7 Support of game development

7.1 Introduction

In this chapter, the Ministry provides an account of existing schemes for support of game development. Firstly, we present the support scheme for interactive productions administered by the Norwegian Film Fund (which, from 1 April 2008, is to be merged with the Norwegian Film Institute and Norwegian Film Development under the name the Norwegian Film Institute). The scheme has existed since 2003, and the Ministry will present its main results. Some regional bodies have also begun to provide support to games, and these will be briefly presented. The Ministry will then give a brief outline of the Nordic and European schemes in the area. Finally, the Ministry proposes maintaining and strengthening the Norwegian support scheme for development of video games. The Ministry will implement a new scheme for launch support and consider introducing a loan scheme under the auspices of the public libraries.

7.2 Support for interactive productions

Today, support is provided for development of interactive productions (video games) over chapter 334 of the fiscal budget. The support scheme was introduced in 2003, cf. Proposition No. 1 to the Storting (2002–2003):

“Video games are an area in rapid growth, and the development is controlled by large international companies. The products are primarily aimed at children and young people. There is a need for alternatives to the often violent and action-filled entertainment that young people meet with through these games. In order to ensure better access to alternative products with Norwegian language and content, it is proposed that a trial scheme be established providing support to project development in new media. The target group for the scheme shall be independent manufacturers.”

The Storting endorsed the proposal. The trial scheme was made permanent in connection with the fiscal budget for 2004.

Administration of the support scheme was assigned to the Norwegian Film Fund, which administers the other state subsidies to audiovisual productions. The regulations concerning the scheme are included in the general regulations of 8 August 2007 No. 979 concerning support to audiovisual productions, which are administered by the Norwegian Film Fund (from 1 April 2008, the Norwegian Film Institute). Pursuant to the regulations, funds shall be provided for “project development of interactive productions […] that use Norwegian or Sami language.” In this connection, project development means that support shall only be granted for the first phases of the development of a video game. This was an important condition for approval of the support scheme by EFTA’s Surveillance Authority ESA. The term “interactive productions” is defined in the regulations as “video games and other interactive productions that tell stories with live pictures”. The majority of applications and grants have in practice been for traditional video games.

The Norwegian Film Fund has excluded from the support scheme games for use in an educational context, advertising games and localization of existing games from for example English to Norwegian. The Film Fund provides development support of up to NOK 1.5 million per project. The support can be given in several stages. The development support shall not be repaid.

Applications are considered by the Norwegian Film Fund in consultation with an expert group. In order to ensure a thorough overall assessment of the projects, the expert group is composed of experienced industry participants with varying backgrounds. The projects are assessed on the basis of artistic, production, financial, technical and market criteria. The amount of support granted is decided on the basis of a collective assessment of these criteria.

7.2.1 Grants

Since the support scheme was not approved by the ESA until October 2003, no funds were distributed until 2004. A total of NOK 24.4 million has been distributed via the support scheme. Table 7.1 shows applications and grants during the period 2004–2007. The amount distributed in 2004 includes funds transferred from 2003.

The scheme has developed positively during the years that it has existed, as regards both the number of qualified applicants and the quality of the various applications. The first year, the number of applications was relatively large, but many of the applicants were unqualified because the projects were of poor quality or because they fell outside the scope of the support scheme. During the period 2004–2006, applicants became more professional. From 2006 to 2007, the number of applications increased by 45 per cent.

According to the assessments of the Norwegian Film Fund, the applications are now of a high quality, and there are more qualified applicants than there are funds for in the support scheme. This bears witness to a positive trend among Norwegian game developers, where there is both a greater professionalism and a greater willingness to develop new projects than was previously the case. It is the assessment of the Film Fund that the support scheme has contributed to this professionalization, both by providing funds to the companies, and through the competence raising brought about by the application process itself.

The game about Captain Sabertooth has received support from the Norwegian Film Fund and has been developed by Artplant. The game is distributed by Norsk Spill Distribusjon.

Source Artplant

7.2.2 Results

The support scheme is aimed at development of projects, and many games have only received support for the initial stages of the development. It is therefore natural that a number of projects do not reach the stage where they can be launched onto the market. This is mainly because the developer has not succeeded in financing the remainder of the development process. Table 7.2 shows how many games have been launched of those that have received support in the given years.

From 2007, the Film Fund will provide support for a greater part of the development process, which will probably result in a greater percentage of the games being launched onto the market. The fact that approximately 50 per cent of the games that have received development support have been launched is not necessarily a poor result. In the film industry too it is usual that a number of projects that receive development support do not reach realization. It should nevertheless be a goal that the projects that receive up to NOK 1.5 million for development are so well prepared that they can in all probability be financed and launched. As regards the sales figures for the various game titles, no material that can document this is currently available from recipients of support.

7.2.3 The gender factor

The video game industry is traditionally perceived as exclusively involving (young) men. This is not the case among Norwegian game developers. Here there is a relatively high proportion of women, particularly if one compares with the film industry, cf. Report No. 22 to the Storting (2006–2007) Veiviseren [The Pathfinder]. Figures from the Norwegian Film Fund show that, in projects that have received support, one-third of the persons in key positions have been women (key positions are here defined as creative manager and producer). Compared with the film industry, where only 20 per cent of key positions are held by women, (manuscript, director, producer), this is a good result. The relatively large proportion of women can be associated with the fact that support is aimed at games for children, an area where women have traditionally played a major role.

7.3 Regional support

Regional film centres and film funds provide support to and invest in various types of audiovisual productions, including short films, documentary films, full-length films and television series. Most of these are also able to provide support to or invest in development of video games. The Central Norway Film Fund, The Central Norway Film Centre and Filmkraft Rogaland have explicitly mentioned video games in their statutes. Table 7.3 shows the approach to games of the various regional film centres and funds.

The Central Norway Film Fund is the only one of the regional film funds that has advertised funds specifically aimed at video games. The fund received two applications following the advertising in autumn 2007, and has granted NOK 30 000 in development support to two regional companies. It is assumed that other regional film centres/funds will also receive applications for support of game development if the opportunity for support becomes better known.

7.4 Innovation Norway

Innovation Norway has a separate sectoral focus on culture and activity industries. The goal of this sectoral focus is to stimulate increased growth and profitability in culture and activity industries by increasing competence, innovation and professionalization in these industries. Among the target groups for this focus are commercial stakeholders in the video game industry.

In 2007, the Ministry of Trade and Industry, the Ministry of Local Government and Regional Development and the Ministry of Culture and Church Affairs launched an action plan for culture and industry. One of the measures in the plan involved allocating funds to “innovative projects, R&D projects in culture and industry with the greatest possible potential for wealth creation”. NOK 15 million was allocated for 2007. The funds were advertised by Innovation Norway in autumn 2007, and are also available for game companies.

In addition, NOK 4 million has been allocated in the action plan to FRAM culture, which is a strategy and management programme under the auspices of Innovation Norway. This programme is also offered to commercial stakeholders in the video game industry.

Industrial stakeholders in the video game industry are free to apply for the same funds from Innovation Norway as industrial stakeholders in other sectors. The GRO programme – aimed at established companies operated by women – is an example of this. In 2006, the game company Ravn Studio AS received funds from this programme.

Owing to the industrial coding, there is no collective overview of game manufacturers who have received support/loans via the various support schemes such as Innovation Norway. The following are examples of grants to game companies:

• SkatteFUNN (tax deduction): Funcom AS, Ravn Studio AS, Skalden Studio AS and Hybris AS

• Support (GRO funds): Ravn Studio AS NOK 0.5 million

• Establishment grant: Ravn Studio AS NOK 0.3 million

• Risk loan: Ravn Studio AS NOK 1.5 million

• Guarantee for operating credits: Caprino Video Game Distribution NOK 1.5 million

• Risk loan, development support (culture) and establishment grant: Game Index NOK 1.1 million, NOK 0.51 million, and NOK 0.2 million

• OFU/IFU (R&D contracts): Hybris Film NOK 1.305 million and NOK 4 million

Innovation Norway supports the Norwegian participation in the Game Developers Conference (GDC) in February 2008 – in cooperation with Nordic Game Program. Innovation Norway is co-hosting the Nordic pavilion at this trade fair and provides support to companies that have stands on the pavilion.

The Government contributes funds to county authority support for industrial development. The county authorities have considerable autonomy in the use of these funds. Most of the county authorities choose to use the local office of Innovation Norway as an operator for distributing funds to company-oriented measures. The county authorities steer the use of the funds by means of the regional development plans and through dialogue with Innovation Norway. Sør-Trøndelag County Authority is engaged in such a dialogue in connection with the regional focus on video games.

7.5 The Nordic Council of Ministers

In 2004, at the request of the Nordic Council of Ministers, a report on video games in the Nordic countries was published. This was the first broad collective survey of the video game industry in the Nordic countries.

The report concludes that only 1 per cent of the games sold in the Nordic countries in 2003 could be regarded as “entirely Nordic”, 0.7 per cent of the games were “entirely Nordic releases”, and 5 per cent of the games contain “a Nordic element”. The basis for the report was approximately 5 500 games.

The game Englekræsj is being developed by the Drammen company Ravn Studio AS. The game has received support from the Norwegian Film Fund and from the MEDIA programme of the EEA Agreement. Ravn Studio AS has also received several types of support from Innovation Norway.

Source Ravn Studio AS

In this cultural area, the national market share was approximately 1 per cent. This is extremely low compared, for example, with the film area, where the national market share lies between 15 and 25 per cent, although with considerable variation between the Nordic countries. In the game area, the share is low in all of the Nordic countries.

The Icelandic chairmanship stated the following motivation for the study:

“Video games are gradually becoming one of the essential elements of the cultural consumption of children and young people. As a central element of the Icelandic chairmanship programme, Iceland therefore wishes to strengthen a clearly Nordic element and the creative diversity in the range of video games available to children and young people. During the Icelandic chairmanship, the range of Nordic video games and electronic information material for children is therefore described and surveyed in the present report. By means of this survey, the Icelandic chairmanship wishes to investigate the basis for establishing a joint Nordic media programme, to be designed with the intention of ensuring greater production and better availability of video games with a clear Nordic element for children and young people.”

The Nordic Council of Ministers followed up this initiative by establishing a separate support scheme for Nordic video games. The purpose of the programme is as follows:

“The purpose of the Nordic Game Program is to ensure the availability of high-quality material with a distinctively Nordic profile in video games for children and young people”.

As in the case of the Norwegian support scheme, the programme is geared towards games for children and young people. However, the programme has more measures than the Norwegian scheme. Support is given to game development, marketing and export, participation in competitions and festivals, training and research, infrastructural measures and information and network building.

According to plan, the total support provided via the scheme will be increased throughout the period towards completion of the project in 2012. For 2006, DKK 6 million will be allocated and for 2007 DKK 10.2 million.

Development support for 2006 and 2007 has been distributed by the Nordic Game Program (NGP), cf. table 7.4. In addition, support has been provided to a number of activities in marketing, export and competitions/festivals as well as support for planning of development projects.

A major priority area for the NGP is the joint Nordic pavilion at the game trade fairs in San Francisco, Leipzig and Lyon. The NGP arranges for participation by Nordic game developers and contributes financially. These markets are important for obtaining financing for Nordic games from international publishers and for international marketing of games that have been developed.

7.6 The MEDIA programme of the EEA Agreement

The EEA Agreement’s programme MEDIA 2007, which is to run from 2007 to 2013, has a separate support scheme for development of interactive projects. The scheme addresses the needs of independent companies that mainly work on audiovisual production and/or production of interactive works. Requirements are imposed regarding the professional and financial capacity of the applicants.

It is possible to apply to MEDIA 2007 for support for interactive projects for the PC, the Internet, mobile telephones and game consoles, including hand-held consoles. It is also possible to apply for support for new formats/concepts for digital TV, the Internet and mobile telephone, where interactive and narrative elements are of major importance.

Support of between EUR 10 000 and EUR 60 000 may be granted. For development of prototypes for console and PC games, support of up to EUR 100 000 may be granted. Each company may apply for a maximum of two projects in any budget year. Support is provided in the form of subsidies, and may cover up to 50 per cent of the development budget, 60 per cent in special cases. The first distribution round was in autumn 2007.

Table 7.5 shows Norwegian results of previous schemes for support of interactive productions in the MEDIA programme.

7.7 The Ministry’s assessments and recommendations

The market is currently dominated by foreign games. Studies conducted at the request of the Nordic Council of Ministers show that less than 1 per cent of the games on the market are of Nordic origin. At the same time, the use of video games is increasing rapidly, particularly among children and young people (cf. chapter 5). In the Ministry’s view, it is important to strengthen the support to Norwegian video games in order to ensure provision to children and young people based on Norwegian language and culture. Such support will strengthen and consolidate the Norwegian video game industry and help create jobs in the game industry. As a consequence of strengthening activity in the game industry, the support will also stimulate increased innovation and competence raising in the industry.

7.7.1 Support to game development

Game manufacturers who wish to create games based on Norwegian language and culture have little potential for fully financing the development of a game. Game development involves considerable investments in technology and high personnel costs. The Norwegian market is small, and the potential for profit is therefore limited. As in the case of the film industry, there is therefore a need for state support in order to encourage production of a range of Norwegian language products. The support scheme for development of interactive productions has existed since 2004. The Ministry assesses the scheme as a major contribution to the strengthening of the Norwegian video game industry, so that Norwegian games can be produced for children and young people.

• The Ministry will maintain and strengthen the support scheme for development of video games.

7.7.2 Support of launching

In order to reach out to the public in competition with foreign game products and other entertainment provisions, it is important to use resources on launching products. Surveys show that public awareness of Norwegian game titles is poor (cf. chapter 5), particularly of games not based on well-known brand names from film and TV. At the same time, the attitude to Norwegian games is positive. This indicates a large potential for increased market penetration of Norwegian games. Game developers and distributors today have limited resources for launching of games. As in the case of the film industry, there is a need to provide support for launching of Norwegian video games.

• The Ministry will introduce a new scheme for support of the launching of video games.

7.7.3 Purchasing programme

Video games are relatively expensive to buy, involving financial outlays that are not possible for everybody. The Norwegian Game Producers’ Association has proposed a purchasing programme for video games under the auspices of the public libraries on the model of similar schemes for literature and films. The Ministry regards it as important that Norwegian video games are made more available to children and young people, and takes a positive view of the proposal from the game manufacturers. However, such a purchasing and loan scheme will require an investigation of the copyright issues.

• The Ministry will consider a purchasing and loan scheme for Norwegian video games under the auspices of the public libraries.

7.7.4 The Nordic Games Programme

It is possible to obtain support for game development and other market-oriented activities from the Nordic Games Programme under the Nordic Council of Ministers. Norwegian companies have been successful in obtaining support from this programme. The Ministry regards the programme as a valuable contribution to strengthening the production and market penetration of Nordic games.

• The Ministry will make active efforts to ensure that the Nordic Games Programme is maintained according to intentions.

7.7.5 Extension of the sectoral levy

There is currently a sectoral levy on sales of films and DVDs, cf. section 3 of the Act of 15 May 1987 No. 21 relating to films and videogrammes. This levy is applied to various cultural purposes associated with film and cinema. The Norwegian Game Producers’ Association has proposed that this levy should be extended to include video games in order to finance increased support to Norwegian developed games. The association has calculated that such a levy would provide an annual income of NOK 30 million.

• The Ministry will consider the possibility of strengthening support schemes for video games by extending the sectoral levy on sales of DVDs to include video games, and will conduct a review on this subject. This must in such case be considered in connection with future fiscal budgets.