharpened? In your mind, you have said inside it was all full of arty crafty-

Ian Livingstone: It is sending out a positive message to say, to be seen as an important sector, rather than a number of disparate, loosely connected industries, to see that the content is being created. As I said earlier, we were often seen as a work-for-hire nation. We have to be able to not just create, not just retain but also protect the intellectual property, because value in companies can only be built by owning long-term intellectual property and scaling that, in the digital context, to global audiences worldwide. So, making sure that we are an investable sector, perhaps have a creative institute or a creative industries bank, in addition to crowd-funding to make sure that people see the real value and it is no more risky than any other traditional industries in the analogue world. The digital creative industry is very investable, because of the global potential of the content it is creating. We are so good at creating content, but we always seem to lose it, having to sell it short-term in return for project finance rather than going the whole hog and scaling it to its ultimate potential.

Paul Farrelly: Which brings us neatly on to financing issues.

Dr Wilson: Sorry, just on the Industries Council point, the Chairman of TIGA, Jason Kingsley, runs a studio in Oxford called Rebellion. I think he would echo one of the points in the last session about having more people on the Creative Industries Council, who are running operations, running digital businesses. That would just be his recommendation on how it might improve that particular council, to answer your question directly.

Q571 Paul Farrelly: Who would like to lead on telling us about the arrival of crowd-funding, the prospects for it, how important it might be and how it plays into the regulatory system that covers collective investment?

Dr Twist: We released a report this time last year on crowd-funding and how the legislation could be tweaked in order to enable ordinary people, not just high-net-worth individuals, to have an equity-based crowd-funding model in the UK. There are basically three models that crowd-funding platforms operate largely, and Kickstarter falls under the first one, which is a donations model. This is where people will back a project and get a perk or something in return that is not equity-based. As I said, Kickstarter is the classic example of this model. In the US, under the Jobs Act, they are trying to change legislation so that they can allow or operate an equity-based model. The second is the debt model, where a wide pool of investors will loan money on agreed repayment terms and Funding Circle operates that model in the UK. Then we have the equity model, where people will take a stake in the company in return for an investment, and Seedrs is an example of a crowd-funding platform that operates this model.

Crowd-funding has been broadly welcomed by all political parties, and the internet has enabled crowd-funding to happen in a way that is more structured. Unfortunately, FSA regulation hasn’t kept up in step and in time with the digital economy and things that the internet allows people to be able to do. I think there is a bit of misunderstanding and a bit of fear factor, and what needs to happen is more guidance and more acceptance and recognition of crowd-funding as a legitimate way to get investment.

UKIE did this report last year, and then we also chaired and facilitated the creation of the first crowd-funding association in the UK. Through that association, we hope that Government will work hard with us, and across Government Departments, to ensure that crowd-funding is understood and recognised. To ensure that more crowd-funding platforms can operate an equity-based model and get approval from the FSA to operate this model, which will benefit not just the games industry but a whole cross-section of sectors outside the creative industries as well. Essentially, the current regulatory frameworks around equity-based models are not designed for crowd-funding and the internet age, so that is what we would urge Government and across Government Departments to work on.

Vincent Scheurer: One needs to distinguish between two very different types of crowd-funding. As Jo mentioned, there is the Kickstarter style where one just gives money, and it is forbidden to have any form of financial return whatsoever. They are very clear about that and, for instance, they don’t want the law to be changed in the UK there. The other is where people can put their money in and they might get something back. In that second case, the relationship is totally different, because bringing that kind of financial incentive in has a corrupting influence on the relationship between the person putting the money in and the recipient, or potentially has a corrupting influence, or ends up with people putting in in order to have a massive return, which may or may not happen, rather than handing over money that one knows will just be lost; there might be a credit in a game, but there might not, but that money is lost.

In the Kickstarter case, there is no prospect of anyone putting their life savings into a video-game project, which is a very high-risk project on any level, and people don’t necessarily know that. With the equity-style investment there is that risk, and in fact there are already in existence institutions that are trying to receive money to fund games, where people are putting in vast sums of money of their own life savings, taking money out of their mortgages to put in already. That is something that I think one would be very, very concerned about.

Dr Twist: I think the UK has a real opportunity to attract, again, companies, crowd-funding platforms, to base themselves in the UK rather than the Netherlands, in some examples of crowd-funding platforms, if the legislation and the FSA regulation were made more fit for purpose for this kind of activity.

Vincent Scheurer: The Jobs Act is good, in the sense that they say, "Okay, we can allow people to gamble some money on a potential return, but we will limit the amount they can put in", so I think small investors can only put in $2,000 per year. They also have a number of very clear requirements as to disclosure, people understanding what the risks are and fully understanding that they might not get any of their money back and so on. They spend a lot of time doing that, although the regulations haven’t been thrashed out yet. But one would certainly want to see something like that happening in the UK if the FSA rules on collective investment schemes were changed. The other point being that in the equity one; a company is giving up equity in return for money, whereas under the Kickstarter crowd-sourcing model you just get the money. You are not giving up any IP, you are not giving up any equity, you are not giving up any of the profits, and any company would want to go along that route first and any other route secondarily.

Dr Twist: At the end of the day, it is also about giving people the option and trusting people, with guidance, to spend their money and invest in a way that they might want to invest so, whether that be through a simple donations model or more choice, that will increase competition.

Q572 Paul Farrelly: Centuries of history might come down against you there, Jo. But Ian, you have been a veteran of the old-fashioned way-or the newly stylised old-fashioned way-of the City underwriting and raising money and distributing shares in that way. In what way can we practically support these initiatives in this modern digital day and age, while also offering sufficient protection to investors? What can be improved?

Ian Livingstone: I think it is very important that UK citizens understand the opportunity, both as someone making an offer and those that are taking advantage of that offer, because the financial sector seems to strangle at the moment especially the games companies. You walk into a bank today and say you have this great idea for a game, and the bank manager looks at you rather like an Alsatian watching television and kind of nods strangely and urges you out the door, and yet we are a very investable sector. So you have to understand the portfolio approach that you can do through crowd-funding, and understand that people who might not ordinarily be able to raise finance can do so through crowd-funding. So, we need to get the regulatory requirements around crowd-funding sorted out, sooner rather than later, because it is an immense opportunity for people, sometimes with skill content, to reach an audience who they would not ordinarily have been able to get that content, but they desperately would like to do so. It has always been the traditional gatekeepers have stopped innovation in many ways from happening.

Q573 Paul Farrelly: Again, with the crowd-funding funding, you are essentially doing what Apple and Google are doing in being able to distribute apps and games. You have the technology to advertise your wares, in this case be it shares or what you have to a wider audience.

Ian Livingstone: There are many potential problems. For every Angry Bird, there are probably 10,000 dead birds out there. So you have to go in eyes open, aware that not everything leads to success.

Q574 Paul Farrelly: One of the arguments that the regulators would say to you is, "Well, at least in the City there is a sophisticated audience".

Dr Twist: But I think there needs to be quite a lot of education with a lot of the VC community, not just in terms of the games industry, and how we have transitioned from a product to a service and how we have become something different and a mixed model. But again there is also the fear factor: we do not have the same VC and investment climate as we do in Silicon Valley, and it is focused around London, naturally, but we need to focus that and de-risk. Crowd-funding allows for people to access finance in innovative ways, different ways, even if they are not based in London, around the financial capital.

Q575 Paul Farrelly: I am not going to dwell on banks, because I think in many industries at the moment we have just given up on banks.

Ian Livingstone: They were never keen to put money into games, frankly.

Q576 Paul Farrelly: What sources of public funding do entrepreneurs in the industry benefit from?

Dr Wilson: It is pretty limited. There is the Abertay Prototype Fund in Scotland, in Dundee, of course, that provides up to £25,000 of finance for developing prototypes. I think they have made about 58 to 60 awards so far. There have been about 300 applications to date. So that is a form of public finance, of course, public funding that has been reasonably popular and I think it is a worthwhile activity, a worthwhile scheme to have, because investing in games is risky, so it is good to be able to have some public support for prototype funding.

Obviously, going back to UK Trade and Investment, the chance to get the trade investment programme grants is another example. But of course it is really going back to the tax system. We obviously have games tax relief coming into effect and the research and development tax credits that you can draw upon.

Dr Twist: I would make a point about other public monies available. Again, when you watch a film and you enjoyed the film and you can see at the beginning or at the end of the credits there might be some lottery funding or Film Council funding or Film 4 or BBC Films, we don’t have anything like that in the games industry and I think it is probably about time we did. We have managed without that, but it is a real recognition of the cultural value of the content and the experience in games and it is a signifier. I would argue, having worked as a commissioner at BBC and as a commissioner at Channel 4, the fear factor around games and the misconception of games not constituting public service content is mistaken and flawed. Games are not just for children and they are part and parcel of what a modern broadcaster or content company should be commissioning, should be thinking about and should be giving the opportunity for developers to create.

Ian Livingstone: It is only 5% of games incur an 18 rating, but 95% of the games that the media never talks about are family-friendly.

Q577 Paul Farrelly: I am amazed here that, having three young kids, I have never come across International Racing Squirrels. [Interruption.] I am going to have a look at that when I get back to the office.

My colleague, John Leech, is going to ask about the film and tax credit, but could I just gently ease in on that with one final question? We had a tax credit proposed. It was then scrapped, and now the tax credit is coming back in again. What has been the effect on the industry in the meantime? What is the balance sheet of losses and gains for the industry?

Dr Wilson: Almost certainly more investment that we could have obtained and jobs that might have been saved were forfeited. There was no advantage in delay, obviously. It is fantastic that everyone across the political divide now supports games tax relief, and it is worth saying in the run-up to the general election 2010, all four political parties in the UK supported games tax relief and tightening proposals in particular, so that was good news, except unfortunately it did not come into effect in the 2010 budget, but we are very glad it has come into effect now. But there is no doubt about it: jobs continue to be lost and investment opportunities lost. As you will have seen in our submission of evidence, when we look at the period 2008 to 2011, the Canadian games industry grew by 33% in terms of head-count, the French games industry grew by 25% and the UK games declined by 10%, and I don’t believe-and no one can convince me to believe-that it is because our teams and our staff in the UK were-

Paul Farrelly: The UK declined by 10%?

Dr Wilson: Yes, absolutely. So there was definitely an impact, so it is great that the games tax relief has come into effect now, and I am glad that all political parties support it.

Dr Twist: We just need to make sure that obviously the final implementation of that and the guidelines are very clear and recognise the nature of the industry and game production.

Q578 Mr Leech: I think Paul has pinched the first question I was going to ask. It is like being back on the football pitch with him again.

I want to come on to taxation, but I want to raise two issues that have been mentioned already by Jo. The first was in relation to cultural content, because I can well understand the argument for financial support from lottery and so on, but is the problem that there is a snobbery against the games industry that isn’t there with the film industry?

Dr Twist: As Ian made the point earlier, and probably will again, we are a young industry, we are 40 years old, and I think there is a cultural bias. It even comes down to when we talk about e-books, reading digitally as opposed to reading on paper. There is a real cultural bias, which is changing, and I think again there is a cultural bias-or potentially it could be called snobbery-which is changing. But there has been a cultural snobbery about games in the past, I would argue, yet we have a huge games-playing constituency in this country. It is mainstream. I think that is rapidly changing as new platforms open up to new audiences.

Q579 Mr Leech: Why is there that cultural bias against the industry though?

Dr Twist: Because as humans, we naturally are culturally biased to anything that is different. We were naturally biased against colour TV; we are naturally culturally biased against change.

Ian Livingstone: I think also the historic headlines expressed in some of the popular press have always been negative and we don’t have the celebrity like film and TV have either, so there have never been sort of photo opportunities for politicians to cosy up to the latest celebrity.

Dr Twist: Although we do.

Ian Livingstone: There has always been this negative perception around games until recently, until the advent of Facebook and smart-phones. People who had never played a game always had a cultural bias, of course. If you had never seen a film before and I asked you to go and see Texas Chainsaw Massacre and Saw and asked you to write a critique of the film industry, it is likely to be quite negative. Certainly, if you only play one or two 18-rated games, which appears to have been happening in mainstream media, they have always written negatively about games, rather than all the wonderfully creative games that are now being carried across all platforms and the fact that we are very good at it, and it is such a great contribution economically to this country and it can grow.

Q580 Mr Leech: Is this to do with the perception that games are for kids?

Ian Livingstone: That has always been one of the main perceptions.

Q581 Mr Leech: Because that brings me on to the second point I wanted to raise from what Jo had said earlier and that was about the age profile of people who are playing games. I imagine the age profile-the average age is somewhere in the 30s, because my generation has had ZX Spectrum and the Commodore 64. We were brought up with games, but is there an assumption within the industry that John will still be playing Angry Birds when he is 75? Will that age profile continue to rise, or is there an assumption that at some time, people stop playing games and grow up?

Dr Twist: No, I believe people won’t ever stop playing games. If you look at the different demographic breakdowns and different genres, the demographics shift all the time and the average age is different or the male/female split is different. At the moment, it is almost half and half in general for the whole population. The fact is that our games industry, given the ecosystem that we are creating and together supporting, and as we get the flow of diverse faces and talents and people into the industry who are inspired to have a great career in the industry, we will have more games that appeal to more audiences, no matter what age you are, no matter what background you have, so it is only going to diversify.

Q582 Mr Leech: Doesn’t that mean then there are bags of potential for the industry growing massively further than it already has?

Dr Twist: Absolutely.

Ian Livingstone: Absolutely. As I have said, it is $50 billion a day, and it is going to be $90 billion by 2015; this is just extrapolating figures already out there. The tipping point is this year from boxed products sold in retail through a digital service, and anyone in the world, hopefully in the UK, can make content for global audiences. Now, there is so much diversity in content today, young and old are playing games, male and female together. It used to be the perception of the dark arts, the young teenager locked away in the bedroom, then that came out into the living room with the Wii and the family started playing games together, now we are all playing on connected devices, either together in the same room or over the internet. Games have become pervasive, and therefore the opportunity is there for everybody to take part in that.

Q583 Mr Leech: But is this an expansion of people playing games, or in 50 years’ time will there still be people playing chess on the chessboard? Will there still be people playing Monopoly on a Monopoly board?

Ian Livingstone: I hope so, yes. I don’t think everything-

Mr Leech: So it is not replacing those?

Ian Livingstone: If you think of games-playing, when we arrive in this world we interact with it; we learn through play. I think we are playful by nature; we learn and we interact through play. It is just that we have always been too shy or too embarrassed to admit that we would like to carry on playing throughout our lives. What is the cut-off point for games? There shouldn’t be one. You just have to make appropriate content and appropriate devices so everyone can be included. Through the high point of the console gaming, which required a certain amount of knowledge and expertise to be able to manipulate a 15-button controller, suddenly along comes the iPad with swipe technology, and Apple nailed the user interface and suddenly a whole raft of new people can play games.

Dr Twist: There are also cloud services, with increasing broadband infrastructure, with pervasive devices everywhere with an always on society. We do have members such as Hide and Seek who combine digital game-playing with physical games, physical street games or playground games, and it is all part of a play culture that as a culture we have lost. We do tend to think that that is for young people and it is not, it is for everyone.

Ian Livingstone: We don’t want to lose sight of the fact that as an industry we are all about the STEAM agenda, not just the STEM agenda, to have the art inside science technology, engineering and maths, and let’s make our learning relevant and practical. We are delighted that computer science is now being seen as the fourth science in the English baccalaureate. That is a wonderful revision of the law and could be transformational for this country, but-let’s make our learning rigorous and robust to satisfy DfE, but at the same time let’s make it relevant and exciting for children to want to be part of it. Let’s make sure it is not just a purely written examination, let’s make sure that half of that learning is practical, so we can make digital makers, whether it is learning how to play and make through games like Minecraft or LittleBigPlanet, games can be a fantastic learning tool. If it is just a written exam, question one, "Who invented the World Wide Web?"-interesting perhaps for a quiz night, perhaps interesting per se, but I would rather have someone who can show me what they can code and I can give them a job tomorrow. So let’s have course assessment and practice digital making skills part of that computer science curriculum, rather than just another dry science.

Dr Twist: Can I just add to that? Crucially, it is also about getting that diversity of people taking up those skills; so, girls in particular. Last year, there were only 241 girls in the whole country who took computer A-levels. That is shocking and appalling in a society where half of our workforce is female.

Q584 Mr Leech: Moving on to taxation, general consensus that tax relief is a good thing for the creative industries, but in UKIE’s written evidence, it is stated that some important questions remain about how a tax relief scheme would function in practice. What are those questions or concerns that you have?

Dr Twist: For example, unlike the film industry, we as an industry do not just release a game and that is it, game over. We do not have that sense of theatrical release. Increasingly, the large proportion of your production budget will be spent post-release in iteration, adding new features, adding new content, keeping your audience and your players coming back for more. So, it is important that the tax relief is structured in a way that recognises that. It is also important that if-

Q585 Mr Leech: What specific features would you have to recognise that?

Dr Twist: You would be able to account for DLC downloadable content benefiting from the tax relief, so it is not just about that initial creation. If you are talking about the film industry, the film and that is it. It is that post-release iteration, that post-release production, that needs to count that you need to be able to claim on.

Ian Livingstone: It is the ongoing costs for providing additional content that you can monetise over time. It is the long tail of the game: does that qualify as well?

Dr Wilson: The good thing is the Government has acknowledged that. I mean, they have recognised that we don’t just launch a game now and that is it, and people move on to a new product.

Q586 Mr Leech: So, you are confident that Ministers and civil servants get it?

Dr Wilson: Yes, under the legislation.

Q587 Mr Leech: Finally, in terms of other areas, obviously corporation tax is one that can impact the industry. Are there any other specific tax measures that would help the industry to grow in this country?

Vincent Scheurer: SCIS I think is brilliant, and I think the amount that is brought back through an income tax credit at 15% is absolutely fantastic, because if you look at a small company trying to raise, say, £100,000, £150,000 to make a game, three people coming out of university, they have a great idea for a game, they can now get it on to the app source so it is feasible to sell it, but they need £100,000, £150,000. They are never going to get it from a bank. It is not going to be easy to get it necessarily even from a crowdsourcing platform, although that would be the starting point. Friends, family and fools are the classic kind of source of investment for that kind of funding, and to get half of your money back straight away it changes the entire calculation.

Ian Livingstone: The only thing I would add to that is to make sure the bureaucracy around the application and SCIS and EIS is not overburdening, particularly the small companies. I have heard of a couple of examples where it has gone wrong because the intent was not communicated to HMRC and that resulted in it not happening, which it should be simplified, particularly for small companies. The other area that might benefit long-term is perhaps to possibly look at a patent box around IP linked to UK production, which could ringfence to ensure that global revenues come back to the UK on IP production produced in this country.

Q588 Mr Leech: Is there anything being done in any other countries by other Governments perhaps as a bit of a fight back because the UK is doing what it is doing? Is there anything to learn from other countries about how they are trying to support the industry?

Vincent Scheurer: The tax credits in Canada have been the ones that have had the most impact, so you might look at, for instance, a very low corporation tax rate in Ireland. I don’t have a perception that that has had a massive impact in the UK, and I am not aware of other countries looking at such generous schemes as the SCIS scheme. I think that the focus on helping relatively small companies to start up and getting funding into those companies-this is what the SCIS does-is really the right way to go, and I am not aware of any other country having a more generous scheme.

Ian Livingstone: That is great for UK content creators, and it is no surprise that some of our best studios in the UK have attracted an incredible amount of investment from overseas, because of our historic brilliance and creativity matched with our knowledge of high technology. It is just that over time our skills had become lower than they should have been and our costs were higher than they should have been. Now that trend is being switched because of the introduction of tax credits and the introduction of computer sciences, so over the long-term, that will empower our creatives to be, if not the best, right up there with the best in the world.

Q589 Mr Leech: Are we keeping ahead of the game, or are we just keeping in touch with others who are doing the right things?

Dr Wilson: I think we are catching up. We are catching up in terms of the tax break, and of course other jurisdictions have had tax breaks against production for a long period of time, particularly in Canada. So we are catching up on that front. I think there are still some things we could do on the R&D tax credits. We have a good R&D tax credit for small firms in the UK, but there are still some amendments we can make. In France, for example, you can use the research and development tax credit to claim for the costs of IP protection, and indeed, I think defending IP cases, where developers feel their IP rights have been infringed. But there is an area where the UK Government can look at here with regards to R&D tax credits.

In other countries, some of the Nordic countries, I think also in Germany, they have Government-funded competitions with games. That is a fairly small level of intervention, but it is another one to consider. In France, again, they also have a scheme whereby they will cover I think about 50% of the production costs if you generate a generally new or innovative game. So it is a source of direct funding for each of the particular game projects. I do feel once the games tax credit comes into effect, it will make a big difference to the UK games industry. It will not be the most generous level of relief in the world; Quebec will still have the highest, and I think Singapore has a high rate as well compared to the UK. Nonetheless, we do get a flat 25% level of relief that all game projects can claim for, and that will be certainly helpful.

Dr Twist: Just to Richard’s point, Canada also has a digital media fund, so it encourages investment and covering of the development of converged interactive entertainment content, so working with broadcasters and TV companies. We used to have that in the form of 4iP, which came out of the discussions around public service publisher. We don’t have that any more. Canada has that, it worked very well. Potentially it is something that we need to think about as well.

Q590 Chair: Can I turn quickly to IP? When we have talked to the film industry and the music industry, obviously piracy and illegal downloading are a huge concern. To what extent is it affecting your industry and how do you regard the copyright changes that are in prospect?

Dr Twist: We are very supportive of the copyright regime as it is. It supports our industry very well. We are classified as software, and we welcome that, so any exceptions do not apply to us as an industry, which we are keen to maintain under the European copyright directive. As an industry, we have evolved our business models very rapidly. We have always been a digital industry, so we haven’t had the heart of our industry ripped out of it, as the music industry have had or the film industry have had. If you look at BitTorrent traffic, in terms of traffic for games, it is around 3% to 4%. However, we do support-

Q591 Chair: Sorry, 3% to 4% of all BitTorrent is games related?

Dr Twist: Of the traffic is around games. We are very concerned with IP protection. We do support enforcement measures, but we are always in conversation with our colleagues in the music and film industries, and we join Ed Vaizey high-level roundtables on copyright and we welcome those as a chance to bring the industry together. We are very supportive of the approach of strangling the blood to sites potentially, so through payment systems work and advertising support on sites. That kind of work we are supportive of, but currently the current IP system works very well for our industry. We have an always on connection in many cases through consoles with our players, so many companies devise really funny and interesting ways, through technical protection measures, to identify whether someone is playing a pirated disc. For example, one game will let you play for a while and then a giant red scorpion will appear and stop you from going anywhere, because it knows it is a pirated game.

Q592 Chair: Sorry, where does the red scorpion come from?

Dr Twist: It is something that appears when the company knows that the game is not a legitimate copy.

Chair: Is this in the console?

Dr Twist: Yes.

Chair: So, the console detects-

Ian Livingstone: In the long term, of course, technology will work in our favour as more games are in the cloud from which you download the client, and then it is streamed from servers from around the world. That is going to be a huge problem for pirates, and also the move from premium to freemium titles where you are serving free content. In some respects, pirates can be marketeers for you, because if they then pirate your game, it still has the app purchases inside it and it still has the advertising inside it, so you can still monetise content that has been put around by pirates. But we can never condone what pirates do. It is just that long-term I think technology is really going to work in our favour.

Dr Twist: We also face increasing problems more around cloning of games and trademark infringements.

Vincent Scheurer: One of the points that Hargreaves makes is to have a cheap way of settling disputes, so cloning is an issue of people copying games. You can’t go to court as an SME at the moment in the UK without risking your entire business on a lawsuit based around an intellectual property dispute because the costs will come in at £200,000 or £300,000, and then if you lose then you are hit for the same again. He has suggested to have a very low-cost way of settling disputes is very useful, I think.

Dr Twist: We would say around the DEA, we support in principle the educational benefits. We think there is a lot of work to be done just to advertise to consumers, to players, to parents about the legitimate route to finding legitimate content.

Q593 Tracey Crouch: Ian, can I just ask you: I think you co-authored a report with Alex Hope from Double Negative reviewing the video games industry for the Government.

Ian Livingstone: With Ed Vaizey.

Tracey Crouch: Yes. What were the gaps in skills that you found, and do you think that since what was published that the Government has taken the report on board and is progressing the recommendations?

Ian Livingstone: Yes, Ed Vaizey commissioned the report and it was funded by NESTA, who also provided us with two full-time researchers. First off we looked at universities, why so many university courses were simply teaching soft skills, the social relevance of games in our lives and some design, but were not giving students the opportunity to learn hard skills of computer programming, art and animation. We were wondering why fewer people apply for computer science, even at universities like Cambridge. We found that the fundamental problem lay in schools, that the ICT curriculum as was taught was largely learning soft skills, learning how to use applications but giving no information as to how to create applications. There was a strange hybrid of Word, PowerPoint and Excel, and it had no relevance to children’s lives, who as digital natives understand this in a week. They certainly don’t need to spend a year learning PowerPoint and then be examined on the back of it. So against all odds, we manage to turn them off technology for life for devices that they love so much. Children run their lives through games with communication and playing games. It is second nature to them.

So, we made 20 recommendations, the main one being in the report that computer science be put on to schools’ national curriculum as an essential discipline. It was well received by the games industry of course and the digital-effects industry, but beyond that not so much. It wasn’t until we formed our Next Gen Skills coalition, funded by UKIE, where we got companies like Google, Facebook, Microsoft, the Sector Skills Council, even GCHQ on board, because we had shared a common need to have computer programmes of a much higher stature than was currently being offered.

It wasn’t really until Eric Schmidt, Chairman of Google, referenced the Next Gen report in his MacTaggart lecture in 2011, during his Q and A session, that suddenly the Government sat up and took notice, because Eric said so it must be true. That resulted in us being fast-forwarded through into the DfE and through BIS and the other Departments. The penny dropped that to have a skilled workforce that can create content, again not just for the games industry, it is important that they have the right skills in computer coding and also maths and art and so on that are vital to the digital economy.

The net result is that in 2012 Michael Gove made a historical speech saying the current programme for study for ITT was going to be withdrawn and replaced with a curriculum that had computer science at its core, and quite recently, over the past month, he also announced that our number 5 recommendation to have computer science brought on to the English baccalaureate as the fourth science was also going to happen. What we are still campaigning for is to have our other part of recommendation 5 to then apply to art. Because it is the marriage of art and science that is so important, not just for games, I keep stressing, but for all creative industries including, say, for example, architecture. You need that visual aesthetic so you can imagine what a building might look like from a beauty point of view, but also you need to understand the maths inside it to make sure it doesn’t fall down and kill you. So we are delighted with the way the report has been taken. We are delighted with the way UKIE is supported on the Next Gen Skills campaign, and hopefully this will be transformational, not just for the games industry but for all creative industries going forward.

Dr Twist: We have just hired a talent development co-ordinator to look after the other more practical recommendations of the Next Gen Skills report, and that is part-funded by Creative Skill set, in order to help to create closer ties between the industry and schools and further education and higher education. Crucially, one of the next steps in the Next Gen Skills campaign, as well as sort of introducing STEAM and pushing the STEAM agenda, is also to make sure that teachers, particularly the ITT teachers who are going to be transitioning to a rigorous programme of computer science teaching, are supported and retained and that CPD is really helping them.

Q594 Tracey Crouch: Yes, I was going to ask you about that, because I think your written evidence was that two-thirds of teachers are judged not to have sufficient qualifications to teach even the outmoded ITT curriculum, so clearly there is going to be a gap.

Ian Livingstone: There is, but we can’t afford not to do it. If you look at some of the countries that do have computer science on the curriculum, like Israel, Finland and more recently Estonia, it is no surprise that some of the best high-tech intellectual property coming out of those countries is world-renowned, so we cannot afford not to do it.

Tracey Crouch: Will there not be a gap?

Ian Livingstone: There will be a gap, and we are going to make mistakes, but as Albert Einstein said, "Anyone who has never made a mistake has never tried anything new". We have to do it. We can’t afford not to do it. One of our Next Gen Skills alliance partners, the British Computer Society, and their affiliate organisation Computers in Schools, have 500 teachers able and willing to become centres of excellence around the country, to teach other teachers in local schools around those skills all to demystify computer science. Also there is an opportunity here-if we can get over the sort of ego problems-that teachers become facilitators, allow the children to work together, collaborate. Teachers can learn with the children, and just trust in their natural ability to learn, trust in their ability to teach their fellow children, and they can do group learning in collaboration

As Ken Robinson says, collaboration is often seen as cheating. But in the real world all our industries are built on collaboration; so, let them learn from YouTube, and let them learn Scratch from MIT. There are fantastic online free resources around the world. Let them do their learning at home, let them do their homework at school, and together during this period, where we are training up a new raft of teachers to teach computer science, we will be able to get through through this collaborative learning process. There has also been bursaries announced, I think 50 for £20,000 each, that Michael Gove announced recently in that to ensure that computer science is seen as an equal science with the other sciences.

Dr Twist: There is also informal activity that we as an industry do, so we run the Video Games Ambassadors Scheme for STEMNET, which is sending industry people into schools, volunteers, and we have over 40 ambassadors who are going to be re-launching that and publicising that because we need different faces, we need to recruit a lot more. But already in the last year and a half, they have spoken to around 8,000 children, so it is crucially important that we get those role models, that we inspire teachers as well as kids into the industry and crack it open for them, and them help support them in terms of career pathways, careers advice and advice on how to teach science and computer science with art.

Ian Livingstone: With entrepreneurial skills as well, or however are we in this country ever going to build the next Google, Twitter or Facebook?

Q595 Tracey Crouch: Richard, did you write a paper on the games business? This is the R Wilson that is in the -

Dr Wilson: Yes, that is right. One of things that we have argued is that, of course, it is very important to invest in computer science. Everybody accepts that it is very, very important, and we have to try to tackle some of the skill shortages that currently exist. No one disputes that at all. But I think, over and above that, it is really important to emphasise and provide entrepreneurship, the commercial training skills that many people need in the games industry. One of the good things over the last few years has been the big increase in start-ups within the UK games industry. I think we have had something like 260 new start-ups between 2008 and 2011, but 197 businesses in the games industry closed down over that same period, not all exactly the same ones, but nonetheless quite a high annual mortality rate.

So we believe it is very important that, in addition to providing technical skills, we also have training available for people who want to build up studios, want to set up their own companies, and they can learn some of the new monetisation discovery techniques, new analytics effectively. This is very important because if we want to grow the companies, if we want to create a more sustainable games industry, we clearly have to ensure that the management and leadership is as effective as it can possibly be.

Vincent Scheurer: One of the people who spoke at the previous session mentioned the importance of, for instance, just improving the country’s ability to the powers of probability, and those kind of basic, core subjects on which you can build an entire business, and I would second that. I think that is a point where we are fairly weak in the UK at the moment, where we definitely need to do more and that has a general application.

Q596 Tracey Crouch: Just to follow up on Richard, you mentioned in your written evidence about the decline in the number of students doing computer science at university, and Ian has just mentioned that as well. Those statistics go up to 2010/2011. I wonder have you seen any change in that, and is there any impact from tuition fees?

Dr Wilson: No. I suppose the encouraging thing I would say would be that maths and physics are in the top 10 I think for A levels this year, which is good. To some extent, one wonders whether the advent of higher tuition fees may be focusing people’s minds more so they can see that there may be financial, as well as creative reasons, for doing some of these hard subjects. That may be a possibility.

If I can link that on to one of the other points I made in the submission of evidence to this Committee? I also mentioned the issue about migration. Obviously companies in the UK want to recruit locally wherever they can do so, but it has to be useful. While skill shortages exist in the UK, it has been useful to be able to use the Shortage Occupation List to bring in highly skilled people with quite rare talents in some respects, sometimes lead programmers, for example, sometimes producers, so it is very useful to be able to have that Shortage Occupation List to be able to bring those key people in. The Government’s Migration Advisory Committee agreed with many of our recommendations, which we put forward before Christmas, which they published quite recently. They said the Shortage Occupation List shouldn’t be automatically wiped clean after two years that there was a case for keeping on software developers, producers, artists and, in fact, they added again designers, which we are very pleased about, because we do need this window of opportunity to carry on drawing high-skilled people from overseas while we are training people in the UK.

Vincent Scheurer: Yes, I agree with that. The tier 4 restrictions on skills, labour coming in, I have had a number of instances where amazing programmers are not allowed to stay in this country. Now, we should incentivise them, first, to help the business here. Also, they might set up their own businesses and build businesses for themselves, so sending them or not allowing them to be in this country is wrong, to my mind.

Q597 Tracey Crouch: You have successfully answered what was going to be my last question. But can I very quickly ask you about art on the curriculum, because we have obviously focused very heavily on the computer science side. What age do you think that art should remain on the curriculum? I presume that you are quite pleased with the Government’s change in thinking around the English baccalaureate that allows the creative subjects to still be measured, but do you think there should be any particular age that children should be studying art up to?

Ian Livingstone: It is a bit like saying, "What age do you stop playing games?" For me art and music and all the creative skills, that give our competitive edge in this country, should be taught as widely as much as possible. It is all about making subjects relevant to the individual, and if you have a wish to do so you should be allowed to be indulged because you are likely going to benefit from that, certainly as an individual, possibly and hopefully as a creative entrepreneur, so we are all for art and science to be combined, because our ultimate graduate is somebody with a double first in maths, physics and art.

Tracey Crouch: That rules me out, then. Good; thank you.

Chair: That is all we have. Thank you very much.

Prepared 5th March 2013