Industry Committee on Feb. 26th, 2014

[Dan Harris, NDP, Scarborough Southwest, ON]

Merci.

As Mike was saying, he had fun going to Quebec City. I got to go to Montreal last year, to the studio there, the fantastic things.... I mean the 3-D studio in particular. Ubisoft attracted 3-D design folks from Industrial Light & Magic, which is seen as the top of the industry.

It's just great to see the depth that's going on in gaming nowadays. For anybody who does play video games, it's incredible the level of detail and the depth of games nowadays, and how realistic they look and feel. That's something. Those are skills that are also transferable into other industries when you're looking at 3-D modelling, when you're looking at simulators, whether you're talking about aviation or others.

I'm going to move over to Jason now because the incubator effect...and you're part of a company now that helps to bring along small companies. Of course, we need to have a lot of start-ups and have a lot of entrepreneurs and have a lot of people developing games in order to continue to grow the industry, because you're going to have to have a lot of different companies before one of them actually breaks out.

How important is it that we actually foster that entrepreneurship and give the opportunities for new companies to form?

[Jason Della Rocca]

It's critical. There's a whole movement towards start-ups, entrepreneurship, where we're seeing a lot of activity, even at the federal level in terms of providing venture capital funds, etc. Not a lot of that comes to the game industry. Games have been in their silo to a certain extent. We have been a successful industry, taking our products to market without the need for venture per se, but there are definitely shifts in the industry that are occurring away from the large console games towards mobile, free-to-play, online, etc. That does open the door to VC investment, etc.

Interestingly enough, in the teams that we support most of the talent is coming from the larger studios. They have their own dreams and ideas that they want to produce. It's not the next Assassin's Creed, and they want to do either ninjas or robots or whatever, so they break free and come to us. The biggest gap in skills that they have is entrepreneurship, just understanding how to run a business. They worry about how a game is going to make money, PR and marketing, all those kind of elements.

They may be a wicked good programmer or designer artist, but completely lacking in entrepreneurial skills, to the extent that over 80%—I think even more—of the Canadian workforce works for the large production studios. Our talent base is lacking in those entrepreneurial skills.

Amazingly it is relevant both to the start-ups as well as in the context of a large studio that has people who are more entrepreneurial. It goes both ways.

[Dan Harris, NDP, Scarborough Southwest, ON]

I think you'll find similar parallels in a lot of different industries; people have the talent to either make something or market it. There's not a lot of crossover without more experience. In terms of getting games out there, obviously in the mobile market it's a little bit simpler, but not by much.

How difficult is it for start-ups to actually get published? In the one experience I had working for a small start-up—I actually did voice acting, ironically enough—it took them eight months to find a publisher to actually be able to get the game out there. By then the technology was somewhat dated.

[Jason Della Rocca]

It's a great question. In fact we try to eliminate the publisher as an intermediary between the game and the market. The beauty of digital marketplaces, like the Apple App Store and Google and Facebook and so on, is that as a developer you can go straight to the market without a publisher if you have your wits about you and the means to do so.

The challenge there, of course, is discoverability. If everyone can go straight to the market, then you are among a million others who have done the same thing. You then have to be smart about marketing and PR and how you acquire users, etc.

So there's still a challenge there, but the challenge is less about “I'm a developer with a product and I have no publisher to save me”, than it is about “I'm going straight to the consumer so I'll have to fight it out with all the other people who went straight to the consumer.” How do I get noticed in all that noise?

It's a separate discussion about the evolution of the role of the publisher, more so as a partner for marketing and discoverability, but no Canadian studio should be sitting around saying, “No publisher wants me.” We should be sending them all straight to the market.

[Dan Harris, NDP, Scarborough Southwest, ON]

At the time, of course, that was before Steam and Google Play and all of those.

[Jason Della Rocca]

Sure. It's definitely an ongoing evolution. It shifts.

[Dan Harris, NDP, Scarborough Southwest, ON]

Well, I mean....

Thank you, Mr. Chair.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Harris. That's appreciated.

Mr. Van Kesteren, you have eight minutes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Chair.

Thank you all for coming. I'm not a regular member of this committee; however, I find this fascinating.

I checked the statistics on corporate rates. Finland has a corporate rate of 20%. In Canada we have a federal rate of about 15%, and then provincial, depending on the province, of about 10%. Do you get a tax break on the provincial end for corporate taxes?

[Jason Della Rocca]

Yes. The tax break that we talk about in the gaming industry is on labour. In Quebec it's 37.5% on labour. If I spend $1 million on programmers, artists, designers, etc., at the end of the year, when I file all my paperwork, I will receive $375,000 back from the provincial government.

So it's not based on how much profit I made, that if I made some, I get some; it's purely a refund based on the spend on labour.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

How do we rate in regard to the rest of the world?

I'm sorry, is your parent company in France, or...?

[Nathalie Verge]

Yes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

So France, and....

[Jason Della Rocca]

We're Canadian.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

You're Canadian. How do we rate as compared with the States, for example?

[Jason Della Rocca]

In terms of tax incentives?

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Yes.

[Jason Della Rocca]

The U.S. would not be comparable because they are not particularly heavy on providing tax breaks and incentives. There are a few states that provide tax breaks, but they're generally linked to film-based incentives, and they're not very useful for the game industry.

Canada, I would say, is a leader in terms of tax-based incentives on labour. There are analysts who have done grids of which countries provide which incentives and so on. Most countries use Canada as a benchmark, as a model.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I gathered from your presentation that you work in collaboration with the universities. Are there programs within the universities—centres of excellence, for instance—that help you along and give you new ideas where you're able to move forward?

That question is for either party.

[Nathalie Verge]

Initially, we mostly worked with colleges—CEGEPs—in Quebec because they offer technical programs. We are working with them on adapting their programs to the rapidly changing industry reality.

We are currently working with universities, especially those that offer programs in computer engineering, software engineering and mathematics.

We are also working with research chairs in artificial intelligence. Some of our research projects are exploring ways to use cameras to read players' emotions. A lot of work is being done at the university level. Our collaborations with colleges, universities and excellence research chairs are definitely helping us stay ahead of the curve.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Chair, how much time do I have? I'm splitting my time with Mr. Maguire.

[The Chair, Conservative, David Sweet]

You have four and a half minutes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Just a quick question, I'm going to date myself and go back to remembering the days of Texas Instruments and somebody saying how that was actually the spawning of much of the modern technology.

What's new on the horizon? What's happening? What have we spawned, and have we spawned some of that stuff here in Canada?

[Jason Della Rocca]

If we had a crystal ball, well, that would be a whole other story. I think what's interesting from the game industry point of view is that it's not just about technology. I really view games and the game industry through three lenses. One lens is technology, which is chips and hardware and all that kind of stuff, and the prediction is it'll be smaller, cheaper, and faster, just sort of an upward, Moore's Law type of trajectory.

Another filter or lens that I look through is the business lens. I think the game industry in particular has massive amounts of innovation with regard to business models. Following this discussion we were having about free games and so on, look at the movie industry, which has completely collapsed based on the shift that has occurred because of digital and online, whereas the game industry has embraced that and has created billion-dollar companies on the backs of those kinds of evolutions.

Then the other filter is from a design point of view, the design and cultural aesthetic. We are really at the forefront of human expression of interactivity, of immersion, and of telling stories through systems that you can play with. So it's not just about guns, race cars, and stuff, but there are games now that touch on a myriad of subjects, essentially, every element of the human condition. So to me the really interesting innovation comes from there. Think of where films were 100 years ago and what they meant to culture, humanity, and society, and we're on the cusp of that from a game point of view.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair.