“If Nebraska were to offer SkyVu Pictures a game development incentive tomorrow, everyone at the studio would dance like crazy for a few minutes,” says Benjamin Vu, co-founder of the Omaha-based animation studio. (Image compliments of SkyVu)
Video games have come a long way in the past three decades.
They’ve gone from austere collections of pixels and 8-bit sound effects to a widely recognized artistic medium proudly standing toe-to-toe (and sometimes beating out) the film and music industries. Around the United States, local governments have taken notice of video games’ profit potential, handing out incentives for new studios like candy on Halloween. Texas, the East and West Coasts: new game development outlets are popping up all over the country, spurred by generous government paydays. Heck, even way up north near the fringes of civilization (Canada), video game studio incentives are out in full force.
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But despite all the newfound growth in the business, there’s a large pocket of inactivity marring an otherwise unified landscape: the Midwest. Although a few states, such as Michigan and Wisconsin, have made efforts to lure video game development (and all the highly sought after jobs and tech dollars that flow in tandem) across their borders, most of America’s breadbasket remains oddly silent.
A gamer since the day I worked out the inner machinations of my opposable thumbs, I’ve have a hard time ignoring this issue. With so much potential for growth – as well as the eradication of unpleasant, country bumpkin stereotypes, right at our fingertips – why hasn’t Nebraska gotten on board with the video game trend? I decided to explore that question, both as someone who wants to see Nebraska’s tech sector flourish, and as a guy who’ll talk about video games all day if given half an opportunity.
“Money is how we keep score”
For all the self-actualizing liberty the free market claims to provide, capitalism is still a cutthroat way of life. New ideas rise and fall on a daily basis, most innovations swept away with the endless tide of fads and luxuries clamoring for a chunk of people’s wallets. The best arbiter of what’s to stay and what’s to go is – of course – how much money it rakes in.
Auspicious entrepreneur Ted Turner once said, “Life is a game. Money is how we keep score.” If that’s the case, then the video game industry has been winning for the past several years. In 2007, Americans shelled out $170 million for the third iteration in Microsoft’s flagship “Halo” series. The sales numbers shattered previous game release records, as well as vaulting past the bar “Spider Man 3” set for the film industry with its $151 million opening weekend.
The video game industry finally has proof that it’s less game, more industry, and important people – from angel investors to government officials – are taking notice. Over the past few years, financial incentives to keep budding video game studios afloat have bubbled to the surface. Countries around the world now seek to retain their best and brightest graduates with the promise of high tech jobs.
Ontario, Canada announced it was nearly doubling the money pot it’s set aside for game studios, hiking the tax break from a 25 percent budget refund to 40 percent, according to an Oct. 23 Hollywood Reporter’s article. And Ireland has made clear its plans to spirit away Scottish game companies with promise of a hefty payday, provided the game makers are willing to relocate, according to a Sept. 27 article in Herald Scotland.
In the United States, several local governments are scrambling to stake their claim in the industry, too. In the months following his keynote speech at 2008’s E3 Expo (the video game trade show mecca, which draws developers, producers and journalists from the four corners of the globe), Texas Gov. Rick Perry announced plans to make his state a leader in the industry, adding to its already bulging roster of more than 100 studios, according to a Jan. 23 post on GamePolitics.com. Georgia and Louisiana have announced similar goals.
But the section of the U.S. whose land-grab roots should make it a natural competitor when it comes to staking a claim in any industry – digital or otherwise – is remaining oddly silent. So far, only two Midwestern states – Wisconsin and Michigan – have taken steps toward game development initiatives.
Moving away from “cows and corn”
Like the other nine silent Great Plains states, Nebraska has made no move toward locking up a sector of the games industry. For a population irked when visitors from the East or West Coasts feign surprise at the presence of electricity and cable TV, this is bad news.
“Omaha is looking at getting away from the whole ‘cows and corn’ thing,” said Dave Mark, president of Intrinsic Algorithm, an Omaha-based artificial intelligence consulting firm. “We want to be known for having a ridiculous amount of high tech jobs. There are a lot of proactive people who want to get into the industry, but don’t want to leave the city. If people find out game studios are an option, I guarantee you’ll pack a Chamber room.”
In August, SPN interviewed Dave Mark about his company and the Omaha game development community.
In recent years, Mark’s become something of a champion for Nebraska game development. But even though he’s discussed the prospect with Omaha’s chamber of commerce, results are a long time coming. Right now, you can count all the game studios in the state without committing a whole hand.
One such studio, SkyVu Pictures, is a sort of involuntary guinea pig for testing the effectiveness of game development incentives: The company has offices in both Singapore and Omaha, with the former location kicking in to help tech-related industries and the latter keeping its hands in its pockets. Singapore is pouring money into improving its digital media industry, and with the auspices of Singapore’s Media Development Authority, SkyVu was able to bring StoryBoy (an interactive ebook program aimed at children) from concept to market in under six months. Battle Bears, a game developed by SkyVu’s American office, also made it to virtual store shelves, but only because it was helped along by the Nebraska Angels.
Benjamin Vu – the company’s president – knows full well the power of government-backing.
“If Nebraska were to offer SkyVu Pictures a game development incentive tomorrow, everyone at the studio would dance like crazy for a few minutes,” said Vu. “A Nebraska company or developer could very well be the next hit. Once you’ve created a hit or a trend, then that will spawn more jobs, more media attention, and bring more benefits to the state.
“In Hollywood, it’s easy to get lost in all the hype, and ‘What’s the next great thing?’ Here in Omaha, we’re sheltered from that and our team simply imagines the things we want to see and play.”
Changing the way the game is played
Long gone are the days when ‘video game’ meant an incomprehensible mess of blurry dots and aggravating beeps, self-contained in a monstrous 200-pound arcade cabinet. Back then, most games where designed by two or three insomniac engineers, and profits were either fleeting, nonexistent or a product of pure chance. By contrast, the making of Grand Theft Auto: San Andreas, the notorious gang-war opus from Rockstar Games, employed nearly 1,000 people, according to a Times interview with the lead developer.
In some ways, one could blame Nebraska’s staunch, traditional values for stymieing game development. As far as Omaha is concerned, half the battle is just “overcoming the expectation of the older generations that video games are for slackers,” said Tom Chapman, director of entrepreneurship and innovation for the Greater Omaha Chamber.
Those were the words of encouragement provided to students by a panel of successful entrepreneurs and business people at University of Nebraska at Omaha’s College of Information Science & Technology in September.
Chapman moderating the panel, held September 30, 2009. (Image from ist.unomaha.edu)
Over the past six months, Chapman said he’s been discussing the topic of game studio incentives more and more, following buzz surrounding Nebraska’s nascent game industry. Among other things, game companies could stop the state’s brain drain (college-educated students abandoning relatively underdeveloped rural areas for greener, more high tech pastures), as “22-year-olds tend to go where there’s a job.”
“There are some leaders who want to talk about this – that makes incentives more likely, eventually,” Chapman said. “However, it’s unlikely anything will pass in the short session of the legislation. I don’t think it’s on anybody’s agenda; I don’t think it’s even going to be presented as an option. They’re in session to figure how to cut $335 million from the state budget.”
And even if a legislator supports video game studio incentives and turns them into a reality for the state, the struggle doesn’t end there. Even after an industry is established, it can still be wiped away with a flick of public opinion’s hand. In Michigan, some legislators (and the constituents who’ve rallied behind them) are pushing to rescind the incentives approved no more than a year ago.
Credit where credit is due
With the state staring down a $1.5 billion budget deficit and wrestling with a 12 percent unemployment rate, some Michiganders are asking elected officials to axe creative tax credits. Currently, development incentives refund 40 to 42 percent of costs incurred by studios producing movies, TV shows, video games and documentaries within the Great Lakes state.
“The uncapped refundable Michigan film credit continues to expend funds from an ever-shrinking revenue source, adding to the growing deficit and creating very few sustainable jobs,” said Nancy Cassis, Michigan state Senator and chair of its Finance Committee, in an emailed statement she’d prepared on the issue.
It also diverts funds away from the state’s small businesses, Cassis argued. Other bills have been proposed, most of which would hamper the handouts given to film and video game companies, and require that 90 percent of a project’s staff reside in Michigan.
But the state’s artists and auteurs refute Cassis’ accusations.
“Lets’ face it… movies, TV shows and video games: They’re high profile – it’s an easy target,” said Mike Manasseri, an area director and producer who founded Big Screen Michigan, an advocacy group intent on curtailing changes to the production incentives. “At the moment, Michigan needs help. The big three have been destroyed. Hundreds of jobs have left the state. You need incentives to build a new industry.
“Creative industries are blossoming in Michigan right now, but since there’s been talk the past couple months of cutting (the tax breaks) back, a lot (potential investors) are staying silent right now – they don’t want to come to a state that looks like it’s getting cold feet.”
But believe it or not, some game companies directly benefiting from those incentives actually side with Senator Cassis. For Doug Kinnison, founder of Michigan-based P15 Studios, it’s not about what’s fair. It’s laissez-faire.
“I think it’s great the state wants to help, but people in the business world would be better served if the government just got out of the way entirely and let things happens,” Kinnison said. He added that, while he doubts Cassis has the popular support to overturn the initiative, he felt a need to “play Devil’s advocate and say, ‘No, the state can’t afford to throw money out there like that.’”
Kinnison approaches the issue with a cold, calculating business acumen. Quality game ideas impress investors and receive financing, while subpar presentations become the laughingstock of board rooms and high end luncheon tables, nothing more. With the state bankrolling two-fifths of a game’s production costs, Kinnison is afraid the market will become flooded with products that have no business being there. What’s more, he believes savvy, but unscrupulous entrepreneurs are engaging in deception to muster additional funds.
“Every creative startup in Michigan says they’ve already got ‘X’ amount of money,” Kinnison said. “But if you really talk to them for a while, it becomes obvious that, no, actually…they don’t.”
For example, assume a polished, gib-laden first-person shooter needs $10 million over the course of two years to become a reality. Technically, Michigan would pay $4 million of that in the form of an end-of-the-year rebate, but $4 million is still $4 million. So, in the next meeting with a potential investor, it wouldn’t be completely untrue to say you’ve already accumulated two-fifths of your budget, which – on the surface – appears to be valid proof of concept.
“You’re given 40 percent of your budget and you go out and use the incentive to bring in the other 60 percent of the project – every bad project could get financing,” Kinnison said. “Only 2 to 5 percent of ideas should make it to the light of day.
Setting the stage
Kinnison isn’t the only person who opposes game development tax breaks despite having a major stake in the industry’s success. Jason Della Rocca, one of the video game business’ leading pundits, maintains tax relief should sustain game development, not spark it.
Della Rocca speaking at the 2007 Montreal International Game Summit (Photo by SIJM on Flickr, used with Creative Commons License)
The man knows a thing or two about getting game development empires up and running. His company, Perimeter Partners, consults interested parties the world over (from Singapore to Brazil to Sweden) on how to properly nurture a nascent game industry. All too often, Della Rocca claims, governments think providing tax breaks is the only impetus needed for the rest of the equation to work itself out.
“Tax breaks are great, but only in certain circumstances. They’re beneficial for existing companies already in business, working on projects – the big guys who can pay their accountants to follow trails of paperwork,” he said. “Tax breaks are not good for entrepreneurial startups. You’ve still got to get money, pay for all your work, and then – a year from now – you’re going to get a tax refund, so a tax break for (startups) is pretty useless.”
Instead, Della Rocca explained a thriving game development cluster is a complex machine, replete with multiple interlocking parts, each one’s function contingent on the other pieces around it. Government subsidies can make or break a fledgling industry, but can’t create one from scratch.
It starts with universities and tech schools offering courses that teach kids who dream of making video games how to garner concrete returns on their ambitions. Once a few classes worth of future Cliff Bleszinskis exit academia and make bold strides into the real world, it’s up to them to decide they’ve got the guts to make a go of a video game startup. After a studio is up and running, then – and only then – should the government consider stepping in.
“In the majority of cases, a game industry does well on its own, and then the government says, ‘Wow! That’s exciting; let’s push it to the next level!’ and gets on the bandwagon,” Della Rocca said. “I’ve yet to see a region that is completely desolate, and then the government comes in and gets things started. Most regions, there’s something there already, either by chance or by the sheer perseverance of the entrepreneurs.”
If Della Rocca’s theory is correct (which – in light of the cities, states and countries around the world he’s dispensed game-related advice to – seems rather likely), then the only way for a game industry to get going is for educated entrepreneurs to pull themselves up by their bootstraps. Fortunately for Nebraskans, it appears their state is already two-thirds of the way there.
Nebraskans eager to break into the game’s industry have multiple institutions of higher learning where they can enroll for training. And businesses like SkyVu remain vibrant proof a creative game company can flourish in a land still dominated (if only in the popular imagination) by ranching and agriculture.
“There are a number of companies (in Nebraska) that have a gaming background, and when you move into data visualization, modeling, the heavy basics of gaming, you’re starting to see the necessary pieces,” Chapman said, adding one-third of students at University of Nebraska’s Peter Kiewit Institute (an Omaha-based tech and engineering college), have expressed interest in working in the games industry.
Plus, the state has motivated individuals like Mark in its corner, tying up the loose ends. While speaking at the Game Developers Conference in Austin earlier this year, he met Della Rocca, and the two talked shop about Nebraska’s chances in the booming games industry. Mark, in turn, introduced Della Rocca to Chapman in hopes of getting the ball rolling.
“Tom wants to do something about this, and as for Jason, this is all he and his company are doing right now,” said an optimistic Mark. “Those two will probably have a pretty good handle on it.”
So, it seems the Cornhusker state has the grit and the groundwork. Now, it just needs the green. And unfortunately, that seems to be the hardest part of the trifecta to obtain.
“It’s not my decision,” Chapman said. “It’s the state’s, it’s the 49 legislators, it’s the governor’s.”
