BDO
and Entertainment
Media
L O A D I N G
Gaming Credentials
BDO Media and Entertainment
contents
Assurance and Compliance
Tax
Corporate Finance
International
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Introduction
When 12 million people tuned in to watch Travis Scott perform on Fortnite it became clear that gaming, the growth industry of the last decade, has become a force to be reckoned with.
Gaming and esports are going to remain a cornerstone of our daily lives, providing a multitude of opportunities for companies in the space. At BDO, with our sector expertise, we can help on every step of your journey. As one of the largest accountancy and business advisory firms in the UK and the world, BDO has the experience and knowledge to deal with every challenge and opportunity that you may have. Whether it is audit, tax, advisory or outsourcing, we have the expertise in our network of passionate and dedicated people.
PETER HEMINGTON
IDEAS | PEOPLE | TRUST
NATIONAL HEAD OF M&A
The development of smartphones has taken gaming from a niche pastime enjoyed by a small minority to a staple of our daily lives and the rise of live streaming platforms like YouTube and Twitch has led to the birth of a whole new industry in esports. In 2019 the global gaming market was valued at $152bn, having cemented its place as a premium form of entertainment. The success of the Call of Duty franchise, which outstripped the combined box office revenue of the Marvel Cinematic Universe, the most successful film franchise in history, clearly indicates that this is now a mainstream industry. Gaming’s newest offshoot, esports, allows gamers to compete in official tournaments for their preferred games. What was once a highly-specialised industry for dedicated gamers has rapidly become mainstream. Amazon’s $1bn acquisition of Twitch in 2014, followed by Activision’s acquisition of Major League Gaming for $46m in 2016 provided the signal that this was an industry on the rise. Having been valued at $252m in 2015, esports was worth $906m in 2019 and is set to surpass a value of $1bn this year. While it remains to be seen what the world will look like post COVID-19, gaming and esports look set to go from strength to strength. The global audience for esports is expected to grow to $560m by 2021 and Global Web Index has reported that the 77% of millennials who have increased their time spent gaming during the COVID-19 lockdown intend to continue playing once the pandemic is over.
What is the best-selling video game in history?
What is the biggest prize pot in esports history?
$3m - 16 year old, Kyle ‘Bunga’ Giersdorf, took the top prize at the 2019 Fortnite World Cup
What is the best-selling games console of all time?
Playstation 2 – Released in 2000, Sony has sold more than 155m consoles
What is the most popular gaming device?
Mobile – 51% of games are played on smartphones
"As a fast-growing company that needs to focus on making games, accounting is something we need to have confidence in – and BDO has provided that."
MISHA LYALIN | CEO, Zeptolab, Global gaming company and developer of Cut The Rope
Minecraft
click here
uk CREDENTIALS
Online video game retailer, publisher and digital partner
Developer of mobile games
ZEPTOLAB
Award-winning online game developer
ZENIMAX
Developer and publisher of mobile games
KWALEE
Developer of freemium mobile games
GLU MOBILE
GREEN MAN GAMING
BDO’s leading audit and compliance practice works with clients such as Zeptolab the creator of Cut The Rope, and Kwalee the hyper-casual video game developer and publisher.
MARK AYRES
Audit Partner, Technology and Media
+44 (0) 7903 891 450 mark.ayres@bdo.co.uk
Ian McBane
Partner, Outsourcing
+44 (0) 7932 337 912 ian.mcbane@bdo.co.uk
Ruth Ireland
Head of Risk and Advisory Services
+44 (0) 7545 779 124 ruth.ireland@bdo.co.uk
HOW DO I MANAGE MY GROWTH PHASE AND GET MYSELF INVESTOR READY?
Faster set-up with ready-made systems and processes Fewer UK administrative employees or offices to manage Access to broader skill base across all services A more cost effective option than setting up or maintaining an in-house UK finance team An expert team that will grow with your business
A sound understanding of the industry issues combined with robust audit expertise, means we can bring the key insights to the board room that help you run your business. Giving you the peace of mind that your financial records are investor ready. We understand the intricacies and nature of investor backed business and the competing interests of stakeholders seen through the context of the audit; and the need to drive growth on the journey to maximise value on exit. The international landscape of gaming is becoming more and more important and your choice of auditor needs to reflect this. We use technology to enhance the quality and efficiency of our audits and also our interactions with our clients.
As you scale your business your focus will be on attracting and retaining customers, international expansion, building high performance teams and developing your technology at breakneck speed. With BDO’s support we can ensure your time is free to focus on growing and scaling up, accessing finance, managing and complying with ever increasing regulations and maintaining the culture that supported your success in the first place.
OUTSOURCING BENEFITS
Audit benefits
What was the most downloaded iPhone game in 2019?
Nintendo’s Mario Kart Tour narrowly beat Call of Duty: Mobile
HOW DO I maximise cash income?
Creative Tax Reliefs allow for up to 20% of qualifying expenditure to be reclaimed on the production of games certified as culturally British by the BFI.
Video Game Tax Relief (VGTR) allows for 25% of qualifying spend to be reclaimed on the production of video games developed in the UK or the European Economic Area. Qualifying spend being designing, testing or producing the game.
Multiplayer mobile games developer
PIXION GAMES
Publishing arm of Splash Damage
WARCHEST
Video game developer focusing on first person shooters
SPLASH DAMAGE
Media and technology group that includes Forge Reply a video game and VR experience developer
REPLY GROUP
Developer of the game Everywhere
BARB
Mobile games developer who also make VR Experiences
USTWO GAMES
Games developer across mobile, computer and console
NDEMIC CREATIONS
AUTODESK
Developer of game design software
BDO’s leading audit and compliance practice works with clients such as Zeptolab the creator of Cut The Rope, and hyper-casual developer Kwalee.
BDO’s Innovation and Technology team are specialists in advising on commercial structures that enable gaming businesses to make efficient use of the three main creative tax reliefs, R&D, VGTR and Patent Box.
+44 (0) 7876 132 175 carrie.rutland@bdo.co.uk
TAX RELIEFS CAN HELP YOUR CASH FLOW
Video Games Tax Relief (VGTR) allows enhanced tax relief in respect of expenditure on the production of games certified as culturally British by the British Film Institute.
VGTR allows for a repayable credit (up to 25% of enhanceable expenditure) on the production of video games. Enhanceable expenditure generally includes costs incurred on designing, producing and testing the game, when incurred in the European Economic Area.
R&D Expenditure Credits (for large companies) can be EBITDA enhancing, with an ‘above the line’ income recognised at 13% of the qualifying expenditure.
Patent Box relief can help reduce the effective corporation tax rate to 10% on profits made from patented technology.
Chris Bond
Partner
+44 (0) 7792 018 593 chris.bond@bdo.co.uk
gareth hill
Director
+44 (0) 7971 306 479 gareth.hill@bdo.co.uk
Eyad Hamouieh
+44 (0) 7384 237 956 eyad.hamouieh@bdo.co.uk
carrie rutland
george ononuju
Manager
+44 (0) 7974 230 783 george.ononuju@bdo.co.uk
Fletcher Adamowicz
+44 (0) 7870 269 281 fletcher.adamowicz@bdo.co.uk
Ross Robertson
+44 (0) 7900 818 785 ross.robertson@bdo.co.uk
HOW DO I ACCESS CAPITAL, GROW AND CREATE VALUE?
Seed or Series A-E funding allows companies at the start of their journey to partner with experts, such as venture capital investors, for a small equity share. This can provide the funds and expertise to support the next stage of growth.
Creative Tax Reliefs allow for up to 20% of qualifying expenditure to be reclaimed on the production of games certified as culturally British by the BFI. Video Game Tax Relief (VGTR) allows for 25% of qualifying spend to be reclaimed on the production of video games developed in the UK r the European Economic Area. Qualifying spend being designing, testing or producing the game. Research and Development Relief (R&D) allows for SME’s to deduct an additional 130% of qualifying expenditure from annual profits on top of the original 100% deduction.Patent Box Relief lowers the corporation tax rate to 10% on profits made from patented inventions.As VGTR and R&D can’t be claimed in the same company BDO’s experts can help structure your companies to maximise the available reliefs
Video Game Tax Relief (VGTR) allows for 25% of qualifying spend to be reclaimed on the production of video games developed in the UK or the European Economic Area. Qualifying spend being designing, testing or producing the game. Research and Development Relief (R&D) allows for SME’s to deduct an additional 130% of qualifying expenditure from annual profits on top of the original 100% deduction.Patent Box Relief lowers the corporation tax rate to 10% on profits made from patented inventions.As VGTR and R&D can’t be claimed in the same company BDO’s experts can help structure your companies to maximise the available reliefs
Patent Box Relief lowers the corporation tax rate to 10% on profits made from patented inventions.As VGTR and R&D can’t be claimed in the same company BDO’s experts can help structure your companies to maximise the available reliefs
Research and Development Relief (R&D) allows for SMEs to deduct an additional 130% of qualifying expenditure from annual profits on top of the original 100% deduction.
As VGTR and R&D can’t be claimed in the same company BDO’s experts can help structure your companies to maximise the available reliefs.
As the interaction between VGTR, R&D tax relief and the Patent Box can be complex, BDO’s experts can advise you on growing commercial group structures to meet your business objectives while using the available reliefs.
Creative services provider to the video games industry
KEYWORDS STUDIOS
Developer of computer vision and facial animation technology
CUBIC MOTION
CODEMASTERS
Our corporate finance team has a strong track record in the sector advising on various transactions spanning fundraisings, acquisitions, disposals, private equity investments and AIM IPO’s – both in the UK and Internationally.
National Head of M&A
+44 (0) 7785 308 245 peter.hemington@bdo.co.uk
GREG LEATHEM
M&A Senior Executive
+44 (0) 7890 556 764 greg.leathem@bdo.co.uk
VINOD PATEL
Transaction Services Director
+44 (0) 7800 682 482 vinod.patel@bdo.co.uk
ALEX NICOL
Transaction Services Associate Director
+44 (0) 7966 276 465 alex.nicol@bdo.co.uk
Debt financing allows companies access to funding without diluting equity and therefore maintaining control.
Disposals allow shareholders to be flexible with their future; share sales can allow a company to partner with private equity or to combine strengths with another corporate to take the company to new heights.
Taking a company public through an IPO and raising significant funds can support shareholder realisations and/or an acquisition and investment strategy; capital markets can provide funding for initial and subsequent liquidity events and ongoing value enhancement.
Acquisitions can enable companies to break into new markets by partnering with a company with proven expertise or to build on their existing offering and gain a more dominant position in their market.
Zenimax
Rebellion
Developer of games, comics, TV shows and film
What is the biggest acquisition in gaming history?
$8.6bn - Tencent acquired Supercell, creators of Clash of Clans, in 2016
Who owns Twitch?
Amazon acquired Twitch in 2014 for $1bn
Which UK based MMO sold during COVID-19?
Jagex Games Studio sold to Macarthur Fortune Holdings for $530m
Developer mobile and browser games IPO reporting accountant Hong Kong
FIRE ROCK HOLDINGS
Developer of role playing console based video games Japan
ME NIHON FALCOM CO
Online gaming company that provides applications for digital card games India
PASSION GAMING PVT
Chinese new media corporation with emphasis on mobile games development Hong Kong
V1 GROUP
Online game developer and publisher Hong Kong
GAMEONE GROUP
Mobile game developer Japan
POPPIN GAMES
IVY COMPTECH
Online and mobile gaming company in India, providing skill games for cash prizes India
PLAY GAMES 24X7
Developer of multiplayer online games and gaming mobile apps Hong Kong
NETDRAGON WEBSOFT
international CREDENTIALS
JOHNSON KONG
Managing Director, Hong Kong
johnsonkong@bdo.com.hk
SCOTT RODIE
Global Head of TMT, Assurance, Canada
srodie@bdo.ca
ALVARO MARCO
Legal Partner and E-Sports Expert, Spain
alvaro.marco@bdo.es
BDO Global has advised the gaming industry around the world.
Ayoub Sunna
Partner, Technology Industry Lead, San Francisco, USA
asunna@bdo.com
Video game publisher for several franchises USA
Ubisoft
Creator, developer and publisher of MMSG’s USA
kabam
Mobile games developer USA
Netmarble
N3twork
Mobile games developer and publisher USA
Wildlife Studios
Technology partner for international gaming brands India
This publication has been carefully prepared, but it has been written in general terms and should be seen as containing broad statements only. This publication should not be used or relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained in this publication without obtaining specific professional advice. Please contact BDO LLP to discuss these matters in the context of your particular circumstances. BDO LLP, its partners, employees and agents do not accept or assume any responsibility or duty of care in respect of any use of or reliance on this publication, and will deny any liability for any loss arising from any action taken or not taken or decision made by anyone in reliance on this publication or any part of it. Any use of this publication or reliance on it for any purpose or in any context is therefore at your own risk, without any right of recourse against BDO LLP or any of its partners, employees or agents. BDO LLP, a UK limited liability partnership registered in England and Wales under number OC305127, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. A list of members' names is open to inspection at our registered office, 55 Baker Street, London W1U 7EU. BDO LLP is authorised and regulated by the Financial Conduct Authority to conduct investment business. BDO is the brand name of the BDO network and for each of the BDO member firms. BDO Northern Ireland, a partnership formed in and under the laws of Northern Ireland, is licensed to operate within the international BDO network of independent member firms. Copyright © August 2020 BDO LLP. All rights reserved. Published in the UK.
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