Canadian Heritage Committee on Nov. 1st, 2012

[Prof. Avrim Katzman]

Yes, they get better offers. Historically the animation industry is more robust in the U.S., and the weather's better in California.

[Terence Young, Conservative, Oakville, ON]

Yet despite the size of our population, I think we're number three in the world in Canada.

[Prof. Avrim Katzman]

In terms of game development, yes, we are number three in the world.

[Terence Young, Conservative, Oakville, ON]

Can you account for that? Can you summarize why that might be, other than the fact that Sheridan College is in Canada?

[Prof. Avrim Katzman]

I don't know. Perhaps it's because there's no hockey this winter, so there's nothing else to do but make games.

[Terence Young, Conservative, Oakville, ON]

Maybe Mr. Davis can add.

Thank you, Mr. Davis. I thought your presentation was very interesting.

You mentioned five things that were on a list of things that might help the industry, so I'd like to ask you to amplify your comments on them.

First of all, you mentioned a federal digital tax credit. Do you have any comments—maybe I can give you a short list of things—on how such a thing might work?

You said that you don't use SR and ED. Maybe you can tell us why or how it could be improved, and how robust rules for broadband might work. Can you give us a summary of your thoughts on those three things?

[Lance Davis]

Thanks. Yes, I would be very pleased to talk to those issues.

Let me correct something. We do use SR and ED. It's very helpful for our industry. Most of our members do well qualify, as there is a high degree of experimentation as well as development in the course of video game manufacture.

What is wrong with some of the provincial programs that provide the digital tax credits, ours included, is that the provincial SR and ED element is offset. You may recall that I mentioned that the B.C. digital tax credit is 17.5%. We take the 10% for B.C.'s SR and ED credit off that, and with the fact that the qualified labour pool is different between the two—and I can speak to that in a minute—our effective tax credit digitally here in B.C. is just over 5.5% as calculated by PricewaterhouseCoopers.

What we have to watch for if we were to contemplate the creation of a federal digital tax credit.... We don't mind that there are stacking provisions with SR and ED. It's okay that this does get deducted off; no one wants to double-dip. However, watch for the qualifying pool of labour. For instance, the B.C. digital tax credit doesn't allow for owner members of certain video game companies to be included in the calculation. I humbly submit that in a studio of five to 10 people—and that's very common in the social and casual gaming realm these days—half the people sitting in that office are owners. In fact, we give equity in our companies. We're very pari passu in our organizations, and flat. It's part of our culture. They should participate.

Contract labour is often excluded, and it's very common in our industry. Because of the project nature of the video game development industry, we parachute people in, if you will, to various projects at certain times, so the contract element is very common to us. Just watch for those things.

[Terence Young, Conservative, Oakville, ON]

In the remaining time, maybe you could talk a bit about how to emphasize training and what we should do with broadband.

[Lance Davis]

It's important that in the educational system we need to prioritize training. We do it in the science, technology, engineering, and mathematics realm, the STEM, but disciplines such as animation, visual effects, game design, and sound design lead to high-value, high-paying jobs. By way of example there, our average salary here in British Columbia in $79,000; the GDP element of that is over $180,000, so you can see the import of these jobs. We should definitely focus on ways that we can train those people and foster a cross-disciplinary approach that includes soft skills such as communications, business, and marketing. I hope that elaborates a bit for you.

[The Vice-Chair, NDP, Pierre Nantel]

Thank you, Mr. Davis.

I will now give the floor to Mr. Andrew Cash.

[Andrew Cash, NDP, Davenport, ON]

Thank you, Mr. Vice-Chair. I would like to share my time with my colleague, Mr. Dubé.

Good afternoon, Mr. Talbot. We are delighted to have you with us today. Since the beginning of this study, we have heard from many witnesses from the world of video game production. You are the first to represent the perspective of gamers.

Can you share your expertise with us on the state of video games in Canada and gamer culture? What do you expect for the future of this industry?

[Denis Talbot]

First of all, Mr. Davis is right: the typical gamer plays a lot.

I also consider my mother a gamer, because she plays on her iPad and online. She now realizes that her Internet accounts cost a lot. They are very, very expensive. God knows she spends a lot of time doing that. Everything goes into the cloud.

Everything is going to the cloud now, the famous cloud. In order to get access to the cloud, you need the Internet. This Internet costs a lot of money, so if we want to continue developing games that will be going in the cloud, the consumer has to have easier access to Internet and not pay a lot of money.

Gamers play a lot. Game creators watch players and wonder how many hours they play on average.

Did you know that the average gamer is about 35 years old?

They're 35 years old. It might be because I'm playing a lot and raising the average.

Thirty-five-year-olds spend a lot of time doing this. Not only do they spend their time playing for their gaming pleasure, but they also watch movies and make purchases online. This becomes extremely expensive by the end of the month. Therefore, we need to find a way to regulate or standardize prices. It would be difficult to convince the bandwidth providers to do so.

Furthermore, gamers are always up to date on the latest technologies. They show interest as soon as a new game arrives on the market. I see this happening every night. For 14 years, I've been doing live TV shows. You can see it happening on Twitter and Facebook. The amount of time these people spend gaming, studying or playing a little game here or there is incredible. The industry is bustling with activity.

Something we haven't talked about is kickstarters. These are individuals who have good ideas.

They have great ideas. They want to work. They want to produce their game, but it's hard to get access to the funding sometimes. What they do is they go to the States, find a buddy who lives there, join up, team up, make

an independent game

and get the funding.

This is called crowd funding.

Once again, these are losses in revenue for Canada, but it still translates into good games that we can get here via bandwidth.

In short, I think we need to reconsider the way in which the gaming industry is designed. It's constantly evolving. Five years in this industry is too long. A new technology arrives on the market every two years. Take the Apple company, for example. It comes out with new phones every six months, new gadgets or new products.

Gamers try to follow these trends and to purchase the new technology. However, all this goes into the famous cloud, and you need money to access the cloud.

I think it's really important to adapt to this new technology and this new reality that didn't exist 5 or 10 years ago.

[Matthew Dubé, NDP, Chambly—Borduas, QC]

Thank you Mr. Cash.

Thank you to our witnesses for being here. I would like to continue the conversation with you, Mr. Talbot.

My generation had the good fortune to watch your show for a good part of their lives. I have several points of interest, so I will try to be brief.

Let's start with Internet access. We hear about the importance of games for the iPad and the iPhone, but these require access to the Internet. The same goes for game consoles. More and more, updates are mandatory to play new games that arrive on the market, even if you have the DVD.

I represent a riding that is 20 minutes away from Montreal. It is not a rural area, it is an urban suburb, yet some people still have a hard time getting Internet access, sometimes due to the price.

Could you expand a little on what you said earlier about this and on these other concerns?

[Denis Talbot]

It's a sad reality. When I do my show, people can watch me on cable from Vancouver, Manitoba, from all over. I often hear that people can't access games anymore, because now they automatically need Internet access, which they don't have. Therefore, they can't play with their friends online because they don't have Internet access.

That's why developing a plan for countrywide Internet access should be a priority. Otherwise, these people without access are going to be missing out later on, because everything is going online. It's crazy! There are refrigerators that can be hooked up to the Internet now. It's really incredible.

There's another aspect to consider. Why do you have to confirm your identity every time you play online? The game designers could tell you the answer: piracy. Huge amounts of money are lost to unscrupulous thieves who take their products and distribute them free. Some even sell them in flea markets. This is why companies protect themselves by requiring the purchaser to identify him or herself to ensure that a genuine and legal copy is being sold.

It's a vicious circle. The company wants more people to play their game, but if they make it available to more people, some will exploit this and rob them of sales revenue. This revenue can be very fragile. When a small company of eight people launches their first game and 300,000 illegal copies are distributed, they're hit hard.

[Matthew Dubé, NDP, Chambly—Borduas, QC]

So it's important to find a balanced solution to this.

[Denis Talbot]

If I may, I'd like to come back to one point.

One subject often comes up when I talk with young people in the schools. They leave school with their training and a firm grounding in their skills. It’s like trying to learn to swim by reading online. The best way to learn how to swim is to jump in the water.

A good solution to train people faster is paid internships. Students just out of school would work for the company while being paid to learn. They would learn to swim in the wonderful world of gaming.

[Matthew Dubé, NDP, Chambly—Borduas, QC]

Absolutely.

[The Vice-Chair, NDP, Pierre Nantel]

Thank you Mr. Dubé. Thank you very much, Mr. Talbot.

Mr. Scott Simms now has the floor.

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

Thank you Mr. Chair.

I like your points about the proliferation of the Internet. It's not just money that's the barrier, but geography. I have 200 towns in my riding, and 36 towns do not have access to any type of Internet. It's so behind the times; it's like highways and railways.

I want to get to Sheridan first, and I have a question for our folks on the coast.

I was reading the other day, and I brought it up at committee, about how Germany is now using a model for its technical colleges to create schools, and to heavily subsidize them, to put them into clusters over certain industries.

It sounds to me like you've gone the other way. You've managed to put yourselves in towards a certain industry, which is great, and it seems to me that you're adapting to this new type of industry, but when it comes to the government, I think you did say “government participation” near the end of your speech. To what extent...?

Now, when I say “government”, I say “federal government“. Obviously provincial government does have a role to play jurisdictionally, but then you get into that silo thing that our other guests have been talking about.

[Prof. Avrim Katzman]

The federal government plays a role in terms of federal grants for research support. The Canada Foundation for Innovation, the Natural Sciences and Engineering Research Council, and the Social Sciences and Humanities Research Council all provide us with support to engage in research that involves students and trains them to be what the research councils refer to as HQPs, or high-quality personnel.

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

I'm sorry to interrupt. I don't have a lot of time.

In order to attract this type of money, do you first go to the industry and ask what they need so that you can qualify for this money from the government to proceed?

[Prof. Avrim Katzman]

For many of these grants, virtually all the granting agencies require that you have an industrial partner, and the industrial partner commits to a proportion that is sometimes as high as 50% of the value of the project.

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

Right.

[Prof. Avrim Katzman]

We're always both at the behest of the government and of our industrial partners. Certainly we seek ideally suited industrial partners.

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

When at the end of your speech you said “government participation”, is this what you're talking about?