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Funding Cut as Film, Gaming Lobbies Squabble

The incentive fund for attracting film and video game companies to Texas is about to take a major budget hit. Advocates for both industries are licking their wounds, and blaming each other for failing to present a united front.

Naveen Nattam (l) Sean Riley (r) play games during their lunch break at Twisted Pixel, a video game company in Austin. Texas is second in the nation for video game industry employment and promoting further growth with incentives and training.

With a $63 million budget cut looming over the state's film incentives program, advocates for the film and video game industries are weighing what went wrong — and pointing fingers.

The two-year budget deal reached by House and Senate negotiators last week includes about $32 million for the Texas Moving Image Industry Incentive Program, less than half the amount requested by Gov. Greg Abbott’s office, and about a third of the program’s funding for the current biennium.

At that level of funding, “film and television in Texas will disappear,” said film industry lobbyist Lawrence Collins.

Created in 2008 to attract business, the program gives companies grants if they hire Texas workers to develop film, television, commercial or video game projects in the state. Since then, production companies have received about $150 million in incentives and spent more than $1 billion in the state, according to the Texas Film Commission, which administers the program.

But with state incentives programs under particular scrutiny from lawmakers this session, film and video game lobbyists had to be on their best behavior to keep the cash flowing to their corner of the budget.

“The video game industry understood from the beginning of the legislative session there were different ideas on the state's incentive programs,” said Mark Miner, a state spokesman for the Entertainment Software Association, which represents several gaming companies with studios in Texas, including Electronic Arts and Nintendo.

And an early rift between the two sides may have buried their efforts from the get-go.

In March, film advocates and prominent business groups started pushing for separate funding for film incentives and video game incentives, arguing that film lobbyists carry most of the weight when it comes to hustling lawmakers for money, and that the industries are fundamentally different. Video games are developed mostly in brick-and-mortar studios and often take several years to complete, unlike fast-paced film projects that move between locations across the state.

"We believe the Legislature wants to incentivize the creation of new jobs and new investment for the future, not reimburse for jobs or investments made in the past,” Collins said. “Film and television production offers prospects for the future in spades.”

But video game proponents pushed back, saying they were open to the idea of a split — just not this year. They thought film groups were trying to cut them out of the budget completely.

“They have continued to introduce a number of riders that would prohibit the video game industry and the visual effects industry from participating in the film incentives,” Tom Foulkes, vice president of state government affairs at the Entertainment Software Association, said in an interview last month.

Film advocates tried to bridge the divide by working with state Sen. Royce West, D-Dallas, on a plan that would have provided roughly $150 million for film incentives, and a separate $47 million for video games over the next two years. Video game representatives didn’t support the idea because of the separate allocations and because of certain provisions that might have made it difficult for video game companies to receive grants.

"When I tried to bring them together to create a united front, there was disagreement," West said on Tuesday. He did not say whether internal disagreement between film and video game lobbyists was to blame for the lack of funding for the program in the budget.

Bill Hammond, CEO of the Texas Association of Business, accused video game lobbyists of “pulling out of negotiations.”

“I am disappointed that video game companies would not agree to an incentive package that would have meant more money for their industry as well as the film and television industry in Texas,” Hammond said.

“We can’t get to the same place,” Foulkes said last month. “I wish the conversation had gone better, but it didn’t.”

Without consensus from both sides — or much support for the program in the Senate — the plan was scrapped and film incentives ended up with a meager $10 million for the biennium in the upper chamber’s proposed budget. That number set a low bar for final negotiations with the House, which had allocated nearly $74 million for the program in its own budget.

The result of those negotiations was the $32 million compromise announced last week.

“The failure of the two industries to find common ground during the Senate mark-up process doomed us in conference committee and is the origin of today’s bad feelings about the future of the program,” Collins said.

For now, the program will have to make do with the same amount of money it received in 2011. Hammond said the cuts "will cost Texas jobs because other states, and even other countries, are working hard to get more productions to move to those locations and away from Texas."

When asked if $32 million was enough for film incentives, West said, "It's gonna have to be enough."

Disclosure: The Texas Association of Business is a corporate sponsor of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.

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