Mass. looks to grow video game industry

BOSTON (AP) - Massachusetts video game companies could receive tax credits and other incentives under legislation that seeks to strengthen the state's foothold in an industry that's sustained strong growth in a weak economy.

Backers say the potential for job growth in video gaming and interactive digital media compares to what the nascent biotechnology industry offered Massachusetts a quarter of a century ago.

But critics question the wisdom of focusing on one industry when the state is facing steep fiscal challenges.

Details of the legislation aren't finished, but a draft offers a menu of possible tax credits tied to job creation or production goals for companies that design or produce video games.

Incentives would be offered to startups or existing companies who expand or relocate in Massachusetts. A so-called 'clawback' provision would help the state recoup investments in firms that leave or fail to produce promised jobs.

State Rep. Vincent Pedone said it's too early to say what the effort would cost, but the goal is expand the state's $2 billion video game industry to $20 billion in five years.

"Twenty-five or 30 years ago, no one in the Commonwealth knew what biotechnology was, and it has now become a critical part of our Massachusetts economy," said Pedone, a Worcester Democrat. "We think the video game design industry has equal potential."

Seventeen other states offer financial incentives to video game companies and the Province of Quebec has aggressively lured firms with tax credits.

Supporters of the Massachusetts effort say it would be unique in scope, creating economic development zones and innovation centers and offering incentives such as low-interest loans or free use of surplus state property for startup firms.

"It's not just throwing money at a company and saying, 'Come to Massachusetts,'" Pedone said.

The effort comes after former Boston Red Sox star Curt Schilling decided to move his video game company, 38 Studios, to Rhode Island after that state offered a $75 million loan guarantee. Pedone said he believes Rhode Island took the wrong approach by focusing on one company and not the entire industry.

Rep. Bradley Jones, the House Republican leader, said he's not against cutting taxes but doesn't believe the state should pick "winners and losers" in the private sector.

"Do we go pick an industry, or do we focus our energies on more broad-based initiatives that would help all companies?" he asked.

Jones said there are lessons in last week's announcement by Evergreen Solar Inc. that it planned to close its solar panel factory in Devens and lay off 800 workers. The company received $58 million in state aid in 2007.

Officials at Becker College, which offers a video game design major, hope to establish a "Video Game Institute" on their Worcester campus and have been working with industry, academic and government officials to craft the bill, which is expected to be filed by Jan. 21.

"Everybody understands the entertainment aspect, but it's the aspects of video games that are beyond entertainment that are really interesting and what probably fits what (Massachusetts) does better than anything else," said Tim Loew, director of academic planning and operations at Becker.

The same technology that drives video games, for example, can train doctors for surgery or prepare soldiers for combat, he said.

Massachusetts has already carved out a respectable niche in the industry, with 1,295 people directly employed by video game developers or publishers, according to a recent report by the Entertainment Software Association. That places the state fifth behind California, Texas, Washington and New York.

The report said U.S. video game sales topped $10.5 billion in 2009 and have grown at an average rate of more than 10 percent since 2005.

Executives of the state's leading video game companies say local colleges and universities offer an impressive talent pool that fits the industry's unique needs.

"Our world is really a combination of everything creative, from visual to storytelling to game play, combined with good, old-fashioned sophisticated software engineering," said Ken Surdan, vice president of operations for Needham-based Turbine, Inc., maker of the online "Lord of the Rings" game.

But industry leaders also say high costs in Massachusetts can inhibit startups and firms looking to expand.

Florian Hunziker, chief operating officer for Cambridge-based Harmonix Music Systems Inc., maker of the popular "Rock Band" games, said the firm is often forced to outsource work to out-of-state studios.

"It's difficult for some of the Massachusetts development companies to be cost competitive with studios that are either in a state where there is a tax break or studios that are in place where there is a lower cost of living," he said.