London Games Conference

Speaking today at the London Games Conference, Shadow Culture Minister Ed Vaizey outlined far-reaching proposals to back one of the UK’s high-tech success stories, the video games sector.

He announced that the Conservatives will:

“Gordon Brown’s economic mismanagement means the UK government simply has not had the fiscal headroom to offer the kind of support that has been available in some other countries. But just because they cannot offer tax breaks, does not excuse them actively doing down the industry.

“I would love nothing more than to work with you to facilitate the investment and risk-taking the industry needs. We are campaigning at a time when Britain is broke, but this creates an opportunity to shape policies that assist the high tech entrepreneurs that will drive our economy in the future. The video games sector must play a key part in this.”

Notes to editors

The full text of Ed Vaizey’s speech appears below:

“Imagine for a moment you are a politician. You have to make a speech, and you want to highlight a world-beating UK industry.

What characteristics would you look for in the industry you chose?

Well, world-beating is one of them. You would want your UK industry to be up there in the top five in the world.

You’d want it to be an industry of the future, not the past, and one that is likely to grow, so it will probably involve technology.

You’d want it to have a wide footprint, perhaps touching many different areas such as leisure, health, education, defence, and so on.

You might like it to be a nationwide industry, with centres from Brighton to Dundee, and many points in between.

You’d like it to be a ‘hard’ industry, in the sense that the people who work in it should be highly-skilled, mainly graduates, with an emphasis on specialisms such as maths and computer science.

And you’d be delighted that the industry relies on virtually no support from the state, although you’d want to promise Government support when and where it is needed. After all, you don’t want this UK world-beater to be overtaken.

Of course, I’m describing the UK video games industry. An industry that is a significant contributor to the UK economy, generating more that £2 billion in retail sales in the UK, and contributing £1 billion to the UK economy, with a positive export balance of more that £100 million a year.

An industry that has strong hubs of activity outside London – rebalancing the economy with big concentrations in the Midlands and North West, alongside the South East.

An industry that lies third in the world behind America and Japan.

An industry that sells more than music and film combined.

An industry that employs almost 30,000 people directly and indirectly.

An industry that started in the UK with the first video game invented in 1952 on Cambridge’s ESDAC computer. We invented the first football video game, the first with music, and, of course, Grand Theft Auto.

Threats

But this rosy picture is under threat. Britain will probably lose its temporary third place to Canada and South Korea, and be out of the top five next year, replaced by China.

While the video games industry has boomed globally, growing by 20% in the last two years, we have lost 44 studios representing 15% of the sector. NESTA research indicates that external investment in privately operated UK developers has dropped by 60% since 2008 and that employment is down 4%,

Global competition

Global competition is incredibly fierce, and high development costs in the United Kingdom are slowly killing the industry. Given what is happening, you would expect our Government to be acting urgently. After all, many others are.

Most famously, Canada has introduced direct financial support to help companies relocate there, almost $400 million in total.

France has a tax credit.

Germany has a development competition.

South Korea has a $200 million fund and a $144 million agency.

Japan has a new centre to promote video games exports, and they were included in its stimulus fund.

Twelve US states have tax credits or some other form of support.

Even New Zealand and Finland are acting.

Lack of government support

Unfortunately, the UK is falling far behind.

NESTA’s research suggests the UK video games sector could shrink by 16.5% over five years, resulting in the loss of more than £180m in external investment and nearly 1700 jobs.As in so many other areas, Labour ministers simply do not seem to care that we are falling behind our competitors in a critically important economic growth area.

Gordon Brown’s economic mismanagement means the UK Government simply has not had the fiscal headroom to offer the kind of support that has been available in some other countries. But just because they cannot offer tax breaks, does not excuse them actively doing down the industry

Keith Vaz, the Labour chairman of the Home Affairs Select Committee, loses no opportunity to link video games with the most heinous of crimes.

But at least Vaz’s attack is full-frontal. Much more insidious was a recent photograph, of a kid sitting on his sofa. Listless, bored, fat. And yes, with a video games console on his lap. The message was clear. Playing video games is bad for your health.

And who sponsored this terrible message? Well, none other than the sponsoring department of the UK video games industry, the DCMS, as part of the Government’s Change4Life health campaign.

Unbelievable.

If that represents the low point in this Government’s approach to the industry, I am glad that some changes are beginning to happen.

An All-Party Group for Video Games has recently been established in Parliament, which should provide a useful platform for the industry to build in depth relationships and understanding at Westminster.

Changing opinion takes time. I hope that the more I and my colleagues voice our support for games, that might help to accelerate change. Since games have entered the living room and family life via the Wii, Guitar Hero, SingStar and so on there does seem to have been a step change in public awareness and perception of video games.

There are many more good news stories getting in to the press. I am particularly fascinated by news reports that video games can have a positive role in education, and can help to treat the symptoms of Parkinson’s disease.

For the Parkinson’s research, I gather researchers were working with the Wii. The games ‘require visual perception, eye-hand coordination, figure-ground relationships and sequenced movement’, all of which make them a great treatment tool for occupational therapy.

It’s something I clearly need, as I managed to come last in the Conservative Party Conference Wii Ski jump competition!

But we still need to a coherent strategy of support for the video games industry. Let me deal with some of the major issues and suggestions that are being considered at the moment.

A Video Games Council?

The video games industry needs a place at the top table. Some people have suggested a Video Games Council, akin the UK Film Council. There is no appetite to create new quangos. And indeed, we are planning to cut back on bureaucracy.

But I think there is a discussion worth having. Namely, to see whether there is any scope to extend the remit of the Film Council to cover video games. That is certainly something that we will look at actively if we win the next election. Some of the regional screen agencies already serve the sector. And the Film Council seems the obvious body to give video games the national voice they need and deserve.

Tax breaks?

Another hot topic is the campaign for a tax break. As I have already mentioned, many other countries give direct and indirect fiscal support to their video games industry.

I know this is an issue that the sector has been campaigning hard upon, and I have read much of the research in this area, including TIGA’s submission to Government, and Cliona Kirby at Olswang’s paper on how a tax break might work.

Let me spell out our approach.

First things first, we need to get the public finances under control by tackling our spiralling deficit.

But we also need to get the economy back on its feet – and that’s where your industry, and other growth areas, come in.

We want to give you the support you need to succeed and expand in the global economy.

We recognise that high technology companies in the UK face specific challenges when it comes to raising finance and attracting venture capital. And we know that Labour’s constant tinkering with venture capital tax rules and the recent £700 million capital gains tax increase has made this situation even more difficult. No wonder early-stage investments have slumped from 11 per cent of total equity value invested in 2000 to less than 4 per cent in the latest figures.

We need a new approach.

That is why Sir James Dyson, one of the world’s leading innovators and designers, is leading a major Conservative Party taskforce to look at the options for government to provide effective support to venture capital.

He will be presenting a detailed report to David Cameron before the next election. This report will help to shape our manifesto for government – and provided we win the next election, will shape the future of your industry in the years to come.

I want to make sure that the views of the video game industry is properly represented in this important process. I know most of you have been focused on an industry-specific tax break.

But I encourage the sector to think more widely than that.

So I am calling on you to make your voices heard, and send us your expert views.

Now is the time to influence our policies – and help us develop a framework that can boost our video game industry, and make the most of our incredible potential.

Broadband and Piracy

The internet is at the heart of the future growth of the games sector. The uptake of digitally downloaded video games is experiencing a rapid rise, but they require superfast broadband speeds to really grow. With disc-based delivery of content likely to disappear within 10 years we need a high speed network to deliver all kinds of creative content, including games. South Korea has 1GB for land lines and 100MB wireless – the Government’s ambition for a 2mbps connection for everyone by 2012 is simply nowhere near fast enough.

The current Government plans to enable superfast broadband by creating a new tax. Frankly, this is an old economy solution to a new economy problem. The cable revolution happened without a cable tax. The satellite revolution happened without a satellite tax.

Instead, our approach is to stimulate investment through the regulatory structure.

Conservatives will oversee wholesale deregulation of the current broadband infrastructure. Dark fibre, Openreach’s ducts and the sub-local loop should be opened up and other operators allowed to access them. We should not rely solely on BT to build this new network. If they are not willing to lay fibre in their ducts, other operators should be allowed the opportunity to do so.

Allowing the market to decide between operators and technologies should always be the preferred route. Whether it is a 100% fibre network or a mixture of fibre and copper, whether it is underground, overground or wireless, the nimbleness of competition will be far more effective at stimulating investment than top down strategies by ministers or regulators. We will seek to free the telecoms sector to develop and innovate itself.

The advent of superfast broadband makes the need to find workable solutions to internet piracy all the more pressing. We think that ISPs do bear part of the responsibility to address this problem, but this must work hand in hand with content providers working innovatively to make their content availability easily, legally, reasonably priced, online.

Skills

Finally, I know that the shortage of good quality graduates is another pressing issue for the sector, especially those graduating with Maths and Computer Science degrees. If we can find a way to make a real difference here, we will enhance the UK games industry’s competitive international position.

This process starts at the very beginning, and links to the perceptions of the sector I was talking about earlier: we should highlight to teachers and parents of children at primary school that gaming is a great profession.

We need to increase the attractiveness of maths and sciences, both as subjects to teach and subjects to learn. My colleague, Shadow Education Secretary Michael Gove, shares your concerns about the decline in these subjects. He is looking at a way to give more weight to A-level performance in maths and sciences, so that schools will place an increased emphasis on these subjects.

At undergraduate level, I would like to look at improving the standard of the 81 video games courses currently on offer. At the moment, only four of these courses have been accredited by Skillset. There is an acute need for a skilled workforce and a qualified and able graduate talent pool coming out of Universities. We urgently need to accredit more courses, and to raise the standards of many more.

Conclusion

I am not a gamer. I have just got myself a Wii. So I am getting involved. It’s been the single greatest pleasure of my job to discover and learn about an industry I knew little about before this job.

As one journalist recently put it, we are in the horse and cart phase of the industry, at least in terms of perception. We are about to move to a new level. I would love nothing more than to work with you to facilitate the investment and risk-taking the industry needs.

We are campaigning at a time when Britain is broke, but this creates an opportunity to shape policies that assist the high tech entrepreneurs that will drive our economy in the future.

The video games sector must play a key part in this. Politicians need to take this industry seriously and promote you consistently.

The principles of our approach are clear. The industry needs a voice at the national level, and we will explore how best to effect this. There needs to be a renewed focus on the skills you need to continue to grow.

And when possible and when necessary, we will provide the right investment, business and fiscal environment to allow you to compete.”