THE 1337 PLAYBOOK

1337: /ˈliːt/ (adj.)

Derived from the word “elite” (colloquially, “leet”), describing formidable prowess oraccomplishment, in the fields of online gaming or computer hacking; originating from31337, the UDP port used by the hacker group “Cult of the Dead Cow” to accessWindows 95 using Back Orifice, a notorious hacking program.

Best in the world via collective action.

THESIS

Why should we care?

Finite natural resources, (theoretically) infinite human potential.

} development model:

Build a sustainable economy, that efficiently leverages local talent, to produce world-class competitive value, in a manner that enhances the country brand.

Software is eating Romania.6.7% of the economy in 2015, growing at 10%+ per year.

65% of the economy in 25 years, 30B euro per year.

Source: ANIS “Software and IT Services in Romania” 2015.

} Cultural Transmission = Entertainment

Source: SuperData Global Games Market Report May 2015.

Romania = $126M, ranked #47

Games are aggregators of art forms + high tech.

Traditional Art Cinema Music Performance Writing

Daniel Dociu Radu Jude Silent Strike Alina Cojocaru Mircea Cărtărescu

Games will be the leading form of cultural transmission of the XXI Century.

Poli Sci @ UCLAActivision

Electronic ArtsDisney

Samsung

Mihai

History

Moisil

The Mainframes

1957: CIFA-1 @ Atomic Physics Institute in Bucharest, by Victor Toma

1962: MECIPT-1 @ Polytechnic University of Timisoara, by IosifKaufmann & Wilhelm Loewenfeld

1963: DACICC @ Computing Institute of Cluj, by TiberiuPopoviciu

The Mainframes

1957: CIFA-1 @ Atomic Physics Institute in Bucharest, by Victor Toma

1962: MECIPT-1 @ Polytechnic University of Timisoara, by IosifKaufmann & Wilhelm Loewenfeld

1963: DACICC @ Computing Institute of Cluj, by TiberiuPopoviciu

The Microcomputers

1967: Computing Technology Institute (ITC) founded in Bucharest

1970: Felix C-256 released, based on the French IRIS 50 computer, further inspired from the IBM System/360

1974: First Romanian-made microcomputer released, Independent-100

The First Romanian Game

1976: The Felix - Şah chess game was

developed for Felix C-256 by Viorel Darie at

ITC in Bucharest.

1984: A multiplayer chess game was

organized between an I-100 terminal at

Casa Scânteii, controlled by Octavian Paler,

connected via modem to a Felix C-256 at

ITC Bucharest running an improved version

of Felix - Şah called Felix 64.

1980s: (Pirated) Games

Sinclair Spectrum ZX

Электроника 302

Commodore 64

HC 85

1990s: The Pioneers

1991 – Ubisoft Romania founded, led by LaurentiuRusu (1991-2001), with support from Andrei Lopata. Currently 1,200 staff, led by Sebastien Delen (1998-now).1994 – AMC founded, starting in games dev in 1998. Led by Cristina Neamtu, specializes in art production since 2000, currently 100 staff. 1995 – Activ Pub founded, releases Rival Realms in 1998, published by Digital Interactive (UK) and Titus Software (ROW) 1996 – Game Over magazine launched (16 issues)1997 – Level magazine launched (active until 2013, afterwards morphed into NIVELUL2)1998 – FUN labs, led by Adrian Filippini, currently 30 staff1999 – Nemira attempts to develop an RTS called “Zamolxis”, led by Andrei Fantana

1990s: The Pioneers

1991 – Ubisoft Romania founded, led by LaurentiuRusu (1991-2001), with support from Andrei Lopata. Currently 1,200 staff, led by Sebastien Delen (1998-now).1994 – AMC founded, starting in games dev in 1998. Led by Cristina Neamtu, specializes in art production since 2000, currently 100 staff. 1995 – Activ Pub founded, releases Rival Realms in 1998, published by Digital Interactive (UK) and Titus Software (ROW) 1996 – Game Over magazine launched (16 issues)1997 – Level magazine launched (active until 2013, afterwards morphed into NIVELUL2)1998 – FUN labs, led by Adrian Filippini, currently 30 staff1999 – Nemira attempts to develop an RTS called “Zamolxis”, led by Andrei Fantana

1990s: The Pioneers

1991 – Ubisoft Romania founded, led by LaurentiuRusu (1991-2001), with support from Andrei Lopata. Currently 1,200 staff, led by Sebastien Delen (1998-now).1994 – AMC founded, starting in games dev in 1998. Led by Cristina Neamtu, specializes in art production since 2000, currently 100 staff. 1995 – Activ Pub founded, releases Rival Realms in 1998, published by Digital Interactive (UK) and Titus Software (ROW) 1996 – Game Over magazine launched (16 issues)1997 – Level magazine launched (active until 2013, afterwards morphed into NIVELUL2)1998 – FUN labs, led by Adrian Filippini, currently 30 staff1999 – Nemira attempts to develop an RTS called “Zamolxis”, led by Andrei Fantana

1990s: The Pioneers

1991 – Ubisoft Romania founded, led by LaurentiuRusu (1991-2001), with support from Andrei Lopata. Currently 1,200 staff, led by Sebastien Delen (1998-now).1994 – AMC founded, starting in games dev in 1998. Led by Cristina Neamtu, specializes in art production since 2000, currently 100 staff. 1995 – Activ Pub founded, releases Rival Realms in 1998, published by Digital Interactive (UK) and Titus Software (ROW) 1996 – Game Over magazine launched (16 issues)1997 – Level magazine launched (active until 2013, afterwards morphed into NIVELUL2)1998 – FUN labs, led by Adrian Filippini, currently 30 staff1999 – Nemira attempts to develop an RTS called “Zamolxis”, led by Andrei Fantana.

2000s: An Industry Emerges

1999 – Gameloft Romania founded, led by Andrei Lopata (1999-2002) and Paul Friciu (2002 - now). Currently has 1,100 staff located in Bucharest and Cluj.2002 – Exosyphen, led by Robert Muresan, went on to develop Hacker Evolution, number 4 best seller on Steam in 20102005 – Mobility, led by Costi Marcu, Iasi, developed Frozen Free Fall, published by Disney, top 50 grossing iOS game in 2014-2015, >$100M gross revenue2005 – JAMDAT Mobile Romania founded, acquired by EA in 2006 to become EA Romania, led by Alex Marinescu, Dan Teodorescu, Vlad Beu, currently 1,500 staff.2007 – Vivendi Games Mobile established, in 2008 becomes Namco Bandai, 150 staff, led by Andrei Lopata.

2000s: An Industry Emerges

1999 – Gameloft Romania founded, led by Andrei Lopata (1999-2002) and Paul Friciu (2002 - now). Currently has 1,100 staff located in Bucharest and Cluj.2002 – Exosyphen, led by Robert Muresan, went on to develop Hacker Evolution, number 4 best seller on Steam in 20102005 – Mobility, led by Costi Marcu, Iasi, developed Frozen Free Fall, published by Disney, top 50 grossing iOS game in 2014-2015, >$100M gross revenue.2005 – JAMDAT Mobile Romania founded, acquired by EA in 2006 to become EA Romania, led by Alex Marinescu, Dan Teodorescu, Vlad Beu, currently 1,500 staff.2007 – Vivendi Games Mobile established, in 2008 becomes Namco Bandai, 150 staff, led by Andrei Lopata.

2000s: An Industry Emerges

1999 – Gameloft Romania founded, led by Andrei Lopata (1999-2002) and Paul Friciu (2002 - now). Currently has 1,100 staff located in Bucharest and Cluj.2002 – Exosyphen, led by Robert Muresan, went on to develop Hacker Evolution, number 4 best seller on Steam in 20102005 – Mobility, led by Costi Marcu, Iasi, developed Frozen Free Fall, published by Disney, top 50 grossing iOS game in 2014-2015, >$100M gross revenue2005 – JAMDAT Mobile Romania founded, acquired by EA in 2006 to become EA Romania, led by Alex Marinescu, Dan Teodorescu, Vlad Beu, currently 1,500 staff.2007 – Vivendi Games Mobile established, in 2008 becomes Namco Bandai, 150 staff, led by Andrei Lopata.

2010s: Dawn of the Indies

2011 – Atypical Games (formerly RevoSolutions), independent, led by Andrei Lopata, 34 staff. Releases Sky Gamblers in 2012, followed by Battle Supremacy in 2014. 2012 – MavenHut, independent, Bobby Voicu, Cristi Badea (RockYou franchise acquisition in 2015) 2013 – Amber, independent, 200 staff, led by Dragos Hancu.2015 – Carbon, first independent games incubator/accelerator in Romania, led by Catalin Butnariu.

Company Revenue

(USD) Staff Founding Year

Ubisoft $ 36,656,699 1220 1991

Electronic Arts Romania $ 33,322,782 440 2005

Gameloft Romania $ 25,699,488 1181 2004

King Games Studio $ 8,608,508 92 2013

Amber Studio $ 4,902,206 127 2013

Mobility $ 4,495,374 18 2005

Mavenhut $ 3,013,662 30 2012

Namco Bandai $ 2,069,564 56 2008

Atypical Games $ 2,011,279 34 1999

Fun Labs Romania $ 1,778,451 3 2013

Quantic Lab $ 884,795 22 2009

Killhouse Games $ 800,668 29 2007

eRepublik $ 690,031 6 2013

Idea Studios $ 634,468 7 2013

Green Horse Games $ 343,368 16 2007

BigBlue Studios $ 318,742 8 2011

WitchHut $ 302,819 12 2014

Mind Treat Studios $ 239,059 1 2012

Transylgamia $ 95,240 0 2013

Exosyphen Studios $ 71,651 0 2011

Phenomenon Games $ 49,251 1 2011

DAAATS Engineering $ 41,413 0 2012

Angry Mob Games $ 33,972 1 2011

Those Awsome Guys $ 17,846 0 2015

Deep Byte Studios $ 17,099 2 2007

2010s: Dawn of the Indies

2011 – Atypical Games (formerly RevoSolutions), independent, led by Andrei Lopata, 34 staff. Releases Sky Gamblers in 2012, followed by Battle Supremacy in 2014. 2012 – MavenHut, independent, Bobby Voicu, Cristi Badea (RockYou franchise acquisition in 2015) 2013 – Amber, independent, currently 200 staff, led by Dragos Hancu.2015 – Carbon, first independent games incubator/accelerator in Romania, led by Catalin Butnariu.

Top 25 Game Developers in Romania in 2015

Source: Romanian Ministry of Finance, 2015 Annual Report

Key Takeaways

Local games industry is still dominated by the presence of the multi-national giants: EA –Ubisoft – Gameloft, even as a bourgeoning indie scene is emerging.

Indie scene is threatened by another “Cambrian extinction” such as the one that occurred at the end of the 90s, when the first wave of enthusiasts disappeared.

VC investment is absent. Angel investment possible, but rare.

Publishing and distribution is nearly absent, with one exception.

Education system not producing industry talent. Key skills missing in Romania. Multi-nationals only partially incentivized to locate high-skills jobs in the local market: Canada vs. Romania (AAA award winning multi-year franchises vs. some product attempts + mostly support work).

Local economic conditions do not allow competition against the global elites – and – labor costs are increasing, while support for game developers is largely inexistent.

Massive opportunity: deep reservoir of talent, cultural fit. / But the fight is unfair.

Established games industry locations (US, UK, Japan, China, France, Germany) benefit from the presence of an entrepreneurial ecosystem.

30+ years of games uninterrupted, market-supported industry evolution.

A network of universities churning out specialized talent every year + R&D labs, incubators, accelerators, dev community.

Vibrant private equity / capital investment + angels, mentors, peer networks, specialized banking/legal/accounting service providers, corporate supporters.

State subsidies.

Future

STATE INCENTIVES

INCENTIVE ECONOMIC BENEFITS

Cash equivalent: supports company consolidation, lowering operating expenses, global competitiveness.

Profit maximization: encourages local revenue recognition, may generate increased investment.

Cash funding: encourages entrepreneurship, fundamental research.

EXPLANATION

Receive a tax credit for the cost of labor, most often redeemable against cash at 85%+ of value.

Reduce tax burden by subtracting qualified R&D expenses from tax owed.

Non-reimbursable, direct cash funding.

ECONOMIC FIT TO ROMANIA

Great: State does not pick winners, encourages both small and large company growth.

Good: requires local companies that produce large taxable revenues.

Poor: State picks winners.

Encourages salary inflation, may reduce operating expenses.

Labor tax reduction. Already deployed, relatively rare measure internationally (only 4 countries in the Deloitte study*).

Tax Credit For Development

R&D Super Deduction

R&D Cash Grants

Partial Wage Tax Exemption

Source: Deloitte, 2014 Global Survey of R&D Tax Incentives* Russia, Hungary, Belgium, Netherlands.

Fiscal Tactics for Growth

0% 20% 40% 60% 80% 100% 120%

RomaniaUK

JapanBelgiumIrelandFrance

USAAustraliaCanada

ItalyKorea

MalaysiaSingapore

Source: Deloitte, 2014 Global Survey of R&D Tax Incentives

TAX CREDIT FOR GAME DEVELOPMENT COST

0% 50% 100% 150% 200% 250% 300% 350%

RomaniaPolandChina

RussiaNetherlands

BrazilCzech…

HungaryIndia

MalaysiaUK

CroatiaLithuania

Singapore

Source: Deloitte, 2014 Global Survey of R&D Tax Incentives

R&D SUPER DEDUCTION

0% 10% 20% 30% 40% 50% 60% 70% 80%

Romania

Israel

UK

Germany

Poland

Mexico

R&D CASH GRANTS (% OF BUDGET)

Source: Deloitte, 2014 Global Survey of R&D Tax Incentives

Case Study 1: Montreal, Quebec

37.5% labor cost credit for video game development (inspiring other Canadian provinces: Ontario 40%, British Columbia 17.5%, Nova Scotia 50%)20% labor cost credit for film production.Loans to cover 100% of anticipated credit, enhancing liquidity. $117M earmarked in Quebec budget in 2011.

10x increase in the number of people employed in the games industry since 2002. 5,400 industry-trained students graduate universities every year.230 companies in 2016, fifth largest video game center in the world. Major studios: Ubisoft (established in 1997), EA, Square Enix (Eidos), Warner, Activision (Beenox)Multimedia side effect: studios specializing in technical and post-production services.

Case Study 2: Singapore

Peerless incentives to jump start an economic sector that was entirely absent 10 years ago:100% labor costs tax credit, up to 3 years200% R&D superdeduction.

Games, animation, online media growing at an annual growth rate of 26%.Companies in this field contributed $1.5B to the economy, employed 11K staff.

Major studios: Tecmo-Koei, Electronic Arts, Ubisof, Bandai Namco.Universities: DigiPen, MIT GambitConference: GameStart (17K attendees)Incubator: Games Solution Center

Lobby for establishing a “tax credit for game development”. Organize the multi-nationals, demand action from management.

Join RGDA, ensure government action is a platform priority. Expect results.

Support the parties willing to insert the “tax credit for games development” into their platform, the candidates willing to make industry growth a focal point.

Get the word out. Social media, blogs, call your journalist friends to regularly report on the state of the industry.

Collective Action