|The state hopes enough small businesses take advantage of generous digital media tax credits to reach the critical mass needed to lure larger companies.|
A May 25 news conference to welcome BitRaider to the Louisiana Technology Park was attended by Gov. Bobby Jindal, Mayor Kip Holden and Baton Rouge Area Chamber President/CEO Adam Knapp.
Jindal says the digital distributor of video games will provide "more opportunities for our children to find high-paying jobs right here in Louisiana." Holden calls BitRaider's move from Jacksonville, Fla., "a huge win for our region." And Knapp says the company helps "provide legitimacy to our region's position in the interactive media world."
In other words, there was a lot of hype for a small company that the state says will create 22 jobs and invest $450,000.
But economic development officials are trying to build something. Traditional industries, like farming and chemical manufacturing, likely will be a huge part of the economy for years to come, even if they aren't expected to grow very much. Digital media, on the other hand, is a fast-growing industry. Officials believe the state has a window of opportunity to become one of the leaders, and they hope generous incentives will help them get there.
"For Baton Rouge, it's great that you guys are out whale hunting," BitRaider founder/CEO Royal O'Brien says, referring to the news conference at which Jindal also discussed the local expansion of industry giant EA Sports.
"But when you're doing sales, you don't rely on the absolute biggest customers to be your bread and butter to keep you alive. You get a lot of smaller sales done, and they become your sustaining factors while the other ones become your major profitability centers."
Major studios would be nice, but a proliferation of small companies can help develop the workforce and create a sense of critical mass, officials hope, which in turn might tempt some of the big fish.
Louisiana first implemented a digital media tax credit in 2005. BitRaider would not have been eligible then, Jindal says, as the program initially focused solely on interactive media, like video games. Bit-Raider doesn't make games, but its patented technology allows online users to play one part of a game while other parts are still downloading, which helps game developers attract and retain customers.
"It makes them a better instrument," he says. "It makes it a lot easier for you to be able to convert them as you see fit."
Financial incentives aren't everything, however; other states and Canadian provinces have their own programs. Holden's persistence also helped convince BitRaider to move here.
"We basically said no for three years, because we weren't ready," O'Brien says, adding that relationships are important in navigating the business.
O'Brien and Pellegrin already knew each other, and it was Pellegrin who first connected O'Brien with local officials. O'Brien speaks highly of programs going on at local schools and universities, and plans on getting involved in helping teachers understand what the industry needs. He says he's very confident he can grow his workforce in Baton Rouge.
THE DIGITAL AGE
Details of Louisiana's Digital Interactive Media incentive program:
• Projects are awarded a 25% tax credit on qualified expenses paid to a Louisiana entity, plus an additional 10% on labor costs paid to Louisiana residents. A cost report by a CPA is required. • Projects that create software products built for commercial sale, as opposed to purely internal use, are eligible. • Credits can be sold or used against the holder's state tax liability for up to 10 years after issuance. • There is no minimum spending requirement, nor is there a cap on the amount of tax credits a company can earn. • Redemption of credits awarded through this program cost the state $421,500 in 2009, according to The BaxStarr Consulting Group. For more information, visit louisianaeconomicdevelopment.com.
Digital media and software development is "the single most exciting growth industry for our state," LED Secretary Stephen Moret says, adding that "probably a couple dozen companies" are considering significant projects in the state. Jindal says digital media has the potential to create 11,000 to 23,000 direct jobs over the next 20 years.
A lot of businesses would love to have access to the sweet incentives Bit-Raider is getting. But Moret says cultivating growth industries like digital media can help Louisiana achieve consistent job growth over the long term.
"It takes diversification to stabilize the local economy," O'Brien says. "The only way you're going to get that diversification is through incentives, and if you don't do that, it's a downward spiral."
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