Evidence of meeting #43 for Canadian Heritage in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was games.
A recording is available from Parliament.
3:35 p.m.
Liberal
The Vice-Chair Liberal Scott Simms
There has been a coup. Mr. Nantel is not here.
I'm going to go ahead with the introductions.
3:35 p.m.
An hon. member
You did get elected.
3:35 p.m.
Liberal
The Vice-Chair Liberal Scott Simms
I did get elected to the empty chair, which has now been filled. Thank you very much.
Welcome. Pursuant to Standing Order 108(2), this meeting is on the Canadian entertainment software industry.
I'd like to welcome our guests. You have the privilege of being our first guests. We look forward to this.
I'd like to introduce to the committee, from Warner Brothers Games Montréal, Mr. Martin Carrier, vice-president and studio head. I hope I pronounced that correctly. From BioWare ULC, we have Richard Iwaniuk, who is the senior director of business planning and development. From Ubisoft Entertainment, we have Mr. Luc Duchaine, communications director. Gentlemen, thank you for coming.
We're going to start with Warner Brothers. Mr. Carrier, you have 10 minutes. Then we'll go to Mr. Iwaniuk, and then Mr. Duchaine, for 10 minutes each. We'll have the questioning after that.
3:35 p.m.
NDP
The Vice-Chair NDP Pierre Nantel
I thought of playing this little trick on you to be able to ask you questions, but it did not work. So I am going to give you the floor.
Mr. Carrier, you have our attention.
3:35 p.m.
Martin Carrier Vice-President and Studio Head, Warner Brothers Games Montréal
First, let me thank you for giving us the opportunity to appear before you today and briefly talk about this industry, which has really evolved over time. I will do the first part of my presentation in French and the second part in English.
My name is Martin Carrier. I am a proud resident of Longueuil, near Montreal. Today I am representing Warner Brothers Games Montréal. Let me give you an overview of our company.
You are familiar with our name because of our movies. Everybody has certainly seen Batman this summer, which was a blockbuster for us. We also have major television productions. Just think of shows like The Big Bang Theory, Ellen and The Voice—in which I will never star, I can assure you—and many other series that people often watch on TV around the world.
Warner Brothers has been in Canada since 1930. So we have been around in Canada for many years, not quite as long in Montreal. Our presence generates economic spinoffs of more than $500 million, if we count film and television productions. There are many productions in Vancouver and Toronto. We also have the major brands that you are familiar with, like Harry Potter and DC Comics, and they are part of our family. We are very proud to have a strong presence in Canada.
Historically, we have produced many films and TV shows, but since 2005, we have decided to embark on the production of video games. Why have we made that decision? In the past, we often granted gaming licenses to companies that were here, either Ubisoft or Electronic Arts, to make games with Harry Potter or The Lord of the Rings, for example. In 2005, we decided to create our own video games subsidiary to be able to better produce our games. They were very well done in the past, but we wanted our employees to be involved in the production of games.
As a result, the subsidiary was created in 2005. In 2008, Martin Tremblay, a Canadian based in Burbank, near Los Angeles, California, was appointed head of the subsidiary. Since then, we have grown tremendously and we have acquired a number of studios around the world. I am thinking of those in Seattle or Boston, for example, with a company called Turbine that makes online games called MMOs. We hired people from the former Midway Chicago that made Mortal Kombat. We have also worked a great deal with a company in England called Rocksteady Studios Ltd. that has developed wonderful Batman games, as well as a company called TT Games that develops Lego games. So Warner Brothers has the license to develop all the Lego company's video games. It is a great success. We are talking about more than 80 million games sold, which is a lot.
We are very proud of the quality of our games and we strongly believe in this industry.
Why are we in Canada and why have we set up a studio in Montreal? I hope that these meetings will help you discover that Canada has some of the most talented video game developers in the world. Montreal has become a hub for this industry.
I have personally worked in the industry since 1997. Back in the day, I used to work with my colleague Luc at Ubisoft. In 2010, Martin Tremblay and I decided to create a new video game studio in Montreal.
Under Martin Tremblay's guidance, in 2010 we decided to create a whole new video game development studio in Montreal and to start from scratch. Basically it was a brand new operation that we decided to start, because we knew, and history had told us, that there was great talent and great opportunity for video game development in Montreal. We can look back at the influence the National Film Board had in terms of the animation industry in Canada. That was a real spark for our industry, which eventually grew to people who developed 3-D software, people from Softimage and so on.
Coupled with great universities, great artistic talent, and great creative talent, especially in Montreal, an industry grew out of that. From 1997 on, there has been a groundswell of activity in the video game development sector. We knew that Montreal was a great place in which to develop games. First we looked all around the world, from Florida to China. We looked at different cities all around the world, but we decided to set our sights on Montreal.
On June 1, 2010, we started our studio in Montreal. I'm very proud to say that today over 250 people work in our Montreal studio. We've had explosive growth in our studio. The most talented folks in the video game industry are working with us in our studio in Montreal, but also in other studios across the country.
Our main activity in Montreal is the development of games, of course. We work with some of the great licences from Warner Brothers, including those from the DC Entertainment family, the superheroes: Superman, Batman, Wonder Woman, and so on. We have two main sectors of development in Montreal. There are what we call triple-A games, which are our major sort of tent-pole types of developments which have sizable budgets that are in the tens of millions of dollars, in the area of $30 million to $50 million. We also have online games. They are free to play and are accessible online. Eventually they will be accessible on mobile devices.
Our first game was produced in Montreal in what we call the beta phase, which is accessible to everybody. It is called Cartoon Universe, which is entering the world of Looney Tunes: Bugs Bunny and Friends and Scooby-Doo, which is another evergreen for us and for kids. I'm also happy to say that our first console game will be coming out with the new Nintendo console, the Wii U, which is coming out on November 18, and we have a Batman game, Batman: Arkham City Armored Edition. That's going to be coming out in October.
In a nutshell, this is a booming industry in the world, but also in Canada and certainly in Montreal. These are people who are involved in the arts. Many artists work with us. Many designers develop the plot and progressions. As you know, video games have a series of challenges. Sometimes you have to save the princess, but there is more to it than that. There may be many interesting challenges and progressions. Now people frequently play online. So video games entail art, design and also a very strong technological aspect.
We have many computer scientists and engineers. They are highly educated people. It is always exciting to see our creative people and our Cartesian people work together to create products that are exported worldwide.
We must be thoroughly proud of the fact that products that are created in Canada are exported everywhere. We are really selling millions of units. These products showcase the talent of young Canadians, whether at the artistic or musical level, because, as you know, our games have soundtracks. That is really something. If there is one point that I would like to stress today, it is that we are really talking about cultural products. We hire people who are creative, both artistically and technologically. They will push the limits of the products to turn them into some of the most sophisticated products in terms of Internet connection or multi-player functions. These are highly sophisticated products.
In our case, our presence in Canada has been a success so far. This is what we also want for our products. This means that talented people will want to move to Canada. Today, we are able to look for talented people around the world. We also hope that it will be easier for us to bring those talented people here.
When I graduated from university in the 1990s, there was talk of a brain drain. Now it is the opposite, at least in our industry. It is very positive for us.
Once again, thank you for giving me the opportunity to speak before your committee. I will now give the floor to my colleagues.
3:45 p.m.
NDP
The Vice-Chair NDP Pierre Nantel
Thank you very much, Mr. Carrier.
I will now give the floor to Mr. Iwaniuk.
3:45 p.m.
Richard Iwaniuk Senior Director, Business Planning and Development, BioWare ULC
Thank you very much.
I will quickly provide some background about myself. I have been in the industry for 12 years, all with BioWare ULC. I'm a chartered accountant by training. I was their CFO for eight of those years. Since then, I have been the senior director of business planning and development.
BioWare ULC has two studios in Canada. The original studio was formed in 1995 in Edmonton, Alberta. We also have a studio in Montreal, which is a more recent addition. It has been in construction for about the last four years. We have been building up that team in a greenfield way. Between the two studios, we have 400 people: about 325 people in Edmonton, and 75 people in Montreal. The company was founded by two medical doctors who just retired last month. They were actively involved in the company from day one. They created a very creative environment. Our core values at the studio are quality in our games and at our workplace. We bring employees in from around the world who want to work on our games, but who also enjoy the benefits of being at a studio that fosters creativity and takes care of them and their families.
In 1995, we were founded in Edmonton. We started releasing games in 1996. Our first game was Shattered Steel. We make predominantly HD-type games, or larger games. These would be played on PCs or the major consoles. The two console manufacturers we have been creating games for are the PlayStation, which is the Sony platform, and the Xbox, which is Microsoft's platform. Most recently, with the velocity of technological change and with tablets and smart phones becoming ubiquitous throughout our industry, we have also started developing for those platforms as well.
From our perspective in terms of the quality in the games, ours are role-playing games. They are very story-driven, so decisions that you make in the game through conversation actually affect how the game plays out for you. It's almost like playing a living novel. Even though it is technologically driven, as my companion here noted, we also have a lot of designers, writers, artists, and animators. This is a very diverse group of people. We too find there are only certain programs within universities in Canada that can support the types of skill sets we need. We find that we are also having to bring people in from around the world to work on our games.
I think that is pretty much it. Martin covered most of the industry stuff; I don't really have much else that I can add to that.
3:45 p.m.
NDP
3:45 p.m.
Luc Duchaine Communications Director, Ubisoft Entertainment Inc.
Thank you, Mr. Chair.
Thank you for welcoming us today. It is a pleasure to talk about our industry. It is funny to hear Martin, whom I have known for a very long time, since we were both working at Ubisoft, and to see that we both share the same passion and concerns for our industry.
I represent Ubisoft, which is the largest developer in our country. Founded in France in 1986, this company established itself in Canada in 1997 in a studio in Montreal. It has gone from 50 employees in 1997 to 350 in 2000, to 1,000 in 2005. Today, we have 2,300 people working at our Montreal studio. That is without counting a studio in Quebec City that opened in 2005 and now has 300 people, and the Toronto studio that opened in 2010 and now also has 300 people. In 2008, we also acquired Hybride Technologies, a company that specializes in special effects for movies. It worked on films like Spy Kids and Avatar. This company now belongs to Ubisoft.
Canada's video game industry has 16,000 jobs, including 8,000 jobs in Quebec. That is a lot of jobs. We are the third most important country in the world in terms of video game production, after Japan and the United States, and the first country per capita. I think it is important to mention this. We are talking about 32,000 jobs in Japan and 25,000 in the United States. That is a positive growth for our industry and our companies. That allows us to create games that are leading brands in the video game industry. All you need to do is go to the video game fair, Electronic Entertainment Expo, or E3, which will be held next June, to see how well represented the games created in Canada are. At last year's E3, Ubisoft's four major titles were games created in Montreal and Toronto. In our view, that is really a big feather in Canada's cap.
Over the past 15 years, Ubisoft has launched more than 80 games, including several blockbusters, such as Tom Clancy's Splinter Cell, Tom Clancy's Rainbow Six, Just Dance, and last but not least, Assassin's Creed. Assassin's Creed is definitely the most popular game of all of them. Since its debut title in 2007, we have launched four games. The fifth one will be launched next Tuesday. So it is a very exciting time for us in our office. We look forward to the game being launched. We are talking about 38 million units sold, generating revenues of $1.2 billion. Furthermore, this brand has gone beyond the frontiers of video games, since it has its own encyclopedia, comic books, novels, and will soon be brought to the big screen. In the past, we had licences, for example in the case of the movie Avatar, but we are now putting our private labels forward for movies, for example the Assassin's Creed brand.
Earlier Martin stressed an essential point, but I think it is important to reiterate it. It has to do with our industry's international profile. I know that our games have a home in Russia, South Africa, Australia, Japan, everywhere in Europe and in the United States. On those games, it says “Ubisoft Montreal presents” or “Ubisoft Toronto presents”. The name of the city is always there. We feel that this international outreach is very useful for our country. That is one of the points I want to underscore. I see that the film, music and book industries are often extensively covered by the media. But the video game industry is more significant than those three industries in terms of revenues. We are talking about more than $50 billion U.S. a year. So it really is a major industry.
The advantages of doing business in Canada are numerous, starting with attractive fiscal policies in certain provinces, especially in Quebec and Ontario, with respectively 37,5% and 40% in refundable tax credits, not to mention federal SR&ED (Scientific Research and Experimental Development) credits. Beyond fiscal incentives, we have among the lowest tax rates in the world, excellent universities, a culture of innovation, and a cosmopolitan, multicultural population.
Although we are very pleased, this success remains fragile. I would like to emphasize three elements that are essential to the growth, innovation and commercial success of our industry.
Innovation is without a doubt the first pillar to focus on. This innovation is two-fold: creative and technological. In terms of creativity, we must count on an experienced workforce who can use their skills and knowledge to suggest innovating ideas. According to a recent TECHNOCompétences study, developers in the province have identified over 1,000 jobs to fill in 2012, the majority asking for two to seven years of experience. Also according to this study, the annual growth rate of the workforce in our field in Quebec has been 23,4% between 2002 and 2011. Let me remind you that Quebec represents half of the video game industry in the country. So it is significant.
As my colleagues said, in this context of full employment, companies have to look internationally. At Ubisoft, 30% of our 467 hires in 2011-2012 were from abroad.
Nevertheless, there exist two major issues that I would like to talk about. The first is receiving labour market opinions. The official process, although well-managed by the federal government, varies from one province to another. Quebec offers a simplified process for certain job categories, allowing us to get an LMO within four weeks.
However, this process covers approximately 50% of our requests. The delays for the rest are much longer. In the rest of the country, the accelerated labour market option is not restrictive and quicker. So we think the process is worthwhile. I should mention that this process was adopted quite recently, and it is a process that has made life significantly easier for us.
The second issue is processing delays at the embassies. I should note that, for some countries, individuals need a visa to come to Canada. We are talking here about a delay of two to four months. It could take up to six months, as occurred in a case at our company. In fact, we have been waiting for a Chinese employee for six months, and this is an internal transfer. An Ubisoft employee in China needs to transfer to come and work at Ubisoft in Canada. He has been waiting for six months.
It is the same story for Indian, Chinese, Brazilian, Ukrainian and Romanian employees, who make up a large proportion of programmers. So we need to wait a long time before being able to use their services. I'm talking about a delay of six months when a game's development cycle lasts 24 to 36 months typically. That's significant.
As my colleagues said, our industry has faced several shifts. There will be a new generation of consoles; the Wii U will be out soon. The rumours are persistent. There is talk that the other manufacturers are going to launch them. There are tablets and consoles. So this involves massive investments in R&D, which are essential to ensure our competitiveness internationally.
The latest budget plans for a reduction of the credits Ubisoft has asked for, and I suspect the same situation in the industry. Concretely, the budget reduces the general rate from 20% to 15% and the eligible portion of salaries and costs for employees who take part in R&D from 65% to 60%, then 55%. This is a significant drop. For Ubisoft, these changes represent an important shortage at a key moment of its evolution in a new market.
As I have mentioned earlier, the growth rate is significant, namely, higher than 20% in the past 10 years, but there is a lack of workforce. To palliate the lack of workforce, companies count on the accelerated development of juniors. To do so, they need to establish relationships with universities and colleges and massively invest in continuing training.
Nevertheless, there currently exist three major issues that hinder continuing training: first, the fast-paced evolution of required skills; second, the lack of interest for teaching from seniors in the industry; and third, for those who do want to, the lack of educational support to accompany seniors who, despite their technical expertise, have very few skills in pedagogy.
To answer these issues, Ubisoft inaugurated a campus in 2005 to train the next generation. This initiative ended in 2010 and was replaced by another program to introduce the next generation to video games. This is an initiative for 12 to 15 year olds. It includes a base camp, an immersion camp for 15 to 18 year olds, a game lab competition and a summer school for 18 to 25 year olds.
Since the creation of this program, we have hired over 30 people. These are talented people recruited directly through these initiatives. We therefore believe that this kind of process is important. Our experienced players get involved and see their involvement as a form of social responsibility, without having to sacrifice a part of their compensation, or their participation in the production of games, which is also important. With the support of the various levels of government, this type of program can be deployed elsewhere in Canada.
Finally, commercial success is a combination of all the elements I have mentioned. You need to have an innovative idea supported by a powerful technology and an experienced team. It is a mathematical formula that will contribute to commercial success. If you take away a technology and the qualified people, you will not be able to produce a quality game.
We therefore believe that investing in research and development, in greater international mobility and in continuing training are conditions of success in order to foster growth, innovation and commercial success in our industry.
Thank you very much.
3:55 p.m.
NDP
The Vice-Chair NDP Pierre Nantel
Thank you very much, Mr. Duchaine.
It is very exciting to hear what all three of you have to say. We rarely have access to such an active sector of the economy. It's fantastic.
I will now give the floor to our colleague, Terence Young.
3:55 p.m.
Conservative
Terence Young Conservative Oakville, ON
Thank you, Chair, and thank you very much to the witnesses for coming here today. The presentations are very interesting.
Monsieur Duchaine, you mentioned that low corporate tax rates were a key reason that your company expanded in Canada. I did the math. Did you say you have 2,600 employees in Canada now?
3:55 p.m.
Communications Director, Ubisoft Entertainment Inc.
We have nearly 3,000 now.
3:55 p.m.
Conservative
Terence Young Conservative Oakville, ON
Nearly 3,000. We get that on this side of the House. I'm a member of the government party. We're the ones who took them down to 15%.
Could you talk about what else attracts you to Canada, to expand your company in Canada?
3:55 p.m.
Communications Director, Ubisoft Entertainment Inc.
Originally, what happened in 1997, to make a long story short, one promoter in Quebec met the founders of our company in France and convinced them to come and open a studio, that there were some tax breaks in Quebec. When he came back to Canada, he went to see the Quebec finance minister at the time, Mr. Bernard Landry, and he told him he had a French company that wanted to come to Montreal but they needed tax breaks. He played a kind of poker game with both sides. It worked and it was a good deal. Martin was there when the studio started in 1997. Also, the great thing is we had the innovation aspect, the creative aspect, in Montreal. Being a French company it was important to be in Montreal where there are a lot of French people, but it was also a good place to be, between North America and Europe.
All those elements really helped us to establish ourselves in Quebec. I don't remember the exact numbers we had in 1997 because the tax break has changed since then. It was lowered through the years.
3:55 p.m.
Communications Director, Ubisoft Entertainment Inc.
Quebec taxes have as well. We still have 37.5% in Quebec. Those are the various reasons. The studio grew, I would say exponentially. We had a couple of good games, but 2002 was really when our first big blockbuster came out. Since then the studio has established itself as one of the best, if not the best. Right now it is the biggest independent studio in the world. That's why people are coming.
3:55 p.m.
Conservative
Terence Young Conservative Oakville, ON
I represent Oakville in Ontario, the home base for Sheridan College. It was announced recently that they have the best animation school in the world. They also have a fantastic musical theatre program. They have actors, etc.
Do you have any partnerships or have you done any work with Sheridan College in Ontario? Also, what are the hardest skill sets for you to find?
4 p.m.
Communications Director, Ubisoft Entertainment Inc.
Regarding the first question, I don't know the specifics for Sheridan College. That's something I could check on with our Toronto studio. I'm pretty sure they would have been in touch, because the Toronto video game culture is different from that in Montreal. In Montreal there are big players, such as, BioWare, Electronic Arts, Warner Bros., THQ, Square Enix, whereas Toronto has a different gaming culture with smaller companies.
I think we were the first really big studio to open in Toronto, so I wouldn't be surprised if we already have a relationship with Sheridan.
In response to your second question, I would say programmers are always the most difficult ones to get, because we need a vast number of people. If you have the best programmers but you have no artists, that's a challenge. Right now we have foreign programmers coming into the country, because this has been identified as a key job. But, for instance, we cannot have key artists or key game designers. Game designer is probably one of the most, if not the most, important jobs in the video game business, because that is the one that makes all the rules. For example, with Monopoly, there was a game designer who decided that if you land on Park Place, it's expensive, but if you land on the other blue square—I forget the name since I haven't played Monopoly in a long time—you get more money.
That's game design. Those are the basics. That's where people have the fun. In design it's very difficult. There are a lot of programmers coming out of school, but fewer designers.
4 p.m.
Conservative
Terence Young Conservative Oakville, ON
Does your company have any interaction with Export Development Canada, specifically with the export guarantee program?
4 p.m.
Communications Director, Ubisoft Entertainment Inc.
I don't know. I guess I should check that.
4 p.m.
Conservative
Terence Young Conservative Oakville, ON
Maybe I could just ask a question of anyone who is here to answer. I think you know the entertainment software industry, your association, has voiced support for Bill C-11, the copyright modernization act. Is this piece of legislation supported by your companies, and how would it help your companies or your industry as a whole?
Maybe we could start with Mr. Carrier.
4 p.m.
Vice-President and Studio Head, Warner Brothers Games Montréal
Our association, ESAC, Entertainment Software Association of Canada, has been supportive of the bill. What it speaks to for us particularly is the protection of intellectual property, which is paramount in our industry. We invest millions of dollars in creating or sustaining brands, and we certainly look for that protection in the bills that are put forward.
4 p.m.
Conservative
Terence Young Conservative Oakville, ON
When you protect your property, you have to hire more people, which is exactly what you're doing, right?