SACRAMENTO, February 13, 2018 – California is facing growing domestic and international competition for its thriving video game industry, part of the state’s $32 billion software publishing sector, according to a report released today by the Milken Institute.

Overall, the video game industry generated global consumer revenue of approximately $116 billion in 2017. California is home to more than 900 companies that employ more than 33,000 workers in the industry, far outpacing other states.

“No other industry reflects the convergence of technology and entertainment as well as the video game industry,” explains Kevin Klowden, executive director of the Milken Institute’s Center for Regional Economics. “As the industry grows, cities, states, and countries are offering economic incentives (such as tax credits, rebates, or grants) and creating, attracting, and retaining strong talent pipelines that compete with California.”

The report, Future-Proofing the Video Game Industry in California, draws on publicly available data, along with proprietary information to assess the industry’s contribution to economic output, employment, and wages. In addition, the research team engaged in broad consultation with industry leaders, academic experts, and elected officials. 

They identified a narrowing gap between California and other states competing for video game companies. The report incorporates case studies from Texas, Georgia, Washington, New York, and Canada, and concludes with recommendations for consideration by state policymakers:

• Adapt California’s sales and use tax exemptions to apply to video games;
• Expand or revise the state R&D tax credit to better serve startups and small businesses;
• Explore developing a production-based tax credit for video games if California’s share of the video game industry declines; and
• Improve the development of in-state computer programmers and developers by strengthening relationships between the video game industry and two- and four-year colleges.

“Like its counterpart in Hollywood, the comparative advantage of having a lead in video game employment and corporate headquarters may not be enough to maintain California's consistent growth in the industry or to remain a leader in fostering the small development studios that are so essential to California's edge in both video game production and employment,” adds Klowden.

Future-Proofing the Video Game Industry in California was written by Rebecca Simon, policy analyst at the Milken Institute’s Center for Regional Economics, along with Klowden and Carolyn Karo Schulman, director of strategic initiatives at the Center. They are presenting their findings and recommendations to state legislators at a public forum in Sacramento on Tuesday, February 13.

The report was made possible with support from the Electronic Software Association. It is available online at www.milkeninstitute.org

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