
Subsidising the video games industry
[This post is based on a provocation written for the Legal and Policy Games Jam at DiGRA2025]
Subsidies are important
In 2016, Matthew McCaffrey argued, in an article for GameDeveloper.com, that video games were not subsidised. His argument turned on whether or not what we might (and many do) call indirect subsidies such as tax breaks were morally equivalent to giving people money. States in general would seem to disagree with McCaffrey: typically tax reliefs are included in assessments of state subsidies, and where those measures are targeted, they’re referred to as specific subsidies or, in the EU, state aid.
The important question, though, is what those subsidies are doing. This is, in fact, a key issue in games policy at present. Behind the scenes of all the discussions about how awful the last couple of years have been for the industry, and the fact that the industry is contracting in various ways, lies the matter of subsidies. Changes to support schemes can make or break local games economies, especially when they are already precarious.
Subsidies are central to the games economy
Relief under the UK’s video game tax scheme, introduced in 2014, had totalled almost £1.5 billion by September 2024, much of which seems to have gone to Rockstar. In its current incarnation, the Video Games Expenditure Credit provides relief at a rate of 34% on up to 80% of your UK-based expenditure.
Subsidy schemes typically include qualifying criteria. Schemes in Europe generally require a game to pass a ‘cultural test’, and to ensure these tests are suitably selective, sample data is produced to show what proportion of games are likely to pass in any given year.
For the UK, 2013 paperwork showed this figure would be somewhere between 25 and 27%: so around a quarter of games made in the UK each year are eligible for (and apparently receive) tax relief on account of their ‘Britishness’. In France, used as the benchmark for assessing the UK relief, relief was granted to 30% of games, indicated by the European Commission as “guaranteeing that the content of video games eligible for the tax relief is truly cultural”.
Subsidies are vulnerable
So, a 34% relief on 25% – or even 30% – of games made in your country. This is a clear vote of confidence in the industry but also 1) quite expensive and 2) in policy terms, a risk. Public money is increasingly tight, and many politicians are campaigning on measures that will further reduce tax income from other sources. As a consequence, nations’ ability to sustain subsidy schemes is threatened.
In Canada, Quebec’s games industry tax breaks were described in 2007 as “‘insane’ and unsustainable” by one major Canadian developer – and the UK considered an intervention with the World Trade Organisation (WTO) in 2008/9 before finding that there are no grounds for such a complaint: “no rules on subsidies exist under the WTO General Agreement on Trade in Services” (GATS). Yet in 2025, Canadian provinces are retreating from subsidies for games: Quebec has announced a 10% reduction in support rate and Alberta has scrapped plans to revive a games tax credit there.
These schemes were a major driver for the introduction of European tax reliefs for games from 2008 onwards. In fact, schemes in Europe are now increasing in number, and potentially also in intensity, a process described as a “regional arms race” by one consultancy firm. To meet rising costs, games trade associations are also asking for subsidy increases. For example, in the UK, industry body TIGA is calling for increased tax relief for independent games, in line with the new Independent Film Tax Credit.
If the British Film Institute thought defining British games was a challenge, they’ll love trying to define indie games…
And there’s also another vulnerability to these subsidies, which comes back to the WTO. As noted, there is no specific provision against subsidy in GATS, but that doesn’t prevent you from including subsidy provisions in trade agreements – and we’ve heard a lot more than usual about those in recent years. Europe has long relied on a so-called ‘cultural exception’, a refusal to bring culture into discussions about trade agreements, a position that today rests on the 2005 UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions.
But with trade policy increasingly disrupted, and pressure rising to do deals, culture may wind up on the table. Indeed, people were terrified this would be the case last year, during negotiations around the Joint Initiative on E-Commerce. One MEP expressed the concern that:
… according to information brought to our attention, the Commission is considering not asking for an exemption for audiovisual services in the ongoing negotiations.
This time, it was a false alarm, and the status quo was maintained. But the games industry has become dependent on subsidies, and is shrinking even with substantial subsidy regimes in place. The question, then, is what should we do about that?