The video game business is trying to move to the next level in Massachusetts. How much of a helping hand will state government offer?
Baker College junior Matthew Herard, dressed in a suit festooned with sensors,
once a month, about 200 nerdy 20-somethings crowd the back room of The Skellig, an Irish pub in Waltham, to talk about video games. It looks like a gathering of people who spend too much time in front of their computers. Sweatshirts and scraggly beards are the norm. Only a handful of women are present. Many of the attendants are college students and recent graduates, some unemployed, giving the place the feel of a frat house as they order burgers and rounds of beer.
But first appearances are deceiving. The monthly events, called Boston Post Mortem, feature panels of local video game developers from renowned companies such as Quincy’s Irrational Games, known for the popular title BioShock; Needham’s Turbine, creator of games based on J.R.R. Tolkien’s Lord of the Rings; and Harmonix, the Cambridge firm that created the blockbuster hits Guitar Hero, Rock Band, and, most recently, Dance Central. Since its release last year, Dance Central has sold 2.5 million copies, at $60 apiece, by challenging players to mimic the dance routines of animated characters—called avatars—on a screen as a soundtrack plays.
In November, the topic of the Post Mortem panel is analytics, or how developers figure out whether or not players are enjoying their games. The crowd is all business. They take notes and, when question time comes, throw around terms like “vanity metering,” “metrics of love,” “virality,” and “gamification.” They debate the ethics of making an online game so addictive that players spend too much time and money on it.
Timothy Loew, the executive director of the Massachusetts Digital Games Institute, or MassDigi, listens from the back of the room. Loew is the point man for an unusual quasi-public initiative to take the video game business in Massachusetts to the next level. It’s currently a $2 billion business in the state with a handful of world-class companies, a number of smaller studios mushrooming from the Berkshires to Boston, and a large pool of fresh talent coming out of video game design programs at local colleges every year. Loew sees tremendous potential in video games and is leading an effort to capitalize on it.
“Video gaming is an industry here. It’s grown that way organically,” says Loew. “The question is, how can we try as an institute to grow the industry?”
The answer will involve more than just strategizing ways that the state might help promote another industry taking root in our knowledge-based economy. Some state and industry leaders want to see Massachusetts go even further and offer tax incentives to the emerging video game industry, much as the state now does for the film industry. They say that kind of industry-targeted assistance is exactly what is needed to have the video game business take off. To others, however, such a hefty state hand-out would be the tax-policy equivalent of Grand Theft Auto.
|Characters from the video game Fate: The
Cursed King by HitPoint Studios of Hatfield.
Massachusetts is home to more than 75 video game developers that employ about 1,300 workers, making it the fifth-biggest cluster of video game production in the country, after California, Texas, Washington, and New York. It is also an academic center for video games. For the past two years, The Princeton Review, the college ratings service, has listed two Worcester schools—Becker College and nearby Worcester Polytechnic Institute—among the top 10 undergraduate video game design programs in the country. Both are in their infancy, the outgrowth of clubs that morphed into full-fledged academic programs seven years ago. MIT’s graduate program in comparative media studies earned an honorable mention in 2011.
The traditional video game business model revolves around games sold through retail stores which consumers can play on their computers, Xbox, or other home console systems. Many of these traditional games are well known. They include variations of Super Mario Brothers and Sim City, or sophisticated epics that feature astoundingly detailed graphics and enormous worlds that can take casual players weeks to explore fully, often from the so-called “first-person shooter” perspective of a character running around a hostile city with a gun.
Nowadays, however, more and more developers are designing games that don’t fit into the traditional business model of selling software to individual players. These developers make games that are played almost exclusively online, such as World of Warcraft, where participants join a website and compete against players from around the world. Or they make games that are apps downloaded and played on smart phones or tablets. Still others make titles accessed via Facebook. FarmVille, where players manage a small farm for weeks or months, sharing their successes with friends along the way, is a good example.
As video games have fragmented into different niches, they’ve become a big business that rivals movies, music, and other media in terms of value. Domestic video game sales amounted to $15 billion in 2010, while domestic box office revenues for films totaled $10.6 billion, according to the Entertainment Software Association. Games are also growing in popularity. The global video game market was forecast to hit $65 billion last year, an increase from $62.7 billion in 2010. It is expected to top $67 billion this year.
Contributing to the industry’s expansion is “gamification,” or using video game features, like characters and scoring, in computer applications that are not entertainment per se. These applications are being used in fields ranging from education to medicine to the military. Using Dance Central for a workout, rather than entertainment, is an example of gamification. Another is a project MassDigi is currently overseeing to gamify Simon & Schuster’s language-learning software. Imagine navigating an avatar on a mission through a town where you have to read and speak Spanish with locals to track the clues needed to move to the next level. Anyone who has abandoned attempts at personal enrichment with Rosetta Stone or similar software might appreciate the difference.
Dave McCool, president of Muzzy Lane, a Newburyport studio that develops gamified educational software, says it’s possible that video games might someday be better suited to teaching than the printed word. “Schools are digitized,” McCool says. “Colleges have done it. Now it’s getting down into secondary and primary school.”
Growth of MassDigi
“We have a chance in this worldwide industry,” says Timothy Loew,
MassDigi isn’t run by a tech guy. Loew got his MBA and worked in banking before filling administrative posts at Becker. When the Princeton Review rankings came out, he says he didn’t need to know the nuts and bolts of computers to see an opportunity. Here was a Massachusetts business that required a specific kind of talent, and a new crop of that unique talent was graduating in the state every year from some of the best academic programs in the field. Yet there was a disconnect: Local companies were often hiring people from out of state and all too often students from local universities were leaving for other tech hubs. It was the classic Massachusetts brain drain problem, and it had been going on since the birth of video games. MIT students created one of the world’s first video games, Spacewar!, in the 1960s and then went on to found Atari in Silicon Valley.
Initially, Loew’s goal was to figure out how to connect students from Becker with local employers. Knowing that politicians were eager in today’s economic climate to create jobs, he began courting local lawmakers and Lt. Gov. Timothy Murray, a former Worcester mayor who was familiar with Becker, for ideas on how to bring academia together with the private and public sectors to put grads to work.
Over the course of 2010, Loew organized panel discussions with developers and several Worcester-based politicians, including Murray, US Rep. Jim McGovern, and state Rep. Vincent Pedone. They eventually reached a consensus that the state should devote resources to help the video game industry, but there was little enthusiasm among public officials for directly appropriating taxpayer dollars to help the private sector. Becker, however, agreed to devote some money and a turn-of-the-century mansion to MassDigi, while Murray secured $50,000 in seed money from the Massachusetts Technology Collaborative, a quasi-public state agency.
In April 2011, Murray presided over the official ribbon-cutting of the institute, designating it as a state initiative to promote the video game industry in Massachusetts. He also arranged for the Executive Office of Housing and Economic Development to give Becker logistical help in drafting applications for other grants, aid that Loew says was crucial in MassDigi’s successful application for a $500,000 grant from the US Department of Commerce in September of last year.
Loew is still renovating his new office space, but he already is planning projects, such as the partnership with Simon & Schuster where Becker students will gamify language-learning software. He’s also arranging to bring a few video game developers to MassDigi for the spring semester for “reverse sabbaticals,” where professionals will take a break from the workplace to teach or conduct research at colleges throughout the state. Eventually, he hopes to have scores of programmers cycling in and out of local schools.
Aaron St. John and Paul Hake, the cofounders of HitPoint Studios in Hatfield.
They’re small steps, admits Loew, but he says global competition for talented developers demands that the state encourage a community that stands out from other game clusters. He hopes MassDigi will become a clearinghouse where developers, academics, and policymakers network, with the institute then serving as a launching pad for new enterprises as video games become more pervasive.
MassDigi doesn’t lobby the Legislature for financial support, but Loew has taken note of what is being done elsewhere for the video game industry. Quebec, he says, offers some of the most generous packages for new companies, while Georgia and Louisiana have already approved tax credits for video game production. Bay State game developers are growing here now, says Loew, but efforts by lawmakers in other states could change the landscape quickly. “Massachusetts is a brains and creativity state, and digital games are a brains and creativity business,” he says. “We have a chance in this worldwide industry.”
Policymakers are listening. Pedone has filed legislation that would add video game production to the same legislation that now gives producers of films and television commercials a tax credit equal to 25 percent of their expenses in Massachusetts. No estimates of the cost have been made. The film tax credit is designed to lure filmmakers to Massachusetts; applying it to video game production would provide a hefty subsidy to existing companies while also acting as lure to draw firms to the state. The tax credit is very attractive to companies because it can either be sold to raise cash or used to offset taxes. Pedone’s bill has 24 co-sponsors, and he and Loew succeeded in bringing House Speaker Robert DeLeo to the Becker campus twice to speak to students, tour the school’s labs, and discuss MassDigi.
“Video games are projected to grow,” says Pedone. “We should have that growth in Massachusetts. If you think back 30 or 40 years ago, nobody knew about biotechnology. Now biotechnology and the spinoffs from bio-medical devices, medical research are the lifeblood of our economy in Massachusetts. I think video game design has the same potential for economic growth.”
The tax credit debate
Becker College student Matthew Herard with Paul Cotnoir, chairman of
Video game developers generally aren’t politically active. Most prefer spending marathon hours writing code or hashing out the plotlines of a new quest rather than pondering the viability of tax credits. The strength of their support for incentives tends to be directly proportional to the size of their operations, which in turn would determine the amounts of tax credits they receive.
Paul Hake, cofounder of HitPoint Studios, says tax credit sweeteners wouldn’t change how he operates his 27-person studio in a renovated tobacco barn in the Pioneer Valley town of Hatfield. “I don’t really pay too much attention or care all that much,” he says. “But MassDigi is good for making connections, learning pay points, and learning insights.”
Larger developers have a different perspective, says Jeff Anderson, who has been involved with two local companies that were acquired by out-of-state giants. Anderson is now senior vice president of Majesco Entertainment, a New Jersey firm that last year purchased Anderson’s company, Quick Hit, which he founded in Foxborough in 2008.
Quick Hit scored a coup two years ago by acquiring a license from the NFL to develop online football games. At the time, California-based Electronic Arts was assumed to have exclusive rights to NFL logos, but Anderson realized that games played on the Internet weren’t included in their agreement. Anderson was also chief executive of Turbine, which Warner Brothers purchased for a reported $160 million two years ago.
When a large developer acquires a smaller one, says Anderson, employees find themselves vying for internal funds within the larger company. In that scenario, he says, regional advantages and disadvantages become obvious quickly. “Turbine is now competing for revenue and expense against other studios in the Warner Brothers system,” says Anderson. “If there is a tax credit in other areas, it’s very difficult for them to win those bids.”
Few events have stoked the debate over tax credits in Massachusetts as much as ex-Red Sox pitcher Curt Schilling’s decision in 2010 to move his video game company, 38 Studios, from Maynard to Rhode Island. Ocean State officials offered Schilling $75 million in loan guarantees in exchange for a promise to create 450 new jobs. As he left, Schilling made no effort to disguise how Patrick administration officials declined to make a suitably generous counteroffer for him to remain. 38 Studios is scheduled to release its first game in February. Rhode Island’s loans remain the biggest source of funds for the company after Schilling’s personal $20 million investment.
Proponents of extending tax credits to the video game industry say the business is close to achieving the concentration of developers necessary to deliver exponential growth, enough to vault the state over the next largest clusters to take the No. 2 spot behind Silicon Valley. Massachusetts also has the qualities ambitious designers seek, such as venture capital, diverse residents, and good local schools. The problem, insiders say, is there aren’t enough opportunities to attract sufficient developers long enough for big companies to emerge and, more importantly, stay here for good.
“More companies here is, No.1, what you need in order to keep people here,” says Kazemi, the moderator at November’s Post Mortem panel discussion. “If you get laid off and you specialize in a very particular kind of a 3D engine [software that makes three-dimensional images], and then you only have three or four other places to go and none of them are hiring, you have to go elsewhere. Generalists do well here in Boston. People with very specific skills tend to come in and then leave.”
Many on Beacon Hill are wary of giving financial support to select industries, particularly in the wake of Evergreen Solar’s bankruptcy after receiving more than $50 million in grants and subsidies from the state. “I just worry about trying to pick winners and losers in tax policy,” says state Rep. George Petersen, a Republican from Grafton. “We have a terrible record of picking winners and losers.”
Gov. Deval Patrick’s administration appears divided on tax credits. The state’s innovation advisor, Eric Nakajima, says the governor opposes expanding the tax credit program because of budget concerns. Even if the funds were there, he says, it’s not clear if the industry needs inducements. Video game developers are already expanding in the state and public efforts to extend broadband Internet throughout Western Massachusetts are likely to help the trend, he says. (See Head Count, p. 19.)
Broader economic currents that favor the so-called “creative class,” a term borrowed from urbanist Richard Florida, will also foster success among Bay State video gamers, Nakajima predicts. Florida is famous for his assertion that future prosperity belongs to economies where workers spend their energy on gigs or projects, with down time in between, rather than traditional 9-to-5 office jobs. Florida took inspiration for his theory from artists and scientists, whose labor resembles that of game designers.
“You can have very big companies, like Disney Research in Cambridge, but you also have a very large number of one- and two- and five-person shops who are creating some components of a game,” said Nakajima. “They are essentially acting as freelancers or contractors who are very flexible, who can change gears quickly, and who can be anywhere in the state.”
Lt. Gov. Murray is more optimistic about incentives. He floated the possibility the Legislature may consider them this year, especially if unemployment remains high and debates about the future of the US economy reach a fever pitch, as expected, during the presidential election campaign.
“There is some preliminary chatter about another economic development bill. That might be a piece of it,” Murray says about the idea of tax credits for the video game industry. “We should stand up this MassDigi institute and then we should do the cost-benefit analysis of the tax credits.”John Dyer is a freelance writer based in central Massachusetts.