The Digital Revolution: Industry offers tax credits to help grow in Louisiana

This article was originally written by SKIP DESCANT of The Advocate. Published: Apr 10, 2011.

Sure, high school football stars eyeing LSU’s legendary athletic program can make the trip to campus and get the razzle-dazzle recruitment tour — and many of them will.

But the gates of LSU don’t have to be their first intro to LSU football or its head coach, Les Miles.

There’s an app for that.

The free Miles Method app — available through iTunes — works on the iPhone, iPod touch and iPad. It was first released in July last year, but only for the iPad.  In March the app became available for iPhone users.

The Miles Method app, with its photos, stats and insight into Miles’ own philosophy, was designed as a recruitment tool for new players by the New Orleans-based Touch Studios.  It is but one example of the growth of what the state’s top economic development gurus see as Louisiana’s entry into the expanding “digital media” industry.

“This has the potential to double in size in the next two years,” Stephen Moret, secretary for Louisiana Economic Development, told a roomful of LSU business students earlier this year.

A 2010 Baton Rouge Area Chamber employment study concluded approximately 3,100 people work in digital media within a one-hour drive of Baton Rouge.  Between 2001 and 2007, employment at Louisiana digital media firms — which can include smartphone app and video game designers, software developers and more — grew 9 percent, according to a 2009 report by the firm Economics Research Associates.  The firm analyzes the various programs managed by Louisiana Entertainment, the arm of the Department of Economic Development responsible for growing the state’s film, music, theatre and digital media industries.  ERA analyzed data through 2007.

To grow the industry, the state offers tax credits, which can be applied toward the company’s own state tax burden or sold on the open market to other companies looking to reduce their own tax bill. In 2009, the state law outlining how much a Louisiana digital media company could earn was modified to increase the amount earned from 20 percent to 25 percent of the base in-state investment, and another 10 percent if those production costs include Louisiana payroll.  And there is no ceiling on how much those production costs rise to.

By the end of 2010, the state had certified $5.1 million in tax credits, according to LED data.  Most of those credits came forward in the last two years because as of 2008, Louisiana digital media projects had only generated $548,300 in tax credits for four projects totaling some $2.7 million spent in Louisiana, according to the ERA report.

The promise of tax credits is a direct incentive for companies interested in doing work in the state because it essentially means that at least a third of a project’s production cost will come back to the firm, often functioning as a jumpstart to the needed funding on a new project like a video game or smart phone app, say industry insiders.

“We have a $1 million project — and that’s not the high end in our industry — you get 35 percent back, you’re talking about $300,000, just on that one project,” said Dane Caro, founder of Ecliptic Games, based in the Louisiana Technology Park in Baton Rouge. “And that’s huge. You know that that funding’s coming.”

“We’re pursuing products because we know we have this refund coming,” echoed Jamison Quave, co-founder and chief operating officer at Touch Studios. “Just knowing we’re getting that back is important.”

Those incentives are proving to work as a pretty big carrot. Since 2009, the state received digital media tax credit applications for 97 projects, according LED data. The state only received 22 applications from 2005 through 2008.  The number of applications is a good indication of the meteoric growth of the industry in Louisiana, Moret said.

“The industry is growing nationally, but it’s not growing near at the growth rate as we’re seeing here in Louisiana,” he added. “In the last two years there’s been exponential growth.”

“Louisiana has the potential to become the next ‘Silicon Bayou,’” said Stephen David Beck, director of the Arts, Visualization, Advanced Technologies and Research initiative at LSU, known as AVATAR, a multi-disciplinary minor in digital media that brings together art, technology and computation. The AVATAR Initiative was launched in 2008 by LSU’s Center for Computation and Technology.

Ultimately, the state’s mission through its numerous business incentive programs is to grow jobs and investment in the state. It’s not entirely clear if the more lucrative digital media incentives are translating into to more jobs. Because during the depths of the recession between 2007 and 2009, the state lost more than 300 jobs in two key digital media areas — software publishers and custom computer programming services — according to data collected by the U.S. Bureau of Labor Statistics. This 7.7 percent reduction came after six years of steady growth.

These numbers should turn around as more projects get moving, Moret noted, adding it takes time for an industry’s growth to show up in actual BLS data. Also, not all of Louisiana’s digital media jobs are categorized as software publishers and custom computer programming services, which can slightly skew the statistics.

However, for companies looking to set up shop in Baton Rouge, there doesn’t seem to be a shortage of workers — given that the industry here is still mostly in its infancy.

“I mean myself, I probably know about 30 individuals that are currently unemployed, and that have professional skill sets,” Caro, of Ecliptic Games, said recently. “And I use them all the time for contract work, and we try to pull together. And a lot of people here are dedicated to stay here. So that’s one of the big things. They have family here. So whatever we can do to help, you know, keep each other afloat.”

One of the newest faces to surface in the local digital media crowd is Scorch Digital Studios, soon to locate in the Louisiana Technology Park. Scorch Studios plans to position itself as a contract-worker firm capable of handling jobs in digital graphics or gaming platforms for sites like Facebook. Both its CEO Jeff Pellegrin and chief technology officer Jason Tate are Louisiana locals with aims of being part of the state’s seedling digital media industry.

“I definitely considered going out of state,” said Tate, 27, who grew up in Thibodeaux and received his bachelor’s and master’s degrees from LSU.

“Really, what we are, are digital artists combined with engineers, looking at developing interactive digital software,” Tate said, offering some insight into a career path that can seem dizzyingly distant for people over age 50, but dazzling and alluring to many younger technology and creative types.

Which may be why after only one year, the new minor at LSU in digital media — flying under the banner of the AVATAR Initiative — already has 42 students. The Baton Rouge Community College has its Entertainment Technologies program, a two-year associate degree to prepare students for the music, film and video game industries.

Despite the response by local higher learning institutions, digital media firms say finding the right worker can still sometimes be a challenge.

“What’s happening, is there’s not a whole lot of iPhone app developers,” said Quave, from Touch Studios. “So I guess the answer is, yes, there is a problem with certain technologies.

“There are absolutely smart, talented people here, but we have to train them for each specialized task,” he added.

“But of course you have to understand, iPhone apps are relatively new,” Quave continued. “We’ve actually trained some of our iPhone people already and we have more coming. But it’s hard on your cash flow when you’re training.”

“There are not a lot of experienced people locally in our field so our seniors have come from elsewhere,” said Mark Greenshields, CEO of Firebrand Games, a Scotland-based video game maker to locate in Baton Rouge. The company has eight employees at its Baton Rouge location. “But there is a great enthusiasm, and in most cases a desire to grow.”

The students in the AVATAR program come from disciplines as varied as music, art, engineering and business,” said Beck, it’s director. The program looks to the digital media industry for curriculum direction, with the aim to grow students who are “really good at what they do,” said Beck, noting that may mean video graphics or web programming. But also, an ability to work well in teams, and have a working understanding of other disciplines.

In short order, he seemed to be describing a 21st economy worker: “You have to know a lot about everything. But we’re not trying to create jacks-of-all-trades,” said Beck. “It’s more important for us to teach our students how to teach themselves in this future economy.”