STATE of the INDUSTRY

1. STATEof theINDUSTRY Today’s Video Game Industry in Pennsylvania Erik V. Huey Senior Vice President of Government Affairs Entertainment Software Association September 11, 2014

2. The Entertainment Software Association Serves business and public affairs needs of U.S. computer and video game publishers • 35 member companies • Activities include: • Business and consumer research • Government relations • Legal and policy advocacy • Content protection • Domestic and international IP policy • Technology policy • ESA also operates E3, Video Game Voters Network, & ESA Foundation • 2014 is the 20th Anniversary of ESAand ESRB

3. Not your Father’s Video Games 1972 1981 1980

4. That was then, this is now…

5. No Longer a Niche Industry • $21 billion domestically (2012) • $79 billion worldwide in sales (2012) • $111 billion worldwide in sales in 2015, according to Gartner • 67% of U.S households have video game consoles • 22% of the 153 million American gamers utilize all four screens—TV, computer, smartphone, tablet—to play

6. No Longer a Niche Industry • In 2010, Twitch did not exist • In 2014, Amazon bought Twitch for $970 million • 55 million unique visitorsglobally every month • #4 in peak U.S. web traffic • Valve is #7 in U.S. web traffic • On October 4, 2013, League of Legends Season 3 World Championship broadcast over Twitch had 32 million people watch, which is more than the series finales of Breaking Bad, 24, and The Sopranos—combined Source: http://online.wsj.com/articles/amazon-to-buy-video-site-twitch-for-more-than-1-billion-1408988885

7. No Longer a Niche Industry 2013 2001 150–250 million gamers 1.2 billiongamers Source: http://www.newzoo.com/infographics/global-games-market-report-infographics/e:

8. Gaming’s Changing Demographics • Women make up 48% of gamers • The number of woman gamers 50 and older increased by 32% from 2012 to 2013 • 49% of adults age 50 and older say they play video games • 80% of these gamers play video games on a weekly basis and 45% play on a daily basis • 92% play at home, and most game play, 55%, is done during the evening hours • AARP’s games webpage draws millions of visitors a month • One of the most popular pages on their entire site

9. U.S. Computer and Video Game Sales Growth Dollars in Billions Source: The NPD Group/Retail Tracking Service; Game Industry: Total Consumer Spend * Figures include total consumer spend ** Other delivery formats include subscriptions, digital full games, digital add-on content, mobile apps, social network gaming, and other physical delivery. 2000-20008 figures are sales of new physical content at retail exclusively.

10. Smashing Records • G.T.A. V had the biggest one-day launch total in entertainment history • Day One Movie Record: $91M • (Harry Potter & The Deathly Hallows Part 2) • Opening Weekend Box Office: $207 M • (Marvel's The Avengers) • Minecraft has 100 million registered users

11. The App Economy • Eight of the top 10 paid apps on the Apple App Store are games • Games make up 63% of Apple’s storefront revenue • Angry Birds has been downloaded almost 2 billion times. The free version earns $1 million a month from ads • U.S. digital sales, including digital games and content, generated $11.7 billion in 2013, up 10% from $10.7 billion in 2012 • Worldwide mobile game growth will exceed $21 billion in 2014

12. Changing Business Models • New platform technologies allowing companies to keep in constant contact with players • Cloud game play expected to reach 66 million U.S. households by 2017 • Social games continue to grow: Zynga currently has 232 million monthly users and posted a 2013 Q3 revenue of $203 million • Mobile games make up 1/3rd of digital game revenue; the average mobile gamer spends $25 per month on mobile games

13. 21st Century Jobs Entertainment software is one of the fastest growing industries in the U.S. economy: • 150,000 jobs in 36 states • The average compensation is $95,000 • 390 colleges, universities, art and trade schools across the country offer courses, professional certificates, undergraduate and/or graduate degrees in video game design, development, and programming • The Princeton Review’s report, "Top Schools to Study Video Game Design for 2014," ranks the top 25 undergrad and graduate schools with video game design programs • In July, HEVGA launched at the 2014 Aspen Ideas Festival with 20 universities; it’s now up to 48 schools

14. The Alliance

15. HEVGA’s Members

16. Are We In Your State? Yes!

17. A Closer Look: Pennsylvania Top Schools for Video Game Design 2014 • Game companies located in 7 of PA’s 18 Congressional Districts (1, 2, 4, 8, 14, 16, & 17) • 17 Developers & Publishers in PA; Eight in Pittsburgh • Average compensation for Pennsylvania game developers is $85,000 • 25 colleges, universities, and trade schools, including CMU and Harrisburg University, offer video game design courses and/or degrees

18. 21 States and P.R. Have Enacted Tax Incentives %

19. Texas Moving Image Industry Incentive The Texas Moving Image Industry Incentive Program wascreated in 2007 • Facts from Texas’s 2014-2015 Biennium report, as of 6/30/14 • Video Games received grants of $6.35M and spent $43.16M in Texas • Each dollar invested resulted in more than $6.79 spent in Texas • Feature Films received grants of $6.65M and spent $37.61M in Texas • Each dollar invested resulted in $5.65 spent in Texas • TMIIP “Life of Program”: 2007 to June 2014 • Video Games received grants of $21.51M and spent $245.45M in Texas • Each dollar invested resulted in more than $11.41 spent in Texas; Film $6.89 • Texas increased their incentive, effective September 5, 2013, eliminating the wage-only option, and keeping the 2.5% “bump” for Underutilized and Economically Distressed Areas • Qualifying spending of up to $1M = 5% (7.5%) • Qualifying spending of $1M to $3.5M = 10% (12.5%) • Qualifying spending above $3.5M = 20% (22.5%)

20. STATEof theINDUSTRY Today’s Video Game Industry in Pennsylvania Erik V. Huey Senior Vice President of Government Affairs Entertainment Software Association September 11, 2014