Canadian Heritage Committee on Oct. 30th, 2012

[Pierre Proulx]

That is being done, particularly in Quebec. After the Ubisoft Campus closed two or three years ago, we set up a group to take over from it, together with the 12 largest companies. We noted at the time that college-level training was no longer enough. Everyone had to have at least a university education to be able to meet the needs of businesses. That led to the establishment of a needs directory. We came up with an average number of programmers. For example, approximately 800 or 900 people were needed per year for the first three years.

However, this is good. The new students will be graduating and we will incorporate them in the industry.

However, how do we go about having my employees who are currently at an intermediate level, or my more experienced employees, replace the people I will be looking for on the other side of the world? Two weeks ago, the Behaviour company in Montreal celebrated its 20^th anniversary. It is one of the oldest businesses in the field in Canada. Most of them have been around for 15 years or less, and 80% of them are much younger. Consequently, there are not a lot of experienced people who are capable of managing a business or a group of 40 or more individuals. When a quick response is required as part of a project, failing which the project will get done somewhere else, the deadline has to be very short and the person who comes from outside Canada has to be able to confirm that he or she can pick the project up and deliver it in two years. So the three- or four-month delay in bringing someone in from outside Canada is very long.

However, we conducted a study and decided, based on it, to organize master classes to meet those needs. We have had nearly a dozen, which have been attended by people like screenwriters and others who work on technical aspects as well. We brought in people from California, where the software we want was written. It costs us $100,000 to bring that specialist in to train 12 people over two days. Businesses are prepared to make that choice and to pay those amounts because they need to train these people. This is for their development.

As you said—and I am going to answer another question that was asked—the export percentage is nearly 100%. On average, a business makes 3% to 5% of its sales in Quebec, if it is lucky. In Canada, that varies between 5% and 8%. The rest of it is sold elsewhere in the world, not in Canada. As you can understand, this is not a consumer good. Since the population is small, sales are made in foreign markets rather than here.

To get back to the question, I would say that it is indeed possible to organize master classes. However, there are specialized schools such as those in Ontario that you mentioned.

However, the studios are currently making a lot more connections directly with Quebec universities. As a result, someone from Eidos Montréal may meet with a professor or the head of an animation or programming department to talk about various avenues and upcoming issues to makes changes and improvements to course programs. I would say that is done on a monthly basis.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

That is unfortunate because—and I believe this applies to virtually everywhere—institutes in Quebec are seeking to train the labour force in the entertainment and television field. However, that field is declining, at least generally, even though demand is high. It would definitely be easier to find people who ultimately would find a job after taking that kind of training.

[Pierre Proulx]

The question here is cost. I will let Stéphane talk about that.

[Stéphane D'Astous]

I also want to let my colleagues speak.

Take our company, for example. We attend graduation ceremonies at colleges and universities at least 15 times a year. We spend approximately $10,000 on scholarships in order to build bridges with the École polytechnique and various colleges and universities. That is a priority on my agenda.

[The Chair, Conservative, Rob Moore]

Thank you.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Nine minutes are already over.

[The Chair, Conservative, Rob Moore]

Mr. Simms.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Thank you, Mr. Chair, and thank you to our guests.

It appears to me, and has now for the last two meetings, that this is a greater and more complex industry than I had imagined, and a lot of it deals with the facts you have spoken about here. But, of course, as we're doing this report we have to come up with recommendations.

The school aspect of it is very interesting because we should probably look at a model similar to what Germany is doing. They actually have technical schools set up around clusters of industries, specifically for that reason. We obviously are not there. Maybe we should consider doing that, but the cultural side is what really interests me, because we do have cultural industries that we invest in, and heavily in some cases. We brought up the Canada Media Fund and other organizations but it seems to me the bulk of the conversation is about tax credits. There are labour-based tax credits for starters, and the digital economy strategy. There's the SR and ED program. You mentioned the SR and ED program, and that really only affects 25% to 30% of the workforce, the programmers. The other side is creative, which is where the Department of Canadian Heritage has a role. Therefore, we go back to the standard bearers that we invest in, such as the Canada Media Fund.

We also have regulations about Canadian content, and God knows I'd love to see an angry puffin in Angry Birds because I'm from Newfoundland. I would love it.

[A voice]

We use Montreal for our video games.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

See? That's good for you, but here's the thing. There is a game called Puffins: Island Adventure, and it was produced by Other Ocean Interactive out of St. John's. St. John's is not typical. It's not Montreal. It's not near the size of Toronto, but for some reason they have a little gaming industry that's happening. What's interesting about it is that this gaming company out of St. John's does Iron Brigade, and CSI games. They do something based on South Park, all of these games that are not Canadian in nature, but on the website for Puffins: Island Adventure there's a moniker that says “Telefilm Canada”.

My first question is about recommendations based on cultural investment, whether it's the Canada Media Fund or according to this, Telefilm Canada. I don't quite understand that and I hope somebody can address it.

What do we recommend for the traditional sources of investment or tax incentives through the Department of Canadian Heritage?

[Maureen Parker]

To start, I believe that was funded under the old CMF, not the new CMF.

[A voice]

The Canada New Media Fund, which was Telefilm

[Maureen Parker]

Right now, yes, there is at CMF a certain allotment of money for experimental interactive, which is generally where the video games fall, and the rest of the money is allotted to television and what they call convergent content. That's digital content that accompanies television programs.

The way the CMF works, and we're fine with the way it works, is with a points system. Ten points mean all of the elements are Canadian: there are Canadians working on these projects; they're Canadians paying taxes, they're employed in Canada creating Canadian content. We certainly support the request for funding, etc. We just think that if there is federal money involved, that money has to be accompanied by Canadian jobs. Maybe there's a tier possible. As you continue to train, maybe there's a tiered credit.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

I don't mean to interrupt but I think this is a great round table we have going here, so I'd like to just keep on going.

Jason.

[Jason Kee]

We have detailed discussions about this in our recommendations. It basically breaks down to three.

In our view there is a role to be played in a combination of a tax credit based funding, which is historically how many of our provinces have done it. That has the value of being agnostic. One of the reasons why, in our view, anyway, the IDM tax credits that have emerged particularly in Quebec and in Ontario have been successful is that they were deployed as economic development plans and not necessarily as a cultural policy objective.

There is a tie to Canadian labour. You have to have labour doing the work that is resident in the province for a certain amount of time. That's what you have to have to be eligible. That makes sense. It's an economic development about building jobs. That's a prerequisite. That tax credit is useful for some types of companies, but it means you are going to get that money after you have delivered and completed your project. That could be years out. A smaller company may have cashflow challenges, in which case direct funding options for them are often good. They fill a role in the ecosystem with respect to making sure they can survive over long periods of time. There is a role to be played there.

The linkage of an IDM fund to what was originally the Canadian Television Fund and got split into two streams is slightly problematic insofar as it is informed by a television and film perspective—I will call it a bias—that doesn't necessarily reflect the full roster of IDM production, especially on the game side, which from a production standpoint operates very differently, especially for the smaller projects. Hiving it off is worthwhile.

[Rob DePetris]

Most of the tax credits for small companies across Canada are on completion of projects, as Jason was saying. The larger companies have annualized tax credits. The difference is you can't go to the bank with these credits that are based on finished products because the bank won't lend you money. They ask what happens if you don't get the product done. The guys who need the annualization don't have it with all or most of the tax credits because of their size.

In Newfoundland and Labrador, the government gets away from the tax credits and starts making individual deals with the companies that invest there. They have different grant and loan programs and so forth. They don't really base themselves on a tax credit system.

[Carole Deniger]

In Quebec, a low-cost gap financing tool helps you have your money beforehand because you are going to get secured revenue. That also helps to bridge. That's an issue.

[Peter Miller]

Thanks for the question. It's an excellent one.

I come at it as someone who has worked in traditional media for 20 years. My Interactive Ontario hat is one I just put on about five months ago. It's pro bono.

I'm going to say this very directly. The worst thing you can start doing with digital media is to start to think about it the same way you think about film and TV. They are completely different. You simply don't want to go there and start thinking about digital media the same way.

It's funny, I was moderating a panel at a conference of the so-called International Institute of Communications yesterday. We had a subject on this. I asked the participants what I should say to them because I needed some advice. One of the things I heard from an independent producer was a very frank comment that the trouble with traditional film and television is the companies are based on earning fees rather than making profits. It's a whole different kind of business model. With all respect to my friend Maureen, the last thing you want to do is import something like a point system, or 10 out of 10, or any of that crap we have in film and TV and bring it over to digital media. It would be a huge mistake.

Just to finish, you will ultimately have to pick priorities. Government funding is limited. One of the things you might have to ask is where limited public funds go.

[A voice]

Can we hear from these two gentlemen?

[The Chair, Conservative, Rob Moore]

You have to use your minutes.

[Peter Miller]

That was my fault.

[The Chair, Conservative, Rob Moore]

That's up to you.

Next we have Mr. Young.

[Terence Young, Conservative, Oakville, ON]

Thank you.

With your agreement, I'm going to ask Mr. Armstrong to finish what he was asking before.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

The question I asked Mr. Henderson had to do with the barriers, the level playing field, that digital distribution of the product can have for the rural areas of the country, but also maybe the challenge of having that creative culture outside urban areas and trying to develop that. You were cut off, so maybe you could just finish your thought.

[Donald Henderson]

Sure. I would say two things. One is that these triple-A games cannot be made in small centres. There's just not the talent there, and we've talked about that.

However, in Ontario there are a lot of small companies, which could really be two or three people, and two or three talented people can be almost anywhere, so there is an opportunity for those people to create great content. These games are different from the retail box product, but you can play them on your phone. The studio that made the Puffin game was a larger studio, but it was probably made by a small team. That's one thing, and I think that is a benefit.

Also, if those smaller teams make a smaller product, they still need help to get the world to find out about it. That has been alluded to, that there needs to be more support for marketing. That small team can be based anywhere and make the best game in the world, but if nobody knows about it, it doesn't exist. I think there is a real opportunity to assist on the marketing side—we call it “discoverability” or having people find your game—because so much content is being created. The flip side of the low barrier to entry is that a lot of people can make that content.