Special Report: Crossing borders, part one

Part one of a two-part in-depth report into how Canada is making games development work--providing an attractive haven for publishers looking to lower development costs.

by

The games industry is no longer a niche market. Top-selling games such as Halo 3, Grand Theft Auto: San Andreas, and The Sims franchise sell millions of copies, and worldwide the industry is currently estimated in excess of $30 billion. According to a report released earlier this year by PricewaterhouseCoopers, by 2011, the global gaming market will be worth $48.9 billion. The two biggest producers of games contributing to that figure are, not surprisingly, the US and Japan, but a new contender has come along to grab third place: Canada.

A view games developers are finding increasingly attractive?

The huge surge in growth in the games industry in Canada has recently seen the country surpass the UK to become the third-largest producer of games, nudging old Blighty into fourth place. Last year, Canada generated 13.2 percent of Western retail revenue in the sector, compared to 12.4 percent in the UK, according to a study by Games Investor Consulting.

International companies such as Electronic Arts, Koei, Capcom, and Ubisoft have set up bases in Canada, and recent games including Tom Clancy's Splinter Cell Chaos Theory, Rainbow Six Vegas, Assassin's Creed, and Need for Speed: Carbon have been developed there.

In February, UK publisher Eidos Interactive announced it would be opening a new studio in Montreal with Stephane Dastous at the helm. The studio is currently working on Deus Ex 3. Homegrown companies include Silicon Knights (Too Human), BioWare (Mass Effect), and Digital Extremes (Unreal Tournament series).

As of October 2007, according to an ESA Canada report titled Entertainment Software: The Industry in Canada, the country boasts 260 entertainment software companies--some with multiple studios--which employ approximately 9,000 people and bring in an estimated CA$1.5 billion to CA $2 billion ($1.5 billion to $2 billion). By comparison, UK Trade and Investment has pegged its local industry at £2 billion in retail ($4.1 billion), with 150 companies employing 8,000 people. Down under, Australia's gaming market totaled AUS$1 billion ($876 million) in 2006, with 40 game companies employing 700 people.

What can other countries do to keep up? Should the US be worried? Can the UK claw back into third place? And how can emerging markets such as Australia get a look in this increasingly competitive market?

WHAT CANADA OFFERS

Canada has used R&D credits and tax breaks to attract games companies, and its foresight seems to be paying off. Canada is made up of 10 separate provinces (and three territories), which operate much like the different states in America, and as such each province offers a different deal for the games industry. For example, in Ontario, combined federal and provincial tax credits can cut the cost of CA$100 to less than CA$44.

Tax credits include The Ontario Interactive Digital Media Tax Credit, which refunds 30 percent of the costs for labour, marketing, and distribution of games created in Ontario, and The Ontario Computer Animation and Special Effects Tax Credit. This refunds 20 percent of the labour costs for computer animation and special effects, and there is also The Sound Recording Tax Credit, which refunds 20 percent on production and marketing costs of sound recording.

Darius Basarab, senior business consultant for Ontario's Ministry of Economic Development and Trade, says that the help doesn't end there, though, and that aftercare was a big part of the Canadian deal. He said, "Companies can come to us and say 'I don't know where the lawyers are, where to set up my office, how to connect into the network,' and we help them with that. For instance, we connect companies with the universities here, so they can draw staff from there."

Darius Basarab, senior business consultant for Ontario's Ministry of Economic Development and Trade.

As to why Canada chose to invest in games, Basarab believes that the country has always been forward-thinking, and that the foundations for the system of tax breaks and R&D credits started around 30 years ago. Basarab explains, "Ontario is a route into Hollywood. It's called the Hollywood of the North. A lot of movies get filmed here because it's easy to make it look like New York or wherever, along with all the bonuses like the tax credits and the cheaper health care. Digital media was a natural next step."

R&D CREDITS AND TAX BREAKS: DIRTY WORDS?

Naturally, many game developers in other countries have been lobbying their respective governments to offer similar R&D credits and tax breaks in their own countries. However, so far, it seems that no one is willing to copy the Canadian model. Margaret Hodge, minister of state in the UK's department for culture, media, and sport, told industry executives at the Entertainment & Leisure Software Publishers Association annual general meeting, "While we are a member of the EU and this gives huge opportunities to industry, it also does mean restrictions on state aid. As I understand it at present, it is those restrictions which rule out the Canadian model."

Furthermore, Hodge told Channel 4 that instead of considering the model for the UK, the UK government was looking to challenge the legality of the Canadian tax-breaks system through the World Trade Organisation. She told the British TV company in an interview, "We're looking at what Canada has done. We're not sure that what they have done sticks by the WTO rules on competition and will have to think about challenging what they are doing if they are, in our lawyer's views, breaching those rules."

However, developers aren't convinced that taking the issue to the WTO is going to be of any help. David Braben, chairman of UK-based Frontier Developments, and codesigner of classic space trading game Elite, said, "This is not a solution--if for no other reason than it will take five to 10 years."

Andy Eades, development director at fellow UK studio Relentless Software, suggested that discussions with politicians about tax credits are often over as soon as they begin. "I've noticed that the government listens for something that fits with their own strategy," Eades said. "If they hear something that echoes their own thoughts, then they will listen. Otherwise there is no point in talking. I've gone into meetings where I've been told that I shouldn't bother talking about R&D tax credits because it's a no-go area. Well, thanks a bundle!"

FRANKLY, MY DEAR, WE DON'T GIVE A DAMN

Philip Oliver, CEO of Blitz Games, a UK developer founded in 1990 that currently employs over 200 people in its Leamington Spa office, thinks that the UK government is sympathetic, to a certain extent. He said, "I think they do take the video games industry seriously. My experience has been that individuals in government do listen and are sympathetic, but nothing much ever seems to happen as a result of that."

Philip Oliver, CEO of Blitz Games.

Braben puts it another way. He told the audience at Nottingham's GameCity event last month that he believed, "The government has made it very clear that it doesn't give a damn about the games industry." When asked to expand on his point, Braben told GameSpot that, "As an industry we have largely slipped between the cracks until now as far as government is concerned. Certainly as an industry, we have a low profile within government; there is a lack of appreciation of the size and revenue generated by our industry, and a similar lack of awareness of the issues we face."

In Australia, the fledgling homegrown-games industry has also been denied support from the government compared to the film industry, a fact that has made many Australian developers angry.

In October, the Game Developers' Association of Australia received a response to its request for a 40 percent investment rebate for the games industry--the same deal as is currently offered to the country's film industry. The answer from the arts minister, Senator Helen Coonan, was considered by many to be a rebuff, "While games will not be eligible for the tax offsets announced as part of the Package, the introduction of a Location Offset is expected to have positive indirect flow-on effects for screen businesses, as digital and visual companies develop larger and more skilled workforces."

GDAA CEO Greg Bondar responded by telling GameSpot AU, "We have been trying to bring our situation to the attention of the Federal Government for a long time now, and this sort of response is disheartening to say the least. The Minister is not offering anything tangible to our industry."

The second part of this article can be found here.

Discussion

122 comments
TKandPBC
TKandPBC

Ubisoft Montréal is one of my favourite devs in the world. They made the Splinter Cell franchise what is it, and thank God that Ubisoft Shanghai isn't making Splinter Cell 5. Let them make EndWar, or w/e, leave the killer stuff to Montréal.

ACbomber
ACbomber

vanhalendlrband, stop smoking weed, thats all vancouver is good for. jks haha but still, dont diss Ubisoft montreal... prince of persia and assassin's creed are both top notch... in fact, my friend is being taught her 3D animation class by the 3D director of assassin's creed :O (beautiful graphics, state of art. certainly beats the NSF engine) And um.... ill have you know that EA is also active in Montreal.. and probably in toronto as well ca fait que tu peux te fermer la gueule ma tête carée de l'ouest ;-)

Cobhamar
Cobhamar

anybody else read kalossimitar's posts and think hes a separatist?

papapavvv
papapavvv

to vanhalendlrband " Assasins creed is just a bunch of advertising dollars, just because you see lots of commercials doesn't mean its big" Makes me think of Halo 3...

Trision
Trision

W00T! Go Canada! It's great to be in Ontario!

jeff537665
jeff537665

Go CANADA This is awesome news for me, I live in Ontario & am currently looking into education to become a video game developer:D

vanhalendlrband
vanhalendlrband

Thats your opinino fact is the EA games kill all ontario and quebec companies put together. Assasins creed is just a bunch of advertising dollars, just because you see lots of commercials doesn't mean its big lol. The game hasn't even been reviewed well and i've played it, and its ok, you can climb every wall in the game and stand out on lookouts and the graphics are very nice, glad to have the game come from Canada but the point i'm really trying to make is that Vancouver is the largest game developer in the country and even if other places are turning out more its no reason to not even mention Vancouver when it contributes a huge part to canadian culture, and as per usual nobody out east will give Vancouver any claims to anything. Like bein the most beautiful City in Canada by far. Toronto hates that btw, to americans that don't know. Yea NHL 08 sure isn't the biggest game sold in canada lol, the X360/PS3/next-gen version is in Vancouver and always will be. NBA Live 08. LIke come on guys just those two games alone is enough, let alone NFS which are big games. There's way more gaming companies all over the place you haven't even heard about, BCIT is a huge school out here always putting up the latest state of the art **** and they got schools usually right by a lot of software companies. DOn't forget if you include the entire pacific northwest, and the fact NIntendo of Canada is also here, you have NIntendo of America in washington, and MIcrosoft Canada here, and Microsoft HW in Washington. So all that together is pretty much the whole damn market, northwest should be its own country with alberta and the oil, bc bud, bc forestry, boeing in Seattle. Northwest ownz.

Jaeme
Jaeme

Development is starting to branch out more here in Canada thankfully. Sticking it all in big cities tends to stifle creative ideas and prevent innovation. That said, the problem of politicians being clueless isn`t completely gone from our landscape. I`m from Stratford Ont. and we have the famous Shakespearean Festival here. No matter what you think of Shakespeare, it means we have some great actors with trained voices and wonderful abilities to move about. All of which are needed within the games industry, yet the local government has actually gone out of its way to kill games development locally. Local studios turned out the Call of Cthulu game (they died before it was done tho), and Capcam came here to get the voices for Resident Evil 2( I actually have drank with some people who were in that game, including Ada Wong), yet when Capcom wanted to do more our council did everything to kill them off. None of the people who did voices (for example) ever reprised their roles. Yet the Festival is down for half the year and the city is CRYING for more to keep our economy going. Meanwhile our gaming culture in this town is HUGE. Our local EB is one of the highest volume ones there is. It is, as usual, just politicians who don`t get it. Thankfully they haven`t taken on the "videogames cause every social ill including frothing at the eyeballs and herpes of the teen pregnancy" stance our American cousins must endure.

jaredcrazy3232
jaredcrazy3232

im gonna go out on a limb and say i settled this argument, as there are no other posts regarding the argument... feel free to prove me wrong... anyway go Canada and Po77InAtOr, congrats although i was annoyed by all your fans in Calgary.

Po77InAtOr
Po77InAtOr

Lol, not too much game development happening here in Saskatchewan. Oh well, at least we have the Grey Cup. Rider Nation baby!

grand17
grand17

voodoo, your comments are so dumb, your obviously from ontario since you think its the centre of the universe lol EA does much more in vancouver then ubisoft does in toronto or montreal good old canada, west hates east and vice versa ps this doesnt mean i like anything that EA makes HAHA

Thug_Life
Thug_Life

BioWare, the greatest video game company ever, is based about three blocks from my house in Edmonton.

Taiko88
Taiko88

GO CANADA GO! Wooo, Ontario rocks. The only thing that is lame is that most of the game developers are either in Montreal, or Toronto. They should branch out more. I know there is a gaming company in Vancouver.

DFTricks
DFTricks

Québec as a lot better project for devlopers and they dont even talk about it... obviusly -_-'

gnutux
gnutux

Sounds like my province (Ontario) is finally doing something useful and encouraging.

MassacreMonk
MassacreMonk

vanhalendlrband lol, quality > quantity EA = quantity > quality for the most part. Last time I checked Ubisoft Montreal made quality games called Assassins Creed and Rainbow Six, while EA is pumpin out crap like the NFS series.

black_ice23
black_ice23

hmm my home country of canada a big contributor to the gaming industry sweet and my home province of ontario si doing big things, its good to be canadian woooo go canada we aint just hockey out here

foxracing1313
foxracing1313

dude you know what I realized ... Electronic Arts has a studio in my hometown....I have no freaking clue where it is though lol.

jaredcrazy3232
jaredcrazy3232

i would like to point out to every one that yes it was a shame gamespot didn't specify on the city and talked to the wrong people, but subsidies are federal, and the money made by market expansion in Canada, ultimately the business created brings more people and more businesses and more money and through taxation of people or other businesses the federal government gets its cut... thus it makes this article about Canada as a whole

vanhalendlrband
vanhalendlrband

No voodoo your wrong. ARe you tryin to tell me that Ubisoft is bigger than the NBA Live 08, Need For Speed, NHL 08 series. You are so wrong man, i laugh at you easterners EA CAnada alone kills all those companies out east, let alone EA blackbox Downtown. Toronto and MOntreal combined don't even come close. Your the one whose being ignorant.

jaredcrazy3232
jaredcrazy3232

kalossimitar, here is the official numbers for the languages taken from the CIA world fact book, English (official) 59.3%, French (official) 23.2%, other 17.5% , it is sad there isn't more French, as it is my favorite language, i took French immersion from kinder garden to grade 7. (i wanted longer but the school i moved to didn't offer it) and the reason why French classes (not immersion) don't work is because they focus on grammar not speech and comprehension.... trust me i took all subsequent classes all the way up to the top high school French class... yes i am REALLLLYYYY rusty and i don't like that fact, luckily i am back in French next semester for collage... anyway i digress..... my point was only to show you where i am coming from so u don't assume i am some dumb redneck!.... to respond to your asinine comment, i know all about multiculturalism.. the term u were looking for were mosaic and melting pot.... my "Frenglais" was separate from my multicultural comment and was used as a means of unification... like the glue used to keep the pieces of the mosaic on the paper... plus it was a mixing of English and French, hence the name "Frenglais" which is Fran

Voodoo2k3
Voodoo2k3

LOL at Van Halen who thinks that Vancouver is the central hub of Canada. It's a big city so it has stuff. Unfortuantly, a lot of attraction is brought to Ontario, Toronto specifically and Montreal because these places are more concentrated, in sort of the more populated areas of the country, where Vancouver is so far away it is at times inconvenient. So, clearly you're from there and probably don't know much about what's going on on the east coast, so I can't blame your ignorance, but many of the big budget game titles, particularly from Ubisoft are being developed mostly in Quebec but often in Ontario as well. Sorry.

Ice-Cube
Ice-Cube

A great article, Canada is growing in the game industry.

Corpand
Corpand

To hell with Vancouver, Quebec or Toronto. Iqaluit is where its at dammit!!!!

ordinateur
ordinateur

Yes that's french and english nothing more. The reason why billingualism is so low is that 2nd language classes really suck here, at least n Quebec but I wouldn't imagine french classes to be better in the other provinces. Here in Quebec, there's a large part of people at the end of high school that can't put 3 english words in line either.

vanhalendlrband
vanhalendlrband

Holy crap people are STILL arguing this. QUEBEC i never even heard of games from Quebec, what last gen NHL games for PS2? VANCOUVER HAS TWO EA SPORTS STUDIOS, ALL THE BIG MOVIES, MOST BEAUTIFUL CITY IN NORTH AMERICA. Disney Interactive Studios is putting their Headquarters here (and like it or not thats a big name), yea Montreal has some EA games, and UBIsoft. BUt its actually vancouver where all the big stuff happens. NHL 08 is made next gen ONLY in Vancouver, NOT in Quebec. When the EA sports studio opened in vancouver it was the largest of its kind in the ENTIRE planet the Prime Minister of Canada came to cut the ribbon here; Jean Chretien. Remember tha game Bully, made in Vancouver by Rockstar, altho i don't think they make GTA here, i'm not sure tho.

Sandro909
Sandro909

kalossimitar, Canada's official languages are English and French. Nothing more.

gregrosychuk1
gregrosychuk1

[This message was deleted at the request of the original poster]

kalossimitar
kalossimitar

multi vs inter, do you know the difference? multi means more like using many things, but not blending them. Inter means more like using together many things, blending them. Canada is all about multiculturalism. But the fact is that theres only two national languages, French being one, but youre the proof of all whats wrong about Canada, you cant even put 3 WORDS, 3, in French, without making faults or nonsense. Talk to me again about that multiculturalism BS when you actually do make the effort to know the other official language of Canada, or when Chinese, German, etc. are all official languages in Canada.

jaredcrazy3232
jaredcrazy3232

kalossimitar, look i see what u are really saying, u are making this an issue about "Vive Qu

kalossimitar
kalossimitar

For those who don't know Canada has been trying to make itself look like a country for the environment, as for peace for years now... but it will never happen, because English canadians are conservative, like the governement in place.

Thomas4
Thomas4

@anothercrazyazn: Actually the Canadian loonie is still worth more then the American dollar... and I got that from the link you provided. LOL. With that said we need your dollar to be higher then our loonie so that SOME of our industries don't suffer.

Thomas4
Thomas4

[This message was deleted at the request of a moderator or administrator]

speedjunkie4
speedjunkie4

At least i know where i want to work if i go into video gaming production (cough EA Canada cough) and also, It dosen't matter if games are made in diffrent provinces, so for those people who think all game developers are in Quebec, you haven't looked around the rest of Canada.

Cordell27
Cordell27

Game development is actually significant these days, aside from having 2 EB Games studios in the greater Vancouver area a great deal of gaming television is produced in Vancouver as well. I'll admit there's also a significant amount in Quebec but it's not all from Quebec. In my opinion I can see the maritimes making use of the fad to boost a not so hot economy due to the sheer amount of man power they can pump into the industry.

Sh4d0w212
Sh4d0w212

oh come I can list a few great games that came out of Vancouver... theres Company of heroes, Homeworld 1 and 2 , Warhammer 40000 , EA sports games...

bansheerpg
bansheerpg

I live in Quebec, in the city where Assassin's Creed was made. I'm telling you; I live in the only place in Canada where games are made. Forget about ONtario, Saskatchewan, Alberta, British-Columbia or any other province. Games are made in Quebec.

kalossimitar
kalossimitar

@brinzen Clearly, you dont understand sarcasm, re-read my posts.

kalossimitar
kalossimitar

@fanible We all know good games from the US. A game in California wouldnt change the fact that good games come from US. You didnt understand a single word of what I said. The fact is that the good canadian games everyone remember are from Quebec, not Canada as a whole. But the article speaks like all of Canada is expanding in the videogame business. Is Saskatchewan to be thank for PoP? How would you like it if your productivity at work made you patron get a whole lot more profits, but he didnt thank you, but instead thank all the employees, even if you were the one augmenting the productivity??? Thats the same thing here. You all like/liked to play prince of persia, rainbow six, splinter cell, assassin's creed, youre eager to play deus ex 3, but you cant give the developpers from Quebec their due. Thats called to be ungrateful.

MalachiLiu
MalachiLiu

@kalossimitar Wasn't Mass Effect (360) made in Canada by BIOWARE, which is in Alberta. Bully (on PS2, 360, and Wii) made in Canada by Rockstar Vancouver, British Columbia. Need For Speed: Most Wanted (all) made by EA Canada (EA Black Box), Vancouver, British Columbia EA Black Box also made Skate (PS3, 360).

Brizen__Beez
Brizen__Beez

@kalossimitar Dude, what are you blabbing about that most games come out of Quebec only?? And yes, its part of Canada so who gives a **** if a developer has a good headquarters set up in Montreal. It's still Canada Man. Also, claiming a game from being developed in "North America" makes it a US product is not a US product. With that logic, the US's success at the Olympics is also Canadas? Why do you think this article has separated the top manufactures into separate categories, with US being on top. I guess your logic stipulates that Canada is somehow first and third because "North America" is just the same thing, right? Obviously we have our own seperate economy from the US. We are linked through international trading in which we have to pay taxes. Anyways, Bioware is a company that if I remember correctly is from Alberta. Maybe you've heard of KOTOR or Mass Effect? There was an article actually posted here on Gamespot about its success and how it originated from Canada. Don't have to look farther than Gamespot on this one. Give some credit to Canada man. Afraid to lose competition in something you aren't even participating in? Who cares, our economy is going up, if making games is helping us, even if the majority of them come from Quebec, woo hoo!

kalossimitar
kalossimitar

@masterchief that was spanish, not even french...

MasterChief725
MasterChief725

Viva La North America...gaming!!! (Long live North American gaming!!) man i dont speak good french

Fanible
Fanible

@kalossimitar By your logic, should Blizzard create a hit title at it's California headquarters, we should generalize less and say "That's a California game, not a USA game. It was made in CALIFORNIA - NOT IN THE US. How dare you generalize and say that it was Americans that made that game. It was the Californians!"

Seriously, that's how dumb you sound.

Catastrophe123
Catastrophe123

[This message was deleted at the request of a moderator or administrator]

kalossimitar
kalossimitar

Just what I said, generalization. last time I checked, Canada was IN North America, as is USA, does that mean we should be thankful to USA for Assassin's Creed, or to North America??? Or maybe even to the world? Thank you world for DX3........ Better luck next time, shadow. P.S. just to prove my point, try to think about a great game you actually remember that was made in Canada, but outside Quebec, try to pinpoint the province it came from too. I pity you if you use google, seriously. Try honesty, and youll know what I mean.