Man vs. Wild Dev Takes Michigan to Court
- Thread starter vansau
- Start date
I don't see how this is actually a negative outcome for the state. After all, in your example, even if a large company funded a small company to develop their IP, so long as they did it in Michigan, you'd be looking at attracting new jobs, of the desired "high tech" kind to the state.Therumancer said:
You have to remember here, the issue in and of itself isn't just diminishing tax revenue for the state, it's the fact that their economy is contracting due to loss of jobs and emigration. If for every 3 blue collar jobs that Michigan has lost, they could have replaced them with 2 white collar jobs, then they'd be in awesome shape - tax breaks or no.
My family still lives in Michigan and when I went back to visit them a couple of years ago I was stunned at how many shops and restaurants around where they lived were just flat out closed. Places that you would never think, like an entire freaking mall! It's obvious what's going on is that there just isn't any consumer spending, likely because no one has any money.
This is real trickle down economics, not that baloney the Reaganites have been pushing for the last 30 years.
So, from the perspective of "Hey, let's inject some cash into the economy by creating a few dozen high paying programming jobs" - I'm all for it. I don't "care" if the IP developed was developed in Michigan or anywhere else. I'd be happy just to have someone spending money, if you know what I mean.
Jake Martinez said:
It's a negative outcome because they want to invest that money in what are going to be long term benefits. If you invest in a "front" company like I described the company is likely to disappear as soon as the project is completed, with another company appearing the same way wherever it happens to be most beneficial at the time for the next project.
With small businesses that are known to be unaffiliated with big ones (or at least as much as you can) they are probably going to be in the area for a while. What's more businesses that are just starting oftentimes have some loyalty to towns and cities that really help them get started despite the odds.
It's like this, down here where I live in New London Connectitcut we have this truely massive company called Pfizers that operates internationally. They were lured in by the city by it building them a huge complex and giving them all kinds of tax breaks in exchange for moving in and employing people. The idea being that the city would lose a lot of money in the short term, but when Pfizer's stayed and started paying taxes on all of this a lot of money would be made. The deal was cut badly however and as soon as they weren't getting a free lunch anymore, Pfizers pretty much decided to pull out of the region. Right now there is a lot of discussion about what will be done with this massive "Campus" the city built for them which is about to be totally unoccupied.
To avoid things like this, towns and states increasingly want to support and foster small businesses as opposed to massive national or international ones that can do pretty much whatever they want to on a whim. You help a fledgeling company with tax breaks, when they can afford to pay taxes and remain profitable and you pull them, chances are they aren't going to immediatly go bankrupt or be able to go fleeing to another area just because they want to.
What's more as I pointed out, you'll notice a lot of mega businesses still maintain their original locations even if doing so is not maximizing their profits. Things like a chocolate company maintaining their first chocolate plant, or at least one in the same location, or a soft drink company maintaining their first bottling plants, and so on. These things become tourist attractions, and in many cases are turned into sort of a "flagship" for the company to show off their roots. Such behavior is not unnoticed. Done correctly fostering a small business into a successful big one can be a beneficial, symbiotic relationship, some big businesses being oddly protective of their community of origin, and those towns also making those businesses a point of pride even putting up signs like "now entering so-and-so, home of so-and-so famous company".
A huge and successful game maker coming into something like this is more likely to just take the tax credits, say "thanks for the free money sucker" and leave when it suits them because they can. The small front company goes out of business, the big liscence reverts to the original owner instantly, and in the end nothing changes except they didn't pay full taxes on that project while the town/state didn't get anything from it except less revenues in the long run.
If a big company plans to deal in good faith they are going to be overt about it (which is why people are wary of things like a small company with liscences they don't control for situations like this), though that isn't any guarantee as Pfizers sort of proves. If a big game studio with big liscences like say Lucasarts (which I simply use because they have Star Wars which we know is a big liscence) wants to negotiate a deal, that's a seperate level of dealing, not a job for a small business slush fund.
Therumancer, I understand what you're saying and I even agree with you, but the situation you described with Phizer is not analogous to the one in Michigan. The state here isn't really outlaying resources up front, in fact if their "plan" is successful they won't even be diminishing current revenue streams, but instead they're hoping to create new revenue streams (and jobs, which inject cash into local economies) where none existed before.
I could see a big problem if they went up to E.A. and said, "Oh we'll build you a studio in Ann Arbor, right next to U of M at a cost of like 30 million dollars", but in this case the state is literally offering *nothing* but a tax break to current companies. The fact that these companies need to have total ownership of their I.P. is actually sort of ridiculous since frankly, as it's been pointed out by others, the game industry hardly works this way.
Also, there is some tangential benefit to supporting game/software studios in your state in the long term in regards to developing an in-state talent pool of people with the applicable skills.
I just had this conversation on Facebook with one of the co-owners of The Manabar here in Brisbane; Essentially the Queensland government has a games initiative that supports small development studios in the state. This has proven exceptionally valuable after E.A. pulled the plug on the one major development studio here in town (Irrational). In the wake of this, government support has really enabled the small houses to prosper and remain marketable, which in turn has kept recent graduates from moving to Sydney or Melbourne, which is enabling these kids to stay here, learn the industry, and hopefully someday go on to either participate in, or found their own new companies.
You have to understand that sometimes it's not all about just taxes. It's also about creating the correct environment to have future growth in a sector that doesn't exist. In the case of Michigan they have two really good universities with two excellent computer science/engineering departments (I know, I graduated from one of them) with University of Michigan and Michigan State University. The problem is, that most of their graduates leave the state for jobs elsewhere in the country (again, I did this too).
If they can instead, capture this talent and use *that* as a lure for investment in the software industry in the state (ergo; "Look, we have a bunch of talent here and the cost of living is low and wages are lower than say, in California or Seattle, etc") then they can be competitive and draw the investment they need in the short term, while creating the talent pool they'll need in the long term to start their own companies.
So ultimately, I don't see this about building campuses (they aren't anyway) or as a plan to lure companies for tax revenue, but instead as a plan to support a nascent industry in the state - which I believe is the positive outcome.
The I.P. stipulation however, is utterly retarded. It not only prevents a studio from opening up a satellite studio in the state, but it also prevents local software dev houses from getting invested in by larger studios! (Which is exactly what's happening to the company in this article; It's a Michigan company being prevented from getting the tax break because they made a deal for development, as the producer mind you!, with another company that holds the I.P.)
This kind of outside investment is really beneficial to a small company. It allows you to hire developers/artists, to get them skilled up on an actual production and it allows you to build the processes, procedures and even your OWN IP (software tools, engines, etc) that you need to fulfill your contract.
We do this all the time in the software business. It's how small companies get the resources they need to go big.
I could see a big problem if they went up to E.A. and said, "Oh we'll build you a studio in Ann Arbor, right next to U of M at a cost of like 30 million dollars", but in this case the state is literally offering *nothing* but a tax break to current companies. The fact that these companies need to have total ownership of their I.P. is actually sort of ridiculous since frankly, as it's been pointed out by others, the game industry hardly works this way.
Also, there is some tangential benefit to supporting game/software studios in your state in the long term in regards to developing an in-state talent pool of people with the applicable skills.
I just had this conversation on Facebook with one of the co-owners of The Manabar here in Brisbane; Essentially the Queensland government has a games initiative that supports small development studios in the state. This has proven exceptionally valuable after E.A. pulled the plug on the one major development studio here in town (Irrational). In the wake of this, government support has really enabled the small houses to prosper and remain marketable, which in turn has kept recent graduates from moving to Sydney or Melbourne, which is enabling these kids to stay here, learn the industry, and hopefully someday go on to either participate in, or found their own new companies.
You have to understand that sometimes it's not all about just taxes. It's also about creating the correct environment to have future growth in a sector that doesn't exist. In the case of Michigan they have two really good universities with two excellent computer science/engineering departments (I know, I graduated from one of them) with University of Michigan and Michigan State University. The problem is, that most of their graduates leave the state for jobs elsewhere in the country (again, I did this too).
If they can instead, capture this talent and use *that* as a lure for investment in the software industry in the state (ergo; "Look, we have a bunch of talent here and the cost of living is low and wages are lower than say, in California or Seattle, etc") then they can be competitive and draw the investment they need in the short term, while creating the talent pool they'll need in the long term to start their own companies.
So ultimately, I don't see this about building campuses (they aren't anyway) or as a plan to lure companies for tax revenue, but instead as a plan to support a nascent industry in the state - which I believe is the positive outcome.
The I.P. stipulation however, is utterly retarded. It not only prevents a studio from opening up a satellite studio in the state, but it also prevents local software dev houses from getting invested in by larger studios! (Which is exactly what's happening to the company in this article; It's a Michigan company being prevented from getting the tax break because they made a deal for development, as the producer mind you!, with another company that holds the I.P.)
This kind of outside investment is really beneficial to a small company. It allows you to hire developers/artists, to get them skilled up on an actual production and it allows you to build the processes, procedures and even your OWN IP (software tools, engines, etc) that you need to fulfill your contract.
We do this all the time in the software business. It's how small companies get the resources they need to go big.