Louisiana tax incentives attract videogame companies

March 25, 2014, 8:19 PM UTC
The Digital Media Center at LSU

FORTUNE — Since launching its tax incentive program in 2002, Louisiana has become a hotspot for Hollywood film and television production. The state is one of the top five Hollywood production destinations in the world with 30 Louisiana-shot feature films released in 2013. Production companies poured a record $810 million into the state.

Approximately seven years ago, Louisiana targeted the videogame industry by offering the same types of tax incentives that lured Hollywood production studios. With giant videogame publishers like Electronic Arts (EA) now ensconced in Baton Rouge at Louisiana State University and Gameloft established in New Orleans, the seeds have been planted to turn the state into a new videogame and technology hub.

Louisiana is offering game developers the same incentives as Hollywood — a 25% base credit with an additional 10% for hiring local Louisiana residents. Companies that relocate personnel to the state will still receive the full 35% credit because those employees will gain residency.

Chris Stelly, head of the Office of Entertainment Industry Development for the Louisiana State Department of Economic Development, said that the state’s FastStart program is the No. 1 job training program in the United States over the last four years.

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“We can engage with the company and basically customize training,” said Stelly. “If you have a need for 20 programmers, some game writers and other developers, we can go in as a state and engage with the company and adopt a customized training program for them. We’re also working with our schools from LSU in Baton Rouge, Lafayette, and Shreveport to Baton Rouge Community College to the University of New Orleans and all spaces in between.”

This fall, LSU will launch its first graduate program for videogame development through the Digital Media Arts and Engineering Program in a brand new Digital Media Center building. Mara Aubanel, the former executive producer of Electronic Arts franchises like FIFA and Need for Speed, is heading up the program. The 15 students will learn all aspects of game development, including how to work within a large team to create a high-quality console game.

“The nice thing about video ames is that you can develop them anywhere,” said Aubanel. “Unlike the film industry where there are geographic and weather factors in picking shooting locations, games can be made anywhere. The government here has been very serious about encouraging digital media, and I think it’s one of the better places that you can start a digital media company in the country.”

That new Digital Media Center building on the Baton Rouge campus offers two floors of lecture halls, labs, and offices to educate future digital artists. The top floor is a secure location that houses 400 Electronic Arts employees. The building serves as the North American headquarters for Quality Assurance (QA) testing for EA videogames. Future iterations of games like Madden, Dragon Age, and Need for Speed are tested here to get all of the imperfections, or bugs, out before shipping to the public. LSU students are helping with this endeavor. Prior to this consolidated Louisiana headquarters, testing was done at each individual EA studio.

“Electronic Arts has really put us at a stage in the world in terms of the digital media,” said Kip Holden, mayor of Baton Rouge, who initiated the conversations with EA back in 2007. “It was not an easy deal to put together because there were a lot of moving parts. The big piece we really were battling was with Romania, which was also vying for this operation. We went back and forth on setting up a curriculum, how to attract students to it, how to get people to come and work, where will it be located at the trial stage if we’re going to also build a regular building for them. So all of those things had to be negotiated, and that took a number of years. We didn’t have anything this big before, and ultimately they saw what could come together by creative minds working together.”

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Craig Hagen, Senior Director of Government Affairs for EA, said being in Baton Rouge on the LSU campus helps the publisher tap into a great talent base with students who are passionate about EA products, while EA brings an opportunity to the workers in Baton Rouge to be exposed to the dynamic and growing videogame industry.

“Louisiana is demonstrating significant leadership in providing incentives for game development, and they are setting the example for other states on how to attract great talent and business operations,” said Hagen. “They are leading the way.”

The State-backed Louisiana Technology Park launched the Level Up Lab last year in Baton Rouge, which is focused on startup videogame companies. In addition to getting the tax incentives, small studios are afforded space to work as well as all of the equipment needed to develop games.

“On top of the hardware and software that’s in the lab and the talent that’s located within the tech park, we have a network of mentors across the country we have identified through our travels and working in the industry — people that specialize in different areas like environmental design, level design, programming, art, etc. – that we can link them up with for interactions and mentoring,” said Jessie Hoggard, director of marketing and business development for the Louisiana Technology Park.

Two companies have been entrenched in game development at the lab, which includes its own motion capture studio and recording studio. Godric Johnson, producer and creative director of the mobile game company Jetstreame, said having a physical office that’s open around the clock allowed him to bring in interns to work on his two mobile games. The studio released Crush Hour, a mash-up of Bejeweled and Burnout, in February. The company is currently developing the action-puzzle game, Drag N Drop, for mobile as well as Wii U.

Bitfinity is developing a new rhythm-based game for PC, Mac, and Wii U called Tadpole Treble. The three-man team raised $50,000 for the endeavor through Kickstarter and is taking advantage of the lab to bring it to life.

“There are a couple of game companies based here that have been able to provide us information that we would never have had access to working in our garage,” said Michael Taranto, co-founder of Bitfinity with his brother Matthew.

One of the established, but still small, game studios inside the park is Pixel Dash Studios. The company is working with New Orleans-based DarkSeas Games on a next-generation console combat motorcycle racing game, Road Redemption, which is a spiritual successor to Road Rash. The game, which was also funded through Kickstarter, will be one of the first titles to showcase what Louisiana development studios can accomplish.

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Evan Smith, co-founder and creative director of Pixel Dash Studios, is a native Louisianan who also spent three semesters as a part-time digital arts instructor at LSU.

“When I was growing up in New Orleans nothing like that existed, so I didn’t know I could make a living developing videogames,” said Smith.

The Baton Rouge technology scene will also get a boost from IBM (IBM), which is investing millions of dollars in a new technology center that will bring 800 new jobs to the region. Jared Smith, head of the Baton Rouge Area Digital Industries Consortium, said that in addition to EA’s and IBM’s efforts, there are several other projects in the pipeline that will further bolster the region’s technology infrastructure.

Just an hour south of Baton Rouge, New Orleans has seen Gameloft, one of the largest mobile game companies in the world, open a studio with 40 employees. David Hague, head of the New Orleans studio, said the plan is to grow to 140 employees over the next seven years.

“As we started honing in on New Orleans as our final site, one of our major concerns was whether or not we would be able to attract people to the area,” said Hague. “At that point, the FastStart team stepped in to help us with multiple recruiting initiatives. We gathered over 1,500 resumes in a one-month period. This not only helped us make a case to our upper management that we could, in fact, recruit people to the area; but have a successful studio as well.”

Louisiana spread the word at the Game Developers Conference in San Francisco last week, where Mayor Holden and key state representatives met with game makers big and small to discuss bringing new studios to the state.