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Guillaume de Fondaumiere - Part One

Fri 03 Jul 2009 1:00pm GMT / 9:00am EDT / 6:00am PDT
Politics

The Quantic Dream co-CEO talks tax breaks - and why the cultural test should only be the first step

The final session at this year's GameHorizon conference was an in-depth demonstration of Sony's forthcoming story-driven title Heavy Rain, by the co-CEO of the development studio Quantic Dream.

But Guillaume de Fondaumiere hasn't been focusing all his time on the creation of games, having successfully lobbied the European Commission and the French government to allow tax breaks to be given to the games industry.

That system, which began in 2008, was based on a cultural test - a phrase used in the UK's recent Digital Britain report. Here, the man himself talks about the problems with that test, why it's not fair, and what the next steps in the battle for media parity should be.

Q: What brings you to GameHorizon?

Guillaume de Fondaumiere: It's very interesting for us, as a French developer, to come to the UK - we know that the UK is the most vibrant place in Europe for game development, so it's interesting for us to showcase what we're doing on Heavy Rain, and present this project that's very different from anything that's out there.

We're working with Sony Computer Entertainment, based in Liverpool, so we have many friends here - it's interesting to understand what others are doing here in the UK.

Q: We spoke briefly at the Nordic Game conference about your instalment as chairman of the EGDF - one month on, with some time to reflect, what are your thoughts on the challenges now?

Guillaume de Fondaumiere: Well, I've been following the work of the EGDF since it was founded in Paris back in 2006, so I'm very much aware of the issues. As I said before, when the national trade bodies started to work together, we didn't know exactly what we were doing. I think it was more a way to share best practices.

But the more we started to work together, the more we started to realise that we have a common destiny, that each country can't do it on its own - except maybe the UK, which is certainly leading the way in Europe - but the more we were discussing topics such as tax credits and education, the cultural recognition of games and the debate on violence or addiction, we found that we had the same issues to tackle.

So I think in the past three years the awareness of EGDF members has grown towards crafting this common destiny - making sure everyone works better together to not only share best practices but also solve some of the issues that we face.

Today I think we're still confronted with the same critical points, the same issues. I guess the most important one at the moment is tax credits and cultural recognition, because the two come together. I think today we're in a time of economic crisis, the games industry seems be doing okay, but we all know that times are getting more difficult - and that if some are very successful still, others are struggling. I think it's high time now for governments to not only help the banks and the motor industry, but also an industry of the future - the videogame industry.

We're still pretty fragile as an industry, especially in Europe on the development side, and it's not because we have a few studios that are very successful that we shouldn't consolidate on those successes and try to improve the framework and ecosystem that enables all of us to flourish in the next decade.

We know that tax breaks are extremely effective in stimulating an industry, and I think again that Montreal and Quebec have shown us the way. If you listen to representatives of Invest in Quebec, they'll tell you that they've invested hundreds of million of dollars in the industry - but look at how it benefited our country, our region. I think the last time I was presented the numbers they'd invested CAD 400 million, with a return on that investment of CAD 600 million.

So I think it's high time for governments, and the EU, to understand that money given in the form of tax breaks to the industry is not money thrown away. It's an investment with a very high return, so it's time that we had those breaks.

We established a tax break in France on January 1 last year, so we have a whole year of projects that have been submitted and received breaks, and it's been very interesting - because for the first time we have a clear picture of what's being produced in France. I know, for instance, that out of the 110 project submitted, approximately 40 per cent passed the famous cultural test and have been granted tax breaks.

The total of the budgets that were submitted were around EUR 170 million - the first time we know how much is being produced in France, and taking into account we probably don't have 100 per cent of the picture here, maybe that number is EUR 200 million of game development budgets. That's quite a high number, and shows how dynamic the development community is in France.

The tax breaks for 2008 are about EUR 15 million, so that's a lot of money... but on the other hand you have to compare that number with the EUR 700 million that the French film industry is getting - those are numbers that are quite considerable.

Q: Do you think that number will go up in time, though? I wonder what the total budgets for film are in comparison to games?

Guillaume de Fondaumiere: It's more than EUR 200 million, but French movies exported a total of less than EUR 400 million last year. I think this is something that's also very important to look at - how much of this production is being exported? Let's not forget, you're talking production budget on one hand and export turnover on the other.

I can only tell from my company, Quantic Dream, but 93 per cent of the turnover generated from our games is from exports - our publishers only generate 7-10 per cent in France, which is normal, as that's about the same as France's share in the market. So we're a heavily exporting company here.

Q: We just had the Digital Britain report in the UK give some indication that a cultural tax break could be implemented, so a lot of people will be looking at France to see how it's worked out there. What's been the general consensus, is it a restriction, or are people happy to embrace it?

Guillaume de Fondaumiere: The cultural test is a problem. It's definitely a problem, and when I negotiated both with the French government and the European Commission I had to give in on a number of criteria - because state aids are only allowed under EU law under the famous cultural exception.

That was the case two years ago when I was negotiating, but I see that things have obviously changed now, because I don't believe banks are part of the cultural exception, or the automotive industry is part of it - but nevertheless those institutions and companies are getting huge amounts of funds.

So I guess that the crisis has brought not just bad things, but opened up opportunities here. I think that what was true in 2005 may not be exactly the truth today - I'm extremely happy for British developers has now, finally, looking at this, but I'd encourage Tiga and those developers to push the envelope to a certain degree.

When I was negotiating with the EU I basically had a two-year discussion with them about how to categorise games into boxes - those which are cultural and those which aren't. We came out at the end with this cultural test, but where does that come from?

Actually in France all films are based on certain very light criteria. You have to be a French company, but saying that Warner Bros France could make a movie called A Very Long Engagement and receive funds... There are a number of criteria like this, but otherwise no such cultural test to receive funds.

But those tests exist in other countries, like Holland, Britain and Germany. We've been presented those tests, and asked if we'd accept for games to pass them. Of course when I looked at them they were absolutely not adaptable to what we're doing in games. So we discussed it for about a year to try and to erase the criteria that were irrelevant.

We now have a test that allows approximately 40 per cent of games produced in France to benefit from tax breaks, and in particular some criteria are more geared towards technology and innovation - which didn't exist in the initial film test.

But I'm still not satisfied, and I've always said this is only a first step. I'd prefer to get a foot in the door, rather than have it slammed. We now have to go back to the EU and fight this battle again, on the grounds that many things have changed - obviously banks, the automotive industries getting funding... obviously there are new criteria. We may not need exclusively cultural criteria for our industry to benefit from tax breaks.

Again - I think it's an investment, while I'm not sure it's wise to invest in the automotive industry...

Q: A cynical person might point to the subject of political votes...

Guillaume de Fondaumiere: When you look at EU rules, you have to ask: "Actually, what is culture?" It's a national decision, so it's kind of weird that we, as the videogame industry, have to work with standards that other cultural areas don't have to follow.

To me, all games are cultural. Videogames aren't just a form of entertainment, but a true form of cultural expression, and I think that in twenty years' time this will be a given. No one will dispute that any more.

So we've got a rocky twenty years in front of us, and we have to make sure this recognition doesn't happen when we no longer have an industry in Europe.

Q: Is Heavy Rain within that 40 per cent?

Guillaume de Fondaumiere: Yes.

Guillaume de Fondaumiere is co-CEO of Quantic Dream and chairman of EGDF. Interview by Phil Elliott. Part two of this interview will follow next week.

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