Posted on Categories creative industry

Will we see a flood of games with hussars and insurgents?

Last week, without fanfare (compared to the bluster shown by the government a few days later in announcing support for the game industry at Poznań Game Arena), a draft of the Act on Financial Support for Production of Cultural Video Games was released. The solutions bruited for several months stir mixed feelings in the industry. Particular controversy surrounds the “cultural test” games will have to pass before they win support. Some commentators fear this may trigger a flood of poor-quality, superficially patriotic games developed solely with the aim of winning government support. It’s worth taking a closer look at the solutions provided in the bill to reach our own conclusions on how they may impact the Polish game market.

The announcement that the Ministry of Culture and National Heritage was taking up work on regulations to provide support for domestic game producers in the form of tax incentives was included in a list of legislative initiatives at the end of July 2018.

Given the understood premise that support would be provided only to developers of games promoting Polish culture or national heritage, the idea generated controversy from the very start. On one hand there was a concern about a flood of mediocre games created just to win financial backing, and the criteria for the “culture test” were particularly unclear. On the other hand, it was doubtful whether solutions would offer realistic, effective support for the Polish game industry. Now that a draft of the bill has been published, we can attempt to answer these questions.

What support can developers receive?

The draft provides for support in the form of tax relief, permitting developers an additional deduction from their income-tax basis for certain types of costs incurred in connection with the game development process. The catalogue of costs is quite broad and includes for example expenses connected with salary for employees, research, services, equipment necessary for production (e.g. leasing of computers), and even introduction of audio description and other forms of ensuring the game’s accessibility for the handicapped. The amount of support obtained in this manner (along with other sources of state aid) cannot exceed 50% of the total production costs for the game or EUR 50 million per year.

Not only entities based in Poland will be eligible for relief, but also those based in other member states of the EU, the EFTA (e.g. Switzerland) or the European Economic Area (e.g. Norway). The relief will be available only to entities involved in the game production process (i.e. developers—publishers will probably not be eligible) who have already launched at least one game. More importantly, in line with earlier statements, the relief will be awarded only to “cultural video games.” (The drafters should be commended for consistently using the term “video games” and not for example computer games, which would exclude from support other platforms such as consoles or mobile devices.) Cultural games are defined in the draft as those employing “Polish or European cultural attainments” and also games that are innovative or foster the development of culture. A game designed under the programme will have to undergo a qualifying test conducted by the minister for culture, leading to the award of a certificate for the game confirming its “cultural” character.

A developer wishing to obtain financial support will thus have to file an application with the minister for culture describing the nature of the future game, the scope of the planned work, the total production costs, and the dates for commencement and completion of the development process. The applicant must also enclose “a document specifying the design elements of the game,” which could be a reference to a game design document (GDD), which used to be a popular form for specifying the preliminary design assumptions of a game at the pre-production phase. However, extensive GDDs have fallen out of favour as impractical, being replaced by more concise design forms known as “game design pillars.” This raises the interesting side issue of whether the act will encourage the return of extensive GDDs because they would better suit the habits of ministry officials.

Is supporting cultural games all that extreme?

The specific criteria to be considered in the qualifying test for “cultural” games, and thus for obtaining financial support, are not known yet. The form and criteria for the test are to be promulgated later in the form of an executive regulation to the act. Only then will it become clear what sorts of games the Polish government really wants to promote. A hint is nonetheless offered in the justification to the draft, where it is stated that games will be evaluated in terms of how they present the cultural heritage of countries from the European Economic Area, placement of the action of the game in one of those countries, the role of narrative in the game, the use of dialogue in Polish, and the originality and innovativeness of the solutions employed in the game. In practice, much will no doubt depend on the ministry’s attitude.

Nonetheless, the conditions already indicated in the draft (such as support for games based on European and not necessarily only Polish cultural attainments) suggest that the fear of a wave of shoddy pseudo-folk elements in games and an endless series of propaganda titles about hussars and Polish insurgents (as signalled in the article “What a relief?” in CD-Action no. 10/2018 and the statements by industry players included there) may be exaggerated.

And promotion of cultural games is not a purely Polish phenomenon. Such solutions have existed for some time in many EU countries. The first country to offer tax relief for production of video games was France, with its crédit d’impôt jeu vidéo. The UK introduced video game tax relief (VGTR) in 2014. In the French and British schemes, support is offered for productions that pass a cultural test, administered by the Centre national du cinéma et de l’image animée and the British Film Institute, respectively. The element of promotion of local culture is included in these solutions mainly because it facilitates approval of the schemes by the European Commission as a form of state aid. In introducing its planned scheme, Poland is only chasing a fairly large pack of European countries already offering support of this type to their domestic game developers, and the scheme here may help equalise the chances for Polish developers on the video game market.

Will the relief lead to the creation of a new international hit from Poland?

In short, probably not. The support offered by the act will not be decisive and will not automatically give rise to a hit title like The Witcher or a Polish equivalent to powerhouse American game development studios like Blizzard. A recent assessment of the impact of VGTR in the UK found that while it did stimulate the growth of the local game market, it did not lead to the creation of new industry leaders or truly earth-shattering new games. Opinions are also divided on the relevance of the cultural element for achievement of market success by the games. Given the strong globalisation of the video game market, most observers regard the cultural element as of marginal importance.

This doesn’t mean that introducing tax incentives for game development is pointless—quite the contrary. Undoubtedly the relief will facilitate market entry by new game development studios and encourage them to produce innovative titles bucking market trends (for example, games departing from the most popular game format at the moment, the “battle royal,” and games that don’t use micro-transactions or “loot boxes”). Indirectly, by contributing to the establishment of more independent game development studios in Poland, it may also raise the share of the video game market in Polish GDP. Certainly the government support programme will help even the odds of Polish developers in competing with players from other European countries already enjoying incentives of this type. In a survey of game developers and publishers in 2017, 63% of respondents said tax incentives are the form of support they most expect from public institutions.

This will make it worthwhile to track the fate of this proposal before it is presented to the parliament. It is currently undergoing public consultations, including comment by representatives of the video game industry. Soon we should hear their views on the proposed solutions and learn of further changes before the bill is adopted.

Jakub Barański