Game Subsidies in Germany - Recent Developments

Details of new EUR 50m subsidy expected to be published this autumn Application period for de-minimis subsidies now open until 30 August 2019 Germany offers a system of state (“Länder”) and federal level subsidies for computer games. The amount of subsidies has often been criticized as being far too low compared to other industries (such as film) and other countries (such as public funding available in Canada, France or the UK). Finally in 2018 the federal government introduced plans to implement a EUR 50m subsidy per year for the game industry. Details are expected to be published in autumn 2019. In the meantime, game companies can now apply for a de-minimis subsidy until 30 August 2019. The following article briefly outlines the expected new subsidy regime, as well as other currently available subsidy mechanisms.

The Expected EUR 50m “Large Volume” Subsidy and the Cultural Test

The German government has announced plans to introduce an annual EUR 50m subsidy for computer game development in 2018. Recently, the government has declared that the rules will be published and enter into force after notification to the European Commission in autumn 2019. So far, only a few details have emerged. However, the prerequisites of the large volume subsidy are expected to be mainly based on the “German Game Fund”, a subsidy model presented by the German game industry association in April 2018. Who can apply? It is expected that the subsidy will be open to any applicant developing the game who has its seat in Germany, or if seated in the EU/EEA, with a permanent establishment or branch office in Germany. In the event of a co-development, the criteria must be fulfilled by the applicant. What is the nature of the subsidy and what amounts are available? What are the conditions, and for which games will funding be available? According to initial announcements, the subsidy will be granted as a non-repayable amount and will be available for the development of prototypes, and/or the development of the actual game. Minimum thresholds are total development costs of EUR 30.000 (for prototypes) and EUR 100.000 (for game development). The share of the subsidized amount will be likely to range from 50% of eligible costs for game prototypes (with a maximum of EUR 400.000), respectively from 50% of eligible costs for actual games (for games with total development costs from EUR 100.000 to EUR 2m) down to 25% of eligible costs (for games with total development costs of EUR 8m or more). Eligible development costs are likely to include (amongst others) costs for personnel in Germany and the EU/EEA, costs for service providers seated in Germany or another EU/EEA member state up to a certain threshold, license fees, and game related software. It is expected that at least 60% of the approved development costs must be spent in Germany. The content of the game may neither violate the German Constitution nor applicable laws, and must obtain or be expected to obtain an age rating in Germany (USK rating) of 18 years or lower. In addition, the prototype/game will need to pass a cultural test which is likely to have the following components:

• Context and cultural content (such as setting/plot and/or the main characters, and or the story or motifs having a relation to Germany or the EEA)
• Creative team (such as the producer, creative director, art director, game designer to be resident in Germany)

If the criteria are fulfilled, and the required minimum amount of points under the cultural test is reached, the subsidy shall be granted automatically without further conditions. Currently, the Federal Ministry of Transport and Digital Infrastructure is coordinating the exact prerequisites and initiating the notification procedure with the European Commission. It remains to be seen what further details the actual guidelines, once published, entail. Current discussions While the plans have been announced by the German Government, recent discussions criticized that the federal budget for 2020 does not expressly include the EUR 50m funding amount. Accordingly, industry representatives are lobbying for the subsidy to finally enter into law.

De-minimis subsidy up to EUR 200.000

In contrast to the large volume subsidy, and to bridge the gap until the large subsidy finally enters into force, the Government has recently introduced a de-minimis subsidy for computer games of up to EUR 200.000. Applications can be handed in anytime now until 30 August 2019. The de-minimis -subsidy does not need to be notified to the EU Commission. Who can apply? Companies requesting the subsidy must develop digital games or interactive content and have their seat, a permanent establishment or a branch office in Germany. The subsidy is not available for private persons, single purpose companies or partnerships. What amounts are available, what are the conditions, and for which games is funding be available? The subsidy is available for the development of prototypes and the production of the computer game. The grant is paid out as a non-refundable amount and can cover up to a maximum of 200.000 Euro, representing up to a maximum of 50% of the eligible project costs. Startups and small companies can get a bonus of 20%, medium sized companies a bonus of 10%. Eligible project costs include: costs of personnel, costs for subcontractors up to a certain amount, costs for hard- and software specifically acquired for the project, project-specific overhead costs (rent, legal costs etc.), and license fees. At the time the application is made, the project may not have been commenced. How to apply? There is a two-step application process with the Federal Ministry of Transport and Digital Infrastructure. Firstly, the applicant has to provide a project sketch, which is reviewed. In the event of a positive assessment, a more formal application for the subsidy has to be made. Eligible companies can submit applications until 30 August 2019 at the Ministry. Further details can be found here.

Other Sources of Public Subsidies for Computer Games

State (“Länder”) subsidies Currently, other available sources of subsidies exist mainly at state (“Länder”) level. A number of German states have introduced specific subsidy programs for computer games. The following institutions at state level provide public subsidies for games in Germany:

• medienboard Berlin Brandenburg GmbH (in Berlin and Brandenburg) • FilmFernsehFonds (FFF Bayern) (in Bavaria) • Film- und Medienstiftung NRW (in North Rhine-Westphalia) • nordmedia – Film- und Mediengesellschaft (in Lower Saxony and Bremen) • Medien- und Filmgesellschaft (MFG) (in Baden-Württemberg)

The available amounts are however limited: According to a fairly recent study, total subsidies available at German state level amount to EUR 3m per year, and usually the amount of public subsidy for a single games project in Germany is no higher than EUR 200,000. The largest state subsidies currently available are provided by Bavaria and North Rhine Westphalia, each with an amount of up to EUR 500.000. State level subsidies are usually granted on a per-project basis in the form of limited recourse loans, i.e. the loans will only have to be repaid if the game is successful. Often, the funding organisations give precedence to applicants situated in the federal state where the respective funding organisation is based. Others require successful applicants to spend the entire subsidy amount in the federal state of the funding organisation. The German Computer Games Awards At federal level, and apart from the de-minimis subsidy mentioned above which is already in force, the only relevant subsidy is the “German Computer Game Award” worth around a total of EUR 590,000 (2019 prize amounts). The prize is sponsored by the Federal Ministry of Transport and Digital Infrastructure, as well as the German computer games industry association game. Prizes are awarded by a jury for different categories such as “Best German Game”, “Best Children Game”, “Best Serious Game” or “Best Innovation”.

What the Future Brings

While Germany still substantially lags behind countries with established large computer game funding systems, the current developments are at least encouraging. The Government will be well advised to finally put into practice the large volume subsidy in order to further incentivize game development as well as co-development in Germany. You can contact the author on LinkedIn.