In practice, there are pitfalls on both sides.
From a company's perspective, interns aren't as cheap as you'd think. What you aren't paying them in wages, you're paying for in time: your average intern needs a bit more hand-holding (or as we call it, "management") than your average full-time employee, which means they are sucking time away from your more productive full-timers. If a $7/hour intern takes up an hour a day of your $80/hour programmer's time... well, you can do the math, but it's a bit more than it looks like on paper. And what do you get in exchange? Game companies don't typically want cheap employees, they want productive employees, and someone who (by definition) has no practical experience is not necessarily going to be that productive. Yet.
From a student's perspective, it's not all sunshine and roses either. Yes, you're working "at a game company" but what are you actually doing there? You are probably not working on anything mission-critical. Maybe you're doing QA, where you at least can't do any real damage if you suck at your job, but if your end goal is to be (say) a level designer then you're not really learning much about how to, you know, design levels. Maybe you're given menial tasks like taking notes in meetings, making copies, and picking up food deliveries. Or maybe you're given a real, honest-to-goodness game development task in your preferred field, and at that point you should be wondering why the company is getting away with paying you so much less than the other people who are doing the same work in the cubicles next to you.
This subject has come up a bit lately because of the somewhat common game industry practice of unpaid internships. There are some problems here:
- In some cases, they are actually illegal. The criteria vary from place to place, so companies doing this would do well to consult a lawyer.
- Even if it is technically legal in one particular case, there is the potential for others to see the practice as exploitative.
This is particularly relevant for schools that have game dev programs, as most of them encourage their students to get internships, some schools actually require that students have a documented internship for graduation, and others offer course credit for internships (paid or not). In particular, this means schools need to:
- Do some due diligence. Be aware of the labor laws in your area. I don't know if a school could get in legal trouble for deliberately steering its students towards illegal work, but I wouldn't want to chance it.
- Keep up with local companies. Know which ones offer internships. If any of them offer internships that are technically illegal, it would be a great opportunity to gently notify them of this fact (for their benefit, so they can protect themselves -- it's probably just a matter of the studio not being aware).
- Educate your Career Center, professors and students. For students especially, make sure they understand the issues at stake as they choose a place to work at.