The Milken Institute recently released “Future-Proofing the Video Game Industry in California,” a report that addresses one central question about the game industry: How can California maintain its edge?
When the report’s findings were presented to state legislators at a public forum in the State Capitol Building on Feb. 13, 2018, Informatics Professor Constance Steinkuehler was on hand to offer her expertise as founder of the Higher Education Video Game Alliance (HEVGA). According to Rebecca Simon, the report’s lead author, “Steinkuehler provided invaluable input on the relationship between educational programs and the video game industry.”
Steinkuehler also recognizes the extraordinary potential of California’s gaming industry. “That’s why I came here,” she says, referring to her 2016 move from the University of Wisconsin to UCI’s Department of Informatics. “Because I knew this could be the mecca of gaming.”
Preparing for Battle
According to the report, California has a 27 percent stake in the video game industry with more than 900 firms and 33,000 employees — which is larger than the 25 percent stake of the next four states combined (Texas, Washington, New York and Massachusetts). California’s industry is clearly thriving, but a growing threat looms.
The report points out that 21 U.S. states and two Canadian provinces offer production tax credits, grants or rebates specifically related to the creation of video games. Although such production credits originated in California, they were aimed at keeping filmmakers from moving to lower-cost states. “We have nice incentives for Hollywood,” says Steinkuehler, “but none of that extends to games.”
At the same time, she adds, “other states are hungry for new industries. They’re looking to replace jobs they’ve lost, so we have real competition.”
Incentivizing California’s Game Industry
Three of the report’s four recommendations focus on tax exemptions and credits for video game production, products, startups and small businesses. Such incentives can encourage not only companies but also graduating students to settle in California.
Steinkuehler explains that “in game design, we don’t just talk about where our graduates get jobs but also whether they create jobs. Because our students often become indie developers and open up shops.” She goes on to say that UCI is greatly interested in these startups because “that’s where our students will go to do internships. We need that ecosystem. We have Blizzard and Riot and other fabulous huge companies, but we need those indie startups too.”
Without incentives, most startups can’t afford California. “We want our students to remain in California,” says Steinkuehler. “We need to make sure that we don’t have a talent drain.”
Advancing the Talent Pipeline
California also must focus on developing that talent, which is why the report’s final recommendation calls for stronger ties between industry and colleges in an effort to produce better computer programmers and developers.
Steinkuehler reported at the meeting that the interest is there. “For the last four years, we’ve been telling people that the next wave of jobs is in coding, and they’ve listened. We’ve had torrents of applicants to our computer science and computer game science programs at UCI.” In 2017, there were 3,373 freshman applicants for the CS program and 775 applicants for CGS, up from 1,959 and 548 in 2014, respectively. Similarly, 426 CS bachelor’s degrees were awarded in 2017 and 47 CGS degrees, up from 125 and 14 in 2014, respectively. Yet state government hasn’t provided additional resources to accommodate the growing number of students. “The faculty are up to their eyeballs in students, teaching classes that are obscenely huge, which is awesome,” says Steinkuehler, “but we need more resources.”
To provide evidence that pouring resources into game design programs is a good investment, Steinkuehler told meeting attendees about various HEVGA surveys conducted while she was president. “Graduates from games programs reported 1.5 times the salary of college graduates and their employment rate was 8 percent higher. Eighty-three percent reported that they’re ‘thriving’ in their career.” Furthermore, game design degree programs had almost double the number of women compared to computer science and engineering programs. “When you add creative design and a focus on users, you draw more women,” explains Steinkuehler. Both interest and diversity should continue to grow, with Steinkuehler helping to develop programs such as the Orange County High School Esports League, which leverages interest in gaming to introduce STEM domains to younger students.
In other words, California has the required pieces and players; it just needs the leadership and funding. “I’m glad we’re having the conversation now, before we’re in crisis mode,” says Steinkuehler, whose message to lawmakers was clear: “We absolutely can address this.”
One day after the public forum, Assemblymember Richard Bloom (D-Santa Monica) announced that he will introduce legislation to provide incentives for video game companies. “California is synonymous with the video game industry just as we are with the film and television industry,” said Bloom. “We need to stay competitive and act fast so that we can keep this multi-billion dollar industry right here in our backyard.”
Kevin Klowden, who helped Simon prepare the report and is executive director of the Milken Institute’s Center for Regional Economics and California Center, is working with Bloom’s office on legislation based on the report’s recommendations. “The legislation focuses on the incentivizing aspect,” says Klowden. It introduces a sales tax exemption for video games and a research and development (R&D) tax credit for equipment. Klowden explains that “the goal is to help startups and small businesses invest in equipment for video game development.”
Steinkuehler, having returned from Sacramento, is back at UCI, continuing her own efforts to, as she puts it, “build an empire of games here.” Such an empire should further fortify California’s dominance in the video game industry.
— Shani Murray