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The UK Games Perspective: Tax Breaks, Digital Distribution, Education

Lawyer Jas Purewal gives his thoughts on a recent games industry event, the Westminster eForum, which gives a snapshot of the UK games industry's perspective on tax breaks, digital distribution and games education.

[This post is reproduced from http://www.gamerlaw.co.uk.  You can follow Jas or ask his advice on Twitter: www.twitter.com/gamerlaw]

The Westminster eForum discussion in London on 20 January 2010 went over a lot of ground and gives a good snapshot of the UK games industry's thinking on digital distribution, games education and games tax breaks.  UK games classification got a special mention, with Keith Ramsdale of EA Northern Europe making a special plea to the government to "just hurry up and make PEGI law" (the current UK games rating system is being reviewed  at the moment and may or may not become law before the next election this Spring/Summer).

My thoughts on the highlights below...

Tax breaks

There was a lot of discussion about the need for a tax break for the UK games industry.  Richard Wilson of industry body TIGA in particular put forward a strong argument for the tax break (and separately Mike Rawlinson of rival industry body ELSPA has done the same).  Keith Ramsdale of EA Northern Europe argued that last year games made 44% more than films and music put together, but attract far less government support.  Overall, the consensus was that the UK games industry punches above its weight, but without government tax breaks to match those being offered in competitor countries like France and Canada, it will decline (some predict that the UK will drop from its current place as the third-largest producer of games to sixth in the coming years). 

Unfortunately, it seems pretty clear that the UK games industry will NOT see a games tax break any time soon.    In December 2009, the present Labour government confirmed it has no plans to introduce a UK games tax break in this term.  Now, Ed Vaizey MP confirmed that, if a Conservative government comes into power this year (as many predictions say they will), the UK games industry will probably not see any movement towards a games tax break for 2-3 years.  He said that a tax break for the UK games industry is simply not one of the Conservatives' top priorities, compared to the challenges presented by the present recession, though he was himself supportive of a games tax break.  Oh well.

In a wide-ranging panel discussion, Vaizey also covered:

  • his hopes for the industry bodies TIGA and ELSPA to work together, or even be merged, in the future.  As he put it, the games industry "needs a voice at the top table".
  • the (controversial) possibility that the UK Film Council could adopt a role in representing the games industry - and possibly the games industry could thereby obtain access to National Lottery funding (an important source of film financing).
  • Conservative plans for broadband penetration in the next few years (he compared the current Labour plans of universal 2mbps by 2012 unfavourably to current broadband already available in Asia)  

Digital Distribution

The discussion about digital distribution was interesting, if not ground-breaking.  The discussion ranged back and forth regarding the pros and cons of digital distribution, the consensus from the industry bods on the panel being that digital distribution would continue to expand rapidly in this and coming years, but there will still be a place for the retail market for some time to come. 

One crucial issue which wasn't discussed at all though is the secondary market in retail games and the total absence of a secondary market in digital distribution (or, put simply, I can buy Half Life 2 boxed second hand but I can't buy it off Steam second hand).  There is a lot of money to be made in second hand sales - for example, the UK's only games retail chain GAME reported in 2008 that fully a quarter of its income derived from second hand sales. 

All of this fundamentally derives from (i) gamers wanting to play games but not wanting to play full whack for them; and (ii) gamers wanting to make some money back from games they have played but don't want to keep.  So it seems likely that sheer consumer demand will mean that at some point a secondary market in digitally downloaded games will have to develop.  Obviously though, this presents real commercial issues (why allow a digital game to be sold secondhand online for $10 when you can sell it firsthand online for $30?) - so whether or not a digital second hand sales market will survive is another question altogether.

In fact, there have already been a few isolated instances of gamers trying effectively to establish their own second hand market in digitally downloaded games (for example, last week a guy tried to sell his Steam account for $1,000), but they are pretty much doomed to failure as long as download platforms stick to their current legal structure in which they can stop and unwind any attempt to sell to someone else any games downloaded them from.

It seems to me that the change could come in one of two ways.  Firstly, a legal challenge against the Terms of Service/Subscriber Agreements that the current download platforms make gamers agree to at the outset, on the basis that such contracts contain numerous unfair contract terms which should be struck down by the court (which I'm going to blog about separately).  Secondly, and probably more likely, someone figures out a new model for profiting from digital second-hand sales and make a popular download platform out of it.

Games education

The discussion regarding games education was also interesting.  The consensus from industry figures in the panel discussion was that the UK's universities are not doing enough to prepare students for entry into the games industry.  For example, David Braben of Frontier complained "we are getting far fewer people with computer science skills.  We're having to recruit people from abroad" and Ian Livingstone of Eidos worried that university courses have "dumbed down" recently (a constant refrain in UK papers for some time now). 

But there were no figures from the education establishment on the panel to respond to those complaints.  If there had been, I think they would have said that the issue is complicated and affects multiple industries, so a simple claim that universities don't do enough isn't particularly productive.  But one big problem which does affect the games industry specifically is the perception among universities that universities simply don't take games-focused courses seriously (according to one university lecturer who I spoke with) .  That, it seems to me, is something that the games industry can and should help to remedy. (Clearly there is enough for a forum discussion on this issue alone!)

And, yes, Keith Vaz didn't show up

Lastly, and most infamously, there was gaming opponent Keith Vaz MP's no show.  More on that here.

All in all, a great session, and I look forward to the next gathering on Monday 25th Jan at the Houses of Parliament for "Taking Games Seriously"...

Unfortunately necessary legals:
© Jas Purewal 2009. This blog/post is intended only as a means of bringing news of games and technology law and practice to its readers; it is not intended to provide legal advice and is no substitute for it. If you'd like to contact us concerning the contents of this blog/post or any other games or technology law-related topic, you can email here or tweet GamerLaw.

 

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