Digital location Germany: Games funding exhausted until 2023
Dusseldorf The Federal Ministry of Economics and Climate Protection (BMWK) is temporarily stopping new applications for federal games funding. This emerges from an industry circular from the BMWK. “The great demand has meant that the funds available for the current year and, due to pre-commitments, also for the year 2023 are currently exhausted,” it says. According to the current status, project applications can therefore not be approved again until 2024 at the earliest.
The fact that the need exceeds the funding is also a success story. “The number of games companies in the core market increased by 26 percent in 2020,” Felix Falk, Managing Director of the Game industry association, told Handelsblatt. “But the halt to funding is now an emergency stop in the race to catch up as a games location, which has just got off to a good start.”
In terms of sales of computer and video games, Germany is the fifth largest market in the world at around ten billion euros. However, more than 90 percent of the games are produced abroad. In order to make Germany, which is a small game location by international standards, fit for the future, a funding program with a total annual volume of 50 million euros was launched in 2019. It was only in August that Federal Minister of Economics Robert Habeck (Greens), whose responsibility for the industry has changed hands from the Ministry of Transport, described himself as the “Game Minister” at the leading Gamescom trade fair.
In the letter, the BMWK emphasizes that it is not a matter of stopping funding, ongoing applications will continue to be served within the budget. A total of 447 projects with a funding volume of around 129 million euros have been approved since the start.
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Industry and state politics reacted with surprise
However, this can still cause problems: “The companies in the industry are planning with the funds, some are now in the middle of the planning phase and are confronted with the statement: there will now be no more money for 14 months,” explains Falk. “The sudden loss of subsidies endangers jobs and important investments, even the existence of small companies in particular can be endangered.”
The industry had even expected that the funds would no longer be sufficient without an increase, but only in the medium term: “I hadn’t counted on it until next year at the earliest and expected that the funds would be increased before then, because the funding is an excellent investment in the future”, said Benedikt Grindel, Managing Director at Ubisoft Bluebyte, the Handelsblatt. With its subsidiaries, Ubisoft is the largest employer in the computer games sector in Germany.
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The company uses the funding for specific projects, such as the implementation of the PC bestseller “Anno 1800” for video game systems. “Thanks to the funding, we can tackle this without compromise and build up this competence in our German studios,” explains Grindel.
Nathanael Liminski (CDU), Minister for Federal and European Affairs, International Affairs and Media and Head of the State Chancellery of the State of North Rhine-Westphalia, describes the federal government’s application freeze as a “fatal signal” for the location. The industry needs reliable support programs.
“Instead, in the middle of the crisis, which is also affecting companies in the games industry, funding is interrupted. Another year without reliable state support will throw many companies back and slow down the positive development of the past few years,” Liminski fears. The federal states often offer their own funding programs, which, however, are usually associated with a repayment of the funds.
Cost disadvantage of 30 percent in an international comparison
In the uncertain environment, small companies are particularly affected. Game development takes years and requires appropriate planning security. They gave the federal funding that does not have to be repaid. “The sudden stop in funding is therefore a nasty and potentially existence-threatening surprise, since projects that have been prepared for a long time can suddenly no longer be implemented as planned,” criticizes Johanna Janiszewski, founder and CEO of the Berlin developer studio Tiny Crocodile.
The company won the German computer game prize in 2018 and is considered one of the industry’s hopes for the future. “We have already been able to more than double our small team thanks to the support,” explains Janiszewski, who is also a board member of the game association. The funding enables leaps in growth that would otherwise only have been possible at locations outside of Germany.
How urgent the problem is for the German industry is shown by an ad hoc survey of the game among the members of the association, which is available to the Handelsblatt. According to this, at least 50 development studios are planning to take advantage of the funding this year or next. A third of the companies that have already sponsored games have been able to increase their production budgets by 50 percent through previous funding, and for one fifth the increase was 100 percent.
It should therefore be more rather than less. This is exactly what the game brought into the project drafts for the funding at the beginning: the funds should gradually increase with the growing market with the real need. “The pot was exactly the right start in 2019,” says Falk. However, annual demand of 100 million euros has already been predicted for 2024.
The number seems to be well forecast: politicians say that an amount of 70 million euros would be enough in the coming year to service all applications. Instead, the previously set maximum funding amount in the budget for 2023 could even be reduced by up to three million euros.
Strong economic leverage in France
“As a developer, I’m now back to zero,” says Falk, referring to the international comparison. “This means that the cost disadvantage of 30 percent compared to France or Great Britain, which we had just overcome, is back for new projects.” This cost disadvantage also makes Germany less attractive as a destination for international settlements. Especially since the example of France shows the leverage effect: for every euro of funding, 1.80 euros in additional tax revenue and eight euros in investments.
“The danger is that we remain in the status quo and, as an international location, do not catch up at all or only very slowly,” confirms Grindel, who works as a Ubisoft manager in a multinational corporation. “But we are far behind the top locations; Above all, we miss blockbusters, international large-scale productions.” These are mainly brought by well-known game companies who advertise the development within their network.
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