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December 2016 Community Attributes Inc. tells data-rich stories about communities that are important to decision makers. Sponsored by President & CEO Chris Mefford OneRedmond City of Redmond Analysts City of Bellevue Spencer Cohen, PhD Economic Development Council of Seattle & King County Michaela Jellicoe City of Kirkland Alexandra Streamer Eric Viola Design Maureen McLennon Community Attributes Inc. 1411 Fourth Ave, Suite 1401 Seattle, Washington 98101 www.communityattributes.com EXECUTIVE SUMMARY In 2007, Community Attributes Inc. (CAI) was Cluster support industries include a distribution commissioned to conduct an Interactive Media network to deliver games to the consumer, professional Industry Assessment. The purpose of the original study services such as banking, financing, real estate, venture was to provide a knowledge foundation that could be capital, legal advising and information and used to grow businesses and economic activity within communications technology (ICT) infrastructure. Most the interactive media cluster throughout Washington importantly, the cluster is supported by a talented state. CAI updated this study in 2012, and again in workforce and the education and research institutions 2014 to assess the changes that had occurred over time. that back that workforce. In 2016 the Washington Interactive Network (WIN) commissioned an update to the previously conducted The cluster is comprised of an estimated 423 studies to assess the cluster’s growth in jobs and companies, including more than 40 companies working business, as well as new trends in the industry with a in the burgeoning virtual and augmented reality field. particular focus on the growing Virtual Reality (VR) Washington’s interactive media firms employed an and Augmented Reality (AR) segments of the cluster. estimated 20,800 people working in interactive media, This study incorporates quantitative and qualitative both at large multi-purpose firms and at small to mid- analysis of cluster strengths and discusses recent trends size firms. An additional 2,400 freelancers work in and future direction of the industry. interactive media as well. The interactive media cluster relies on a robust support In 2015, Washington’s interactive media cluster boasted system to fuel its growth, including devices, content revenues of $21.4 billion. A wide range of firms and communication systems. participating within the cluster contribute to total revenue, including Microsoft, Amazon, Bungie, and Devices include mobile, game consoles, laptops, Valve. desktops, television platforms and a burgeoning technology market of virtual and augmented The total economic impacts of the cluster throughout reality equipment Washington’s economy are significant. The cluster Content includes entertainment, education and supports a total of 94,200 jobs through direct, indirect training applications and induced impacts. Overall, the cluster supports almost $28 billion in revenue throughout the state and Communications networks, such as social media $7.6 billion in labor income. outlets, are used to share and promote all forms of media Washington’s interactive media cluster is supported by a strong backbone of talent throughout the region’s Washington Interactive Network Page ii Interactive Media Industry Assessment December 2016 ICT industry, strengthening growth and innovation. As Another important industry trend continues to be the a whole Seattle ranks fourth in terms of employment free-to-play (F2P) market. This market continues to within interactive media-related occupations, with comprise a major portion of the monetization strategies 107,000 people employed in these occupations. of the game market. With F2P being a difficult model Additionally, Seattle ranks third in the country in terms to sustain and grow a company, this market is now of average wages among interactive media-related seeing increased diversification in strategies. occupations at almost $109,000 annually. Stakeholders also emphasized the importance of talent for the continued success of the industry. Within an Experts mentioned that AAA game development, or increasingly competitive regional market for talent, this the development of high quality games with large is a continuing challenge for interactive media development and promotion budgets, is expected to companies. see increased budgets, but a slight decrease in the number of projects across the industry. Access to One challenge mentioned by industry experts is tax capital is extremely important for these developers and policy. Stakeholders expressed that favorable tax needs to be improved. policies are essential for the success of the industry. Among the policy needs mentioned were policies that Interactive media in Washington continues to evolve promote the success of small and mid-size firms, as and stakeholders interviewed mentioned augmented well as policies that promote the freelance market, such reality (AR) and virtual reality (VR) as one of the as health benefits and tax incentives. Stakeholders biggest trends within the industry. The development of mentioned the challenges associated with paying taxes AR/VR content is bringing in a wider range of talent before they earn revenues on the product they are into the cluster, such as cinematographers, actors and developing. They mentioned that an environment that more, and the talent required for this is indicative of promotes investment to develop new intellectual the proliferation of interactive media into the property and products that also allows time for entertainment industry overall. development and release of a project is important to their success. This AR/VR subsector has seen increased venture capital and fundraising successes and experts predict that it will continue to attract investment dollars. Investment is an important concern among AR and VR industry experts. Although funding sources have diversified, access to venture capital is still an important factor in the success of the AR and VR industry. Washington Interactive Network Page iii Interactive Media Industry Assessment December 2016 CONTENTS Introduction .................................................................................. 1 Interactive Media Cluster Overview ............................................ 3 Interactive Media Trends ............................................................. 9 Augmented and Virtual Reality in Washington ........................ 12 Measures and Impacts ................................................................ 16 Appendices .................................................................................. 26 Washington Interactive Network Page iv Interactive Media Industry Assessment December 2016 Blank. Washington Interactive Network Page v Interactive Media Industry Assessment December 2016 INTRODUCTION Background and Purpose includes updates and refinement to previous analysis, highlights trends and qualitative findings from In 2007, Community Attributes Inc. (CAI) conducted a interviews with industry leaders. This study also cluster study of the interactive media industry for the provides a qualitative assessment of the burgeoning Washington Interactive Network, then a program augmented and virtual reality subsector in the housed under enterpriseSeattle (now known as the interactive media cluster. Economic Development Council of Seattle and King County). This initial study highlighted the importance The Washington Interactive Network (WIN) is a of the cluster to the regional and state economy. The nonprofit organization under the umbrella of study identified rapidly growing jobs, high wages and OneRedmond whose mission is to advance, cultivate, exciting career opportunities. The report also identified and grow the interactive media industry in Washington that the most significant challenge to the industry at the state. WIN works closely with interactive media time was attracting talent to support the growth of the companies, educational institutions and the interactive Industry. media workforce to foster and promote the region as a global leader in interactive media development and In 2012, an updated assessment of the interactive intellectual property creation. media cluster was needed to track the growth of the industry and was funded by a federal grant for the Methods Washington Interactive Media Accelerator run by the Washington Interactive Network. That study gauged This report relies on secondary data analysis and economic activity connected to interactive media in primary data collection. Secondary data analysis draws Seattle and statewide. from data compiled by public agencies including the Washington State Employment Security Department Funded by the same federal grant, the Washington and Department of Revenue, the U.S. Bureau of Interactive Network commissioned an update to the Economic Analysis and additional publicly available previous studies in 2014. The focus of the 2014 study data. highlighted the rapid and continuing evolution of the industry and discussed opportunities to support the Companies included in the analysis self-identified as economic development of the industry. interactive media companies through participation in WIN. Revenue and employment data were collected In 2016, the Washington Interactive Network using participating businesses’ Unique Business commissioned CAI to provide an update to the three Identifiers (UBIs). previous Interactive Media Assessments. This study Washington Interactive Network Page 1 Interactive Media Industry
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