Economic and Fiscal Impacts of Texas’ Moving Media Industry
Strategies for Enhancing Texas’ Competitive Position in the Moving Image Industry
Incentives programs targeting the film and television industry are not a new concept. For the past three decades, states (and some cities) have offered incentives, financial and otherwise, to lure film and television production inside their borders. With the passage of time, incentive programs have become more diverse and aggressive. In addition to film and television productions, states have expanded their incentive programs to cover areas such as commercials, music videos, soundtrack composition, multimedia productions and video games. The range of incentives has also expanded to include various tax tools such as rebates, credits and exemptions, as well as cash rebate options, and, in the case of New Mexico, an innovative loan program based on participation in lieu of interest (see Appendix C).
If ranked, Texas would fall behind many other states in terms of the level of incentives offered. This situation is compounded by the fact that states such as Michigan, Massachusetts, New York and Louisiana have recently increased their incentives significantly – roughly five to nine times the amount that Texas offers. To compete effectively in this arena, Texas probably needs to increase its incentives. A 25 percent tax credit is the current median nationwide. New Mexico and Louisiana, states that routinely stand-in for Texas’ varying landscapes, both offer 25 percent tax credit programs and are having great success luring filmmakers to their states – in some cases away from Texas.20
Along with raising incentive levels, spending caps on the amounts paid-out per production should be reexamined. Most states have a significantly higher cap on payouts, with some having none at all (see Appendix C). By raising or eliminating payout caps, projects with large budgets may once again find Texas economically competitive as a shooting location. But to address the payout cap issue, the Moving Image Industry Incentive Program must receive greater funding in order to handle the increased payouts that major projects would require. Texas currently operates its incentive program with a dedicated $20 million per biennium. While this amount is competitive with some states, it is also dwarfed by many others (see Appendix C).
The fast-growing video game industry and the high volume television commercial sector also warrant renewed attention. Video game development in particular offers the opportunity to not only compete for individual projects via incentives – as with films and television production – but to attract entire game development companies. Unlike the majority of film and television companies who are largely tied to Los Angeles due to well-developed financial and social networks, game development companies can and do operate efficiently in many states – including Texas.
To grow and attract the moving media industry, Texas must do more than offer financial incentives. In particular, the state must support an education and training infrastructure that can produce qualified professionals with the requisite skills demanded by the industry. On that score, Texas appears to be on the right track.
A total of 29 university and college programs specializing in film and television production are found across the state (see Appendix D). These programs continue to produce graduates qualified to work in various capacities from on-air personality to film director. To enhance the state’s already well respected programs, consideration should be given to offering financial inducements for the production of student films. The Southern Utah Student Film Production Incentive program, instituted to entice student filmmakers to the state, is a good example. Students compete for cash grants in the range of $15,000 to $20,000, and eligible projects must meet the following guidelines:
It must be a feature-length film; it can be any genre, but it must be Western-themed and 75 percent of principal photography must be shot in Kane County, Utah; the film must have a G or PG-13 rating; and the student and university must each match the cash contribution of the incentive, equating to a minimum budget of $45,000 to $60,000.21
By offering a matching incentive, the Southern Utah Student Film Production Incentive creates a holistic arena in which the filmmaker, the university and the granting organization leverage each other to produce the film while at the same time stimulating the local economy.
|Art & Animation||$65,107|
|Average College Graduate||$56,788|
Sources: Game Developer Magazine, U.S. Census.
Texas universities are also responding to the growing market for animation and video gaming by creating innovative programs melding arts and technology. At present, about 24 institutions offer associate, bachelor’s and master’s degrees that train students in video graphics, computer animation and other digital arts (see Appendix D). With curricula that mix courses in computer programming, engineering, animation, storytelling and project management, these new programs are graduating students whose salaries are, in some, cases considerably higher than the average college graduate (See Table 13).
As these arts and technology programs mature, employment options for graduates are expanding as well. Though “entertainment” is still the largest segment of the video game industry, the technology is rapidly migrating to “serious gaming.” For example, real estate companies, the military, the health care industry and government agencies are all integrating advanced simulations and digitally created worlds into their day-to-day operations.22
One successful arts and technology program, located in the Institute for Interactive Arts and Engineering at the University of Texas at Dallas (UTD), has already forged partnerships with many entities outside the entertainment industry including Alcatel, Lockheed Martin, Raytheon, Samsung USA, Texas Instruments, as well as several branches of the military.23 These industry connections are important because they help keep some of UTD’s newly-minted arts and technology graduates in the state.
But most graduates of the UTD program and similar programs at other state universities move out-of-state upon graduation, especially to California and Washington where the major video game developers are located. The challenge to Texas, then, is to focus on the demand side of the equation, since we appear to be competitive on the supply side. In other words, we need to stimulate expansion of home-grown gaming companies while simultaneously pursuing policies to entice non-local companies to expand or relocate in the state of Texas.
Leveraging Existing Economic Development Programs
As discussed above, video game development companies and publishers are more geographically footloose than traditional film and television companies. Texas is home to many video companies, both large and small, but ranks third in overall employment behind California and Washington. Despite the gaming industry’s geographic mobility, companies tend to congregate in regional clusters – just as they do in the information technology industry. With moderately-sized clusters already formed in Austin and Dallas, Texas has a significant advantage over other locations in terms of becoming a major production center for digital content. That being said, it may make sense to target several of the state’s economic development programs at game publishers and developers. As a 2006 study of Austin’s gaming industry notes, due to the substantial lack of game publishers in the city, “much of the value created by the intellectual capital developed in Austin is realized elsewhere.”24
One strategy to grow and attract video developers and publishers might be to leverage the Moving Image Industry Incentive Program with other economic development programs, such as the Emerging Technology Fund (ETF) and the Texas Enterprise Fund (TEF). Indeed, Gov. Rick Perry has already indicated a strong interest in this leveraging strategy.25 Serious gaming, in particular, would seem to qualify for funding from either the ETF or the TEF, which both stipulate that grants should go to firms with the potential for scientific breakthrough as well as firms offering partnerships with educational institutions. Much like the aforementioned student film incentive concept in Utah, which uses several sources of funding, policymakers should consider leveraging all or some of the three Texas programs in question to create an attractive relocation package.
For instance, a game development company in California might be enticed to relocate to Texas via a grant from the Texas Enterprise Fund. Simultaneously, the company would already be eligible for incentives offered by the Moving Image Industry Incentive Program. In addition to these two options, the company could receive funding through the Emerging Technology Fund if certain criteria were met such as producing a game considered to be of scientific merit, using proprietary technology that could be spun-off as a separate product, or forming a partnership with a Texas public or private institute of higher education.
In short, by offering a “package” of incentives, grants and rebates, Texas might be able to attract entire companies from California, Washington and other states instead of individual projects.