Massachusetts is the Unsung Hotbed for Video Games, MIT Conference Panelists Say

4/19/10Follow @xconomy

When it comes to the video game industry in Massachusetts, “we have a major brand problem,” says Jason Schupbach, the creative economy industry director of the Massachusetts Department of Business Development.

“We have an amazing technology community here, but we don’t have a huge history of consumer-facing brands being based here,” he said at a panel discussion on Friday at the MIT Sloan Business in Gaming conference.

The result? The state’s $2 billion video game industry isn’t growing at the rate it could be. Massachusetts’ many colleges produce a slew of talented gaming professionals with skills in both the development and design facets of the industry, but many graduates flee to states more better known for creating hit video games, like California, panelists said.

Many of the Massachusetts technology companies focus on the infrastructure side of video games, and don’t have the flash of the consumer-focused companies that make big names like World of Warcraft or the Halo franchise. Massachusetts companies, by comparison are “really unsexy. A lot of the great talent wants to work for sexy businesses,” said Brian Balfour, co-founder and VP of product marketing at Viximo, a company that provides virtual goods products for social networking, online dating, and casual gaming sites.

“It’s almost like ‘I want to graduate and move to the big leagues,’” said panelist and former Red Sox pitcher Curt Schilling, who founded a gaming and entertainment company, 38 Studios, in Maynard, MA in 2006. (This was one of many baseball references he used during the roundtable. Schilling also likened state tax assistance for the video game industry to “steroids” for the economy, in the way that a similar film tax credit has brought movie makers to the state and boosted local businesses.)

Schilling, who had the ability to self-fund his company to the tune of $30 million, said the lack of financial support at the government level for gaming could deter young startups in the space. “If this state doesn’t find a way to bring tax credits to this industry, the best possible scenario is that this industry will stagnate,” he said. But tax credits are only a piece of the puzzle, he continued. Tax incentives in the form of payroll breaks wouldn’t affect small, young startups, which could better benefit from subsidized office space and grants, he said.

Schupbach, who Wade interviewed in October (and who will be leaving his position in May for a post in Washington, D.C.), said the state’s financial woes would most likely prevent it from offering a tax break to the industry in the next few years. Still, he says startup programs such as business plan competition MassChallenge, as well as startup workspaces and incubators, could spur more video game companies to get started in the state.

Panelists also noted that non-compete agreements at startups, which prevent employees from seeking jobs at competing companies for a fixed amount of time, have stalled the industry. The hiring clauses are not enforceable in California, making it easier for people to switch jobs, which helps the state recruit and retain video game developers. “Why would they come here [to Massachusetts] to have handcuffs slapped on them?” asked Bob Ferrari, vice president of global publishing and business development at Sanrio Digital, a company focused on social gaming and the publishing of interactive entertainment for the Hello Kitty brand. He’s also VP of business development at the company’s joint venture partner, Typhoon Games.

But, this is a problem that the industry doesn’t need lawmakers to fix, and can tackle at a grassroots level, Ferarri and others said. Even though it is legal in Massachusetts to use those clauses, startups and their investors should stop requiring employees to sign non-compete agreements, the panelists said.

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