Thank you, Mr. Chair.
Good afternoon. My name is Donald Henderson. I am the president and CEO of Interactive Ontario, or IO, as we call it. With me today is Sara Morton, who is a board member of Interactive Ontario. She is also a member of our research and advocacy committee. We’re delighted to be here today to speak to you about Canada’s entertainment software industry.
As a bit of background, Interactive Ontario is a not-for-profit trade association. It was formed 13 years ago. Our mandate is to assist our members in growing their interactive digital media businesses. IDM is the abbreviation.
We represent approximately 300 interactive digital media companies. These companies create interactive content across a wide range of sectors for the entire spectrum of digital media devices. This creation of content includes creating video games and other forms of entertainment software, but also e-learning applications, web-based content, apps, and other types of content for such mobile devices as smart phones and tablets.
Given our mandate and our membership, it probably will not surprise members of the committee that we take a very broad view of what constitutes the entertainment software industry. This is probably consistent with what you have already heard from some of the other speakers.
The definition of video games has changed remarkably over the past five years. We've already heard references to companies, such as Electronic Arts, that make what are called triple-A games for PCs or for such consoles as Xbox One and PlayStation. These are the traditional video games in Canada from a development perspective. In cities like Vancouver and Montreal these are the dominant types of products created.
In contrast, although there are several companies in Ontario that are creating these types of games, Ontario is also home to a large number of small and medium-size businesses, many of which are bootstrapping their own businesses with smaller-scale development and which distribute their content digitally, as we have already heard.
Only 4% of Ontario’s interactive digital media firms are considered large—and in this industry, large means over 100 employees—and a full third of Ontario's companies have five or fewer employees. It is a very entrepreneur-driven business.
Another change that has happened is that people are consuming games in a different way. They'll pull out their smart phone while they wait for the bus; they'll check their Facebook account; they may play a game while they are on a break at the office.
Games are also starting to serve a broader purpose than simply entertaining, as many are designed to simply educate or inform. The underlying technologies for all of these types of entertainment software are the same regardless of the company creating the software.
To give a little more background on it, In Ontario we have approximately 1,000 companies creating interactive digital media. They involve approximately 17,000 employees and generate over $2 billion in annual revenue. This is about an 18% compounded annual growth rate over the last three years. We have quite a successful industry in Ontario. There are several reasons for this.
First, the barriers to establishing an IDM firm are very low compared with those for such traditional sectors as manufacturing or natural resources. Ontario benefits from having a large number of highly skilled employees. There are challenges, which have already been alluded to, in finding senior and intermediate employees, but Ontario's universities and colleges are generating a large number of qualified employees who are helping companies in this industry grow. These include computer science graduates from McMaster University and the University of Western Ontario, and those with technical as well as artistic and creative skills, such as those from the design program jointly offered by York University and Sheridan College.
That said, the industry is growing faster than the labour market, and so, as mentioned, there are some challenges for senior and intermediate employees in certain circumstances.
The second factor behind Ontario's success is the concentration of other creative industries in Ontario. There is a long history of excellence in industries such as film, television, book and magazine publishing, and music.This provides talent and cross-media opportunities that have fostered the development of a strong digital media sector.
Third, the Ontario government, like the federal government, has supported the digital media sector. In Ontario, the broader ICT sector is one of the economic priorities. The government in Ontario is investing in this sector through tax credits and other means of support.
Finally, government support has targeted both Canadian-owned and foreign-owned digital media companies, not necessarily in the same ways for all companies, but government has recognized that to build a strong industry, we need an ecosystem that supports both Canadian-owned and foreign-owned companies.
Government's role in supporting and growing this important industry cannot be overstated. We believe the objective must be to create a successful industry, with the emphasis on the word “industry”.
I spoke to the House Standing Committee on Canadian Heritage a few months ago. We mentioned at that point that the goal should be to develop an industry rather than to try to subsidize cultural products. Support for the IDM industry must allow the government to see its investments recouped through employment, payment of taxes, and other ways of return on investment.
I'll now turn it to Sara.