Could the Super Mario Brothers bring the same financial windfall to the state as Indiana Jones?
While much has been made of Connecticut’s enactment of tax credits for the film industry, one of the statute’s best kept secrets is that it also provides credits for video game developers. But so far, not one digital media developer has tried to take advantage of the tax credit.
Maybe that’s because they don’t even know it exists.
“It is in the statute and it has always included video games,” said Karen Senich, the acting executive director for the Connecticut Commission on Culture and Tourism. “We’ve had a lot of interest from the film industry, but not a single application for video games.”
In the statute, video game production is mentioned just once and lumped in with film and television production.
Video game developers are entitled to the same tax credits that film projects, such as the highly publicized Indiana Jones movie recently shot in New Haven, have received. As long as the production expenses in Connecticut exceed $50,000, video game developers may receive a tax credit of 30 percent on expenses.
The statute includes “interactive Web sites,” with production costs of more than $500,000 annually and used mostly for interactive games or animation. The Web site credit would not apply to sites that are used for institutional, industrial, retail or marketing purposes.
Connecticut’s tax credit program is seen as a success. Production companies for television, film and commercials have spent $300 million in the state since the law took effect in July 2006. That is compared to a scant $1 million for the first six months of that year.
Other States Recruiting
Similar to how some states strongly recruited film and television producers, others are doing the same to attract video game developers. In particular, Georgia and Louisiana are states that have reached out aggressively to the larger video game companies about opening studios.
The recruitment effort appears to be working for Georgia. Last month, CDC Games International, a China-based company, announced the creation of CDC Games USA to be headquartered in Atlanta. The move is part of the company’s $100 million investment worldwide for its multi-player online video games.
Video game developers usually provide high-paying jobs and are clean, efficient companies that do not adversely affect the local community, according to the Entertainment Software Association, a Washington D.C.-based trade group.
But in Connecticut, there hasn’t been any active recruitment of video game producers. In fact, when Brandon Curiel, CEO of Cromwell-based Venan Entertainment inquired about the tax credits, he was told that he was the first to contact the Connecticut Commission on Culture and Tourism about it.
“For us, that could mean a tax credit on every penny we spend because we’re right here,” said Curiel. “It could lead to other companies coming here if they know about it.”
Connecticut is not the only state to have included digital media as part of a grander production tax credit statute. Massachusetts, Florida and Texas have adopted similar laws in the past two years, while New Jersey is mulling its own proposal. In all, 11 states have enacted tax credits for video game production and development.
Georgia, now home of more than 50 video game developers and publishers that employ roughly 2,000 people, enacted a 9 percent tax credit in 2005.
Industry insiders say that the tax credits can have a significant impact in job creation because some companies are opening up studios in states that provide them. While an entire company may not relocate to a state that offers a tax credit, there could be a shift in jobs, according to the Entertainment Software Association.
Although Connecticut’s film tax credits have been widely covered in the press, Senich said the commission did not market the film or video credit as other cities and states have done because her agency lacks the funding to do so. She credited the film industry itself for spreading the word.
No Promotion
“In the film industry, [word] just spread like wildfire within the industry,” she said. “We participated in seminars to a degree, but it was really people within the industry talking to each other that got Connecticut noticed.”
However, when it comes to digital media, Senich said the commission did next to nothing to promote it.
“Have we gone out and actively pursued the video game developers? No,” she said. “Was that deliberate on our part? No. There was a level of knowledge with the tax credits for the film industry and we just don’t have the kind of money that allows us to do too much.”
Video games companies are few and far between in Connecticut, though the state would welcome them with open arms and a tax break, Senich added.
“Certainly, we would be very receptive to any company that would want to come to Connecticut and providing the tax credits if they meet the $50,000 threshold,” she said.