Article Library / 2015

2014-2015 Annual Assessment

Beyond hasbara, improving the video game industry in Israel would have positive economic benefits. As mentioned above, the video game industry contributed more than $6 billion to America’s GDP in 2012, with the industry employing around 146,000 workers across 36 states.21 Employees earn an average salary of $90,000 a year.

According to Israel Advanced Technology Industries, Israel’s largest umbrella organization for the high-tech and life sciences industries, Israel’s video game industry comprises roughly 150 companies generating close to $500 million in annual revenue.22 Israel has a lot of companies creating games for the mobile application market, but there are no major game studios in Israel producing blockbuster video games. While it is relatively inexpensive to create mobile applications, this is not the case for producing and marketing AAA* video games. The 2013 video game, Grand Theft Auto 5, cost around $265 million dollars to create and market.23 That investment was quickly recouped in its first day on the market with a record crushing $800 million in sales, and over a billion dollars in the following days. Israeli video game companies are not presently capitalized to spend the necessary funds to produce AAA games.

In order to compete in the video game market, Israel will need to increase the size and abilities of its game industry. Many states in the U.S. have taken great efforts to increase the size of their video game industry to create jobs and boost their economies.

The state of Washington, which has smaller population than Israel, is home to the third largest number of video game industry employees in the United States. Between 2009 and 2012 the video game industry in Washington grew by 7.5 percent, five times as much as their overall economy during that period. Over 12,800 game industry related jobs there added $600 million to the state’s economy in 2012.24 Washington is home to approximately 330 interactive media companies, with revenues of $19 billion.25

Some of the success of Washington’s interactive entertainment industry can be attributed to the Washington Interactive Network (WIN), a nonprofit organization created a decade ago “to promote, nurture, and grow the Interactive Media industry cluster in Washington State.” 

Washington is also able to attract interactive entertainment companies through the following tax incentives:

  • No state income tax for individuals
  • No state corporate income tax
  • No capital gains tax
  • Advanced Computing R&D Business & Occupation Tax Credit

While Israel may not be prepared to broadly adopt such aggressive tax incentives, it should consider the creation of specific industry zones or hubs that offer some tax incentives to encourage the growth of the interactive entertainment industry.

Pennsylvania, Georgia, North Carolina, Florida, Texas, and Louisiana have all passed legislation offering incentives to the video game industry.26 Some states have also used partnerships with universities as a way to grow the interactive media industry.

Within Europe, Germany, through its federal economic development agency, actively seeks to attract international gaming companies. With a gaming industry of 10,000 employees, it attributes its success to the 40 education facilities, both private and public, that offer video game related courses.27

One of the challenges faced by Israel’s gaming industry is an inexperienced work force. Because there are no major game studios in Israel, Israeli game programmers and computer animators seek employment abroad. Once the relevant experience is gained, it is unlikely that Israelis could find comparable employment in Israel.

In order to improve the quality and experience of Israel’s gaming industry, the government of Israel should encourage institutes of higher education to offer more programs and courses in video game design and production. Special attention should be paid to provide students in these programs internship opportunities in major game studios abroad to gain practical job experience that they can bring back to Israel.

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