An International Review of Financing for Video Game Companies

Key insights

7 takeaways

01
Private investment in the video game sector rose 77% in 2020 over 2019, reaching USD 13.2B.See it on page 8
02
The US provides no direct federal funding program for video games, but provides indirect support through the Federal R&D Tax Credit.See it on page 13
03
The US R&D tax credit provides a 20% credit against eligible expenditures and can be carried forward for up to twenty years.See it on page 13
04
From January 2017 to May 2020, 266 US video game companies attracted over USD 5.5B in private investment from angels and venture capitalists.See it on page 13
05
The UK Video Games Tax Relief provides a tax rebate of up to 20% of qualifying game production expenditure, or a cash rebate at 25% for companies claiming a loss.See it on page 18
06
The Creative Europe Loan Guarantee Facility aims to guarantee up to €2B of new loans for thousands of cultural and creative SMEs.See it on page 15
07
In 2020, the global gaming market was expected to generate USD 159.3B, growing 9.3% year-over-year.See it on page 6

Summary

This study, prepared by Communications MDR for Interactive Ontario and last updated September 15, 2021, reviews public and private financing for video game companies in peer jurisdictions including the UK, US, France, Germany, the Netherlands, the EU, the Nordic region, Israel, and, where information was available, South Korea, Singapore and Japan. Its method combined a review of web-based literature with twenty-two key informant interviews with industry representatives, financiers and investors. The authors argue that Canada's competitiveness depends on updating its video games tax credit and adding investor tax credits and loan guarantees for the sector.

The document reports that growth is fueling investment in the video game sector. Private investment in the video game sector rose 77% over 2019 to a total of USD 13.2B in 2020. Games-focused venture capital funds have grown, with the largest, Galaxy Interactive, holding USD 260M. Crowdfunding, private project funds and public loan guarantees also appear as financing sources in several jurisdictions.

The study also finds that direct public funding is available in every European jurisdictions examined and in Singapore, while the US, Israel and Korea provide no direct public funding for video game development. Interviewees noted that the bulk of financing rounds remain clustered at seed and early stages.