Objetivos básicos del mantenimiento

U.S. Video Game Sales and Unit Growth

New Sales 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 CAGR

Dollars (in billions) $2.6 $3.7 $4.8 $5.5 $5.6 $6.1 $7.0 $7.1 $7.4 $7.0 12% Units (in millions) 74.1 108.4 153.0 185.2 197.1 211.0 226.4 241.4 250.0 228.5 13% Source: Entertainment Software Association, and ERA

Since 1996, U.S. unit and sale growth of video games and consuls averaged 13 and 12 percent per year, respectively. U.S. dollar sales by the largest companies rose from just under $3 billion in 1996 to roughly $7 billion in 2005. U.S. unit sale growth rose from around 75 million to 230 million over the same time period. Growth has reached a plateau in recent years, however. The slightly higher growth in unit versus dollar sale growth implies slightly higher prices per unit in the industry.

Estimates of the global marketplace sales in the video game industry are estimated at slightly more that $30 billion according to the study commissioned by The Chamber of Greater Baton Rouge. This would imply a total U.S. market share of roughly 25 percent of the global industry – which is consistent with the U.S. economy’s share of the global economy. Increasingly, it is expected that relatively higher rates of growth in the industry will occur in East Asia and particularly India, as an emerging middle class consumer is expected to fuel growth for the industry. Applying a longer term growth rate for industry sales and unit growth, implies a domestic U.S. video game market growth of roughly $1 billion per year over the next several years. Software developer wages are higher than average wages for most areas of the economy. Various estimates peg the annual salary for a developer in this industry at roughly $70,000 per year. As with other knowledge-based industries, annual wages are comparatively higher than average wages across the economy.

When reviewing the digital media industry, it is important to distinguish between publishers and developers. Publishers are primarily involved in deal making – securing deals between platforms (consoles) and developers, contracts, and dispersal of funds. Developers are primarily responsible for the actual development of games, including all elements of the process needed for creating a functioning game – software development, programmers, game designers, artists, etc. Developers are central to the process of creating the functional video game product.

Importantly, developer and publisher processes need not be in the same physical location. One key finding of a survey conducted for The Chamber of Greater Baton Rouge found that professionals in the video game industry largely agreed that development could be separated geographically from publishing. Another area of mutual agreement was that a primary need for the creation of a video game industry requires a relatively high concentration of related industry talent. Thus specialized training (perhaps at a university or specialized certification level) relating to industry functions is viewed as an important prerequisite to an ongoing industry development in this field.

The current structure of the industry is one which is highly fractional at this point in time. There is one firm – Sony – with a high market share (33%) and more than a dozen which vie for much smaller market shares. It is clear from the figures shown next that the industry has not experienced heavy levels of consolidation and concentration – 3 or so companies with greater than 90 market share – which is more characteristic of mature industry structures. What the figures also illustrate is the likelihood of relatively high levels of entrepreneurial involvement which is more characteristic of evolving, high-growth marketplaces. Market share estimates are shown in the following graph and table.

0% 5% 10% 15% 20% 25% 30% 35% 40% Percent

Sony Nintendo EA Microsoft Other

Firm

Estimated Market Share

Estimated Market Share Sony 33% Nintendo 13% EA 12% Microsoft 5% Other 37% Other Includes Atari 4% THQ 4% Activision 3% Take-Two 3% Konami 3% Namco 2% Ubi Soft 2% Sega 2% Other 14% Source: Euromonitor

Relatively high levels of entrepreneurship is a finding consistent with the study commissioned by The Chamber of Greater Baton Rouge. Entrepreneurial-led industries have their own separate development obstacles as compared to mature industries. Such markets are 1) highly fractional (many firms competing for a rapidly changing market), 2) these smaller, individual firms have difficulty accessing important growth investment (capital formation), and 3) relatively abundant talent is an important catalyst to growth.

State and Regional Programs

A small number of states or regional governments have enacted policies to support the development of the digital, interactive, or video game industry in their territories. This subsection reviews four programs in place in the U.S. and one in Canada – those of Georgia, Florida, North Carolina, Wisconsin, and Ontario. Louisiana’s program, by comparison, is somewhat more aggressive in developing the games industry. The following is an overview of such programs.

Georgia

Georgia initially revealed plans for their incentive program in November 2006, and by April the incentive program was enacted. The incentive takes the form of a credit against Georgia income taxes. Georgia’s program is similar to the program set up in Louisiana, though comparatively the Georgia program is less aggressive. Some highlights of their program include

! Limited tax liability can be transferred as long as the transferor recoups at least $0.60 on the dollar;

! Qualifies expenditures on editing, animation, coding, special effects, and other costs generated when creating a product which is to be distributed outside of Georgia;

! Qualifying companies earn a state tax credit of 9% of the base investment for production in the state;

! Additional credit for 3% of the aggregate of all Georgia residents employed by the project; ! Additional 3% for companies who invest in designated Tier 1 and Tier 2 counties.

Florida

Florida offers cash reimbursement for companies of up to 15% on the total Florida budget of a filmed entertainment program that spends at least $850,000 in qualified expenditures. The maximum reimbursement that may be given is $2 million dollars. Projects available for this incentive include films, videos, television shows, and digital media effect (VFX) production. The production costs that are considered “Qualified Expenditures” are:

! Wages, Salaries, and other forms of compensation for crew, performers, actor, etc.;

! Expenditures on good and services including: sound stages, sound recordings, set, and digital effects.

Digital Media Companies have an incentive which states that a qualified digital media effects company which furnishes digital material to filmed entertainment may be eligible for a rebate of 5% of it annual gross revenue, with the stipulation that it can’t exceed $100,000.

North Carolina

North Carolina had also been in the process of instituting an incentive bill for game development. One stipulation is that companies cannot claim tax credits on the cost of making games that fall under the states obscenity statues. To qualify for this tax credit companies must be making product distributed on electronic media that “contains a computer-controlled universe with which users may interact in order to achieve a goal” – meaning, interactive media and games. There also needs to be a substantial amount of text, sound, fixed images, animated images, and 3D geometry. The incentive would give a 15% tax credit for money spent in-state on equipment and labor costs. This bill recently failed to move beyond the Finance Committee of the North Carolina House.

Wisconsin

Wisconsin legislators have been proposing competitive tax breaks and other business incentives in order to attract game developers and other creative industries to the state. A tax incentive packaged was recently put together for the benefit of the film, television, commercial, and video game industries. The bill creates:

! A refundable tax credit of 25% of direct production expenditures for feature films, television movies, episodic and mini-series television, video games and broadcast advertising production; ! A 15% state income tax credit for film, television, and electronic game production businesses that

make a capital investment by starting a business in Wisconsin. Ontario

Ontario’s entertainment industry is the third largest in the world behind New York and California. Ontario expects that video games will be the biggest worldwide growth market in entertainment over the next 4 years and because of this, they have boosted its Interactive Digital Media Tax Credit to 30% for small business in the provincial budget.