EA's Keith Ramsdale
The Northern Europe boss talks tax, TIGA and why long term govt engagement is important
The UK tax breaks issue isn't going away - probably something to be expected given the emotive nature of the subject, and constant (and troubling) comparisons to other countries.
Here EA's VP and GM for Northern Europe, Keith Ramsdale, explains his thoughts on the subject - why they're a little more toned down compared to some, and why he believes there are benefits in playing the long game.
Q: There's been more discussion in the press recently about the lack of tax breaks for the games industry in the UK - what's EA's position on the matter?
Keith Ramsdale: I've seen the comments made by other executives in the industry, and we've been talking about that. I personally am pretty close to our relationship in the government here in the UK, and look - our position is quite different.
We've got quite a pragmatic view of what we can expect out of working with the government; we work quite closely with them - I'd like to say we have quite a good relationship, and I think they're quite open to what needs industry has, whatever industry that may be.
I think that this industry, and the companies within the industry, need to be pragmatic on the issues that the government faces today. We're not going to suddenly be handed a great big tax relief bill when the government's facing the economic issues it is - I think that cuts to the chase on this.
The conversations we've had with government are pretty clear on this. That doesn't mean to say that we're not arguing the need for tax credits - and of course arguing the need for an equitable status with other entertainment industries; and I think that's an important point that hasn't been made clearly by others. What applies to other entertainment sectors needs to apply to the videogames industry.
But consumers are being faced with austerity measures, and I don't think it looks great on a company to be bleating loudly that we want our P&L to look better by having tax credits given to us, by the very government that's having to pass these austerity measures onto consumers.
We want to have a long term conversation with the government, so that as the economy improves, we're ready with a strategy together with them to actually then start to see an R&D tax credit scheme come to fruition as the government's in a position to be able to deliver against that.
Actually, I think if you look at the way that it works, there are schemes in place that companies do benefit from. Some of the work that we've been doing with UKIE - of which I'm a board member, and it's a pragmatic bunch on that board - we've been having those conversations.
While R&D tax credits remain a criterion that in the longer term we'd very much like to see played out, we're also talking to them about other financial options that could run. Some of them are schemes that are currently available, and actually the conversation is how we can make access to them easier.
So it's about a little sense check - EA does have a different, much less aggressive view than our big competitor there, who doesn't speak on behalf of all of us.
Q: So let's make it crystal clear - EA is not against tax credits; it's proposing that people need to take a step back in the response to the way that things have gone in the past six months.
Keith Ramsdale: Yes, I think that's exactly right - and I think that tax credits have their place. UKIE is working on how that tax credit proposal might work best, and in the meantime there's an access to finance programme that UKIE's working up with the government, of which tax credits is one part.
Access to current financial measures that are in place for business - it's making that more available, particularly for small- and medium-sized businesses. We support that.
Q: I suspect the point about SMEs is really the key to a lot of the emotion - rightly or wrongly - we've seen on this issue. This is a global business, and if videogames were only made in the UK, maybe it would be less of an issue - but the truth is, the playing field isn't level and economic crisis or not, that's not something that helps the situation.
Keith Ramsdale: No, and I think the difficulty is, to be frank, that you have to look at the total package of what it takes to develop games in a country. Just looking at the headline R&D tax credit that's available, without looking at the whole macro-environment of creating games really is just banding words.
It could be, when you look at the total piece, that there are more favourable territories from time-to-time, and I think that becomes cyclical as tax breaks and skillsets vary by country. Of course, skills are just as important as tax - it's all very well having great tax breaks, but you've got to have the skills there are well.
A key conversation between UKIE and the government isn't just around tax credits - coupled with that is skillsets. We're saying to them that we need to have good quality skills, and they're not quite there at the moment. The long term plan is, how do we build the skillset and make this an attractive country - with skills and remuneration - to maintain the fantastic British creative talent that we have.
Q: EA has a sizeable workforce in the UK, including development - so has the company looked at the current cost levels and had the conversation, at least, that it would be better to move that development to other territories?
Keith Ramsdale: I'd say it's a conversation that happens all the time. All the time. The fact of the matter is that you want to make the best game with the best talent - we have DICE in Sweden, and we all know Sweden isn't the cheapest place to be. We have Criterion in the UK, and that team just made the best Need for Speed game ever created, and sold the most units it ever has in the period up to and through Christmas.
So to be honest it's much more about having the talent in the right place. It doesn't mean that we don't want to have those conversations about the right economic environment to work in - of course we do - but it's coupled with where the talent goes.
Back to what Mr Kotick said, I think just to hone in on one headline soundbite isn't really where EA's position is. Our position is for a long term, sustainable industry, based on talent and an economic environment that allows growth of that development base.
Q: How would you evaluate the UK as a place to do business right now, bearing in mind that country is facing significant austerity measures?
Keith Ramsdale: Well, it's a big territory. From a commercial standpoint we need to be here - when you've got a country that's established like the UK... I've been working here for EA for 14 years, and you start to learn and understand how to navigate the consumer environment.
What we've understood and seen was that the consumer came to retail really late - but you can see from the charts that they did come in the end.
Q: In terms of the industry's relationship with government, is there a concern that too many negative headlines in the press could cause some damage?
Keith Ramsdale: The government is made up of human beings, and they'll get wound up just like anybody else when they see stuff that isn't appropriate being flashed around. You have to treat them like anybody else - I don't think the way to do that is by having sensationalist headlines; the way to do it is by having grown-up conversations with them face-to-face on what the real issues are, understand what their issues are, and figure out together how it works.
Because what the government needs to see is a case where, if they're going to hand over money, what does it get in return for UK PLC? Therefore the industry has to prove to them what that return on investment would look like - and that's exactly the approach that UKIE and its member companies are taking.
They're big people, they're used to being bashed by the press. I don't expect they pay too much attention to it, if I'm honest. What they're really interested in is sitting down and having proper conversations with the companies in the industry - big or small - and really understanding what faces them.
Just rattling on about R&D tax credits all the time doesn't serve the purpose. You have to show what the return on investment for that would look like and why. It's very important - I'll say it again - to link skills with fiscal investment.
Q: One organisation that has been persistent in the tax breaks argument in the past couple of years is TIGA, and it's an approach that yielded results with the last Labour pre-Budget statement. Meanwhile Labour MP Tom Watson advised the industry to keep at it, despite Ed Vaizey MP suggesting TIGA should drop the matter for 3-4 years... It's already been suggested that the industry previously presented 'mixed messages' - isn't there a danger that will continue to happen?
Keith Ramsdale: I think you'll find that if you look at the consistent messaging that's come from UKIE to the government, you won't see any mixed messages there.
The fact of the matter is that you can flog a dead horse - that's a pretty good term for this. I'll refer you back to the finance packages that we're talking to government about. There are a number of items on there that we're talking about, and a year or two ago R&D tax credits would have been at the top of that list.
It's still on there now, but it's further down, because it's clear that it won't happen - but it's not gone away, we're still talking about it on a regular basis. But if we just keep going in every time we speak about R&D tax credits, they're just going to stop engaging with us.
What they want to know is, what alternatives are there? And that's why we're having a proper conversation with them.
Q: That may be the case, but UKIE isn't the only voice speaking to government. That being the case, if there's more than one voice, there's plenty of potential for more than one message.
Keith Ramsdale: There are many industries that have more than one trade body representing them, and what happens is that each trade body represents a different part of that industry. If you look at the member make-up of TIGA and UKIE, the profile is slightly different. You can have two trade bodies.
My personal reach-out to TIGA - and we do have conversations with them - it's the same thing. Let's build that consistent, pragmatic conversation with government, facing the reality of the economic situation today. And let's make that conversation much more with government, rather than outside of government.
We have good conversations with TIGA - but they have to represent their own members as well.
Q: Hang on, part of the problem there is that while previously, ELSPA represented publishers and TIGA developers, there wasn't a cross-over. But with UKIE's expanded remit to cover the whole industry, there is - and there are some organisations that are members of both. That's bound to introduce a lack of clarity to the situation.
Keith Ramsdale: I would say that it's in everybody's interests that UKIE and TIGA do come to the table together. I absolutely think that's of benefit to everybody, and that in recent times we're seeing that happen more and more. I believe that.
Q: Back to the tax breaks subject - if you're a big publisher like EA, or Ubisoft, or Activision, you have the capability of spreading your bets across different territories, and the option of moving people and projects between them depending on the economic environment. An SME, particularly in independent development, just doesn't have that option - do you understand, then, why it's an emotive subject, and why some people feel let down by the Coalition's rejection of tax credits (austerity requirements notwithstanding)?
Keith Ramsdale: Of course, and you can probably apply that - I'm not a political expert and I'm not here to make political comment - but I know of some cases where the government had to take a different view on the policies they thought they were going to be able to implement because of the state of the economic environment they faced. I don't say that in support or attack on government, merely as a statement of fact - I'm sure they had to change what they were intending to do.
I would have thought it was a relatively easy decision for them to say "Okay, the videogames industry versus something else - it's something that's going to have to go," because it wasn't in place.
It was something that was promised, and we were all disappointed that we were picked out. I think we were disappointed in the way that we were picked out - but if we're all honest and looked at ourselves, I think we probably understand why something that wasn't in place didn't actually go ahead, given everything else.
Do I have sympathy for EA, Activision, or the smallest developer in the UK? Of course I do. It's just how it is.
Q: And going back to your previous point about equality with other entertainment industries - one assumes you're thinking of the film business there, which still enjoys its tax breaks, even now? Should that disappear, do you think?
Keith Ramsdale: I wouldn't like to say it should disappear; I would like to see an equitable status between all entertainment industries. It would be wrong for me to call out that the film one should go - it should be equal among all of them. You picked the right example, though.
Are therefore jobs in the games industry less valuable than those in the film industry? Maybe that's a question - and why would policy continue to have that view, given the contribution that the games industry makes?
If you look at what's happening with the film industry, and you look at the growth of HD gaming, and users on new devices such as the iPad, iPhone and online - if you look at the touch points for videogames compared to film, it's vastly different.
It's interesting actually, because people are looking at the growth of the videogames industry and declines based on year-on-year revenues in the market - but what they're not looking at is the overall picture to include all forms of gaming. Mobile, digital, new devices - it's still very much an industry that's on the rise.
Keith Ramsdale is EA's VP and GM for Northern Europe. Interview by Phil Elliott.