Ministry of Finance: "The state is not the best investor, certainly in gaming projects"

On the second day of the St. Petersburg International Economic Forum, a round table was held on the topic “Russian Game development and trends in its development“. One of its speakers was Maxim Parshin, Deputy Minister of Digital Development, Communications and Mass Communications of the Russian Federation. We quote his speech in its entirety.

Maxim Parshin

Some considerations about possible state support for the gaming industry: there is a lot of speculation on this topic right now (either about the creation of some $50 billion fund, or on some completely incomprehensible topics).

How do we see this state support in the Ministry of Finance?

For a long time, state support [of the Russian video game sector] was based on the principle of “do not interfere“, “do not touch what was already dynamically developing.” The state is not the best investor, certainly in gaming projects. The budget is not a venture fund.

Games have developed largely due to the human resources potential of our industry, the talent of developers, a relatively low threshold for entering this market (primarily if we talk about mobile games), as well as high margins (if the project was successful) and relatively (in the recent past) simple monetization in global markets.

No direct budgetary funds were allocated for the development of gaming projects. It was a conscious decision, because the risk is high (along with high profitability if fired). This is a pure venture, and the state does not play a pure venture. But in principle, support measures were provided.

I will not name (for obvious reasons), but a preferential loan was granted to a good large game project for 400 million rubles. The release will be next year. But here we share the risks with the bank. The bank that provided the loan risks the whole body of the loan, it believed in the project, believed in the team, provided the loan. Here the budget has taken over the compensation of the interest rate. The developer received a preferential loan at several percent per annum. We hope to see this game soon. I can’t name it, because the owners asked not to do it, it could hurt in the current conditions (…).

At the same time, the industry was developing, showing stable growth from year to year.

Here we consider the gaming industry as part of the IT industry. Equivalent and very important. For example, there are 64 [gaming] products in the Russian software registry, including such well—known games on the market as Warface, “Allods“.

There are also a number of simulator products in the registry, this is software with game mechanics. They are also important, but they are not games in the literal sense. This is software that, if [located] in the registry, can enjoy certain benefits and preferences in our market.

Let me remind you that just at the request of game developers, we initiated, and the State Duma and the Federation Council adopted a law (at the end of 2020), which was aimed specifically at the development of the gaming industry — eliminated double taxation, made it possible to count incoming VAT when advertising or server capacity is purchased in foreign markets. This gave an additional impetus to the development of the industry.

What has changed in a year?

There were absolutely panic moods among a number of players: everything was gone, everyone who was there left. That’s not so. According to our assessment, the industry has consolidated and [today] is adapting to new conditions, developing.

The logic of our possible support is based on the general logic of import substitution. A management infrastructure to support Russian IT projects has now been built. It is a Competence Center for the replacement of industrial software and a Competence Center for the development of system-wide and gaming software. As part of this, a Central Committee for gaming services was created, within which, first of all, a landscape was built that answers the question of what is missing in terms of software for the development of games.

In terms of the landscape, we have a lot of positions there. All this is painted in different colors. Green is a boxed Russian solution that is present on the market and competes with global solutions. Yellow means that there is a good groundwork, orange means that there is something, but it is so-so (but there is something to work with), and gray zones (there are few of them, less than 10%) mean that no analogues have been found in our market, we need to take separate decisions.

In terms of games, such a landscape was also built. It is clear that, for example, game streaming and cloud services — there is a good groundwork here, they are in the yellow zone, there are good strong solutions. The game engine is in the orange zone. There is a backlog. We welcome that VK is investing in the development of the game engine. There are green positions with which everything is fine. Our game distribution platforms are located in the green zone. They are being monetized and developed.

Based on the landscape, we will make a decision (by “we” I mean primarily the market) how it will be supported. It probably makes sense to fill in some things (in the gray zone) at the expense of some public investments. But this is still an exception. These are very specific projects, for example, related to simulators, which may not pay off quickly in the market for various applied and urgent tasks. Everything else, of course, is the market.

Investments should be non-state. We proceed from the fact that there is money on the market, there are projects, there are talented developers. Everything is there to ensure that projects are supported by non-state investments (…).

Foreign markets. Here we are in negotiations, first of all, with our colleagues from the Asia-Pacific region. It is premature to talk about the access of our developers to these markets. But we are looking at it with great hope. We hope that such agreements will be reached.

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Parshin’s speech was supplemented by Alexey Goreslavsky, General Director of the Internet Development Institute (IRI):

I think everyone has heard the main message: there is everything on the market, go ahead, work, everything will be fine. But I, as the director of the Internet Development Institute, will allow myself to correct Maxim Leonidovich a little about the fact that the state does not invest [in games]. A year ago, IRI here promised to invest a billion in games and, I must say, invested. Well, I’m cheating a little bit. In fact, I invested about 960 million rubles, if we count strictly on a calendar basis.