Industry Committee on Feb. 24th, 2014

[The Chair, Conservative, David Sweet]

Good afternoon, ladies and gentlemen.

Welcome to the 11th meeting of the Standing Committee on Industry, Science and Technology. Pursuant to Standing Order 108(2), we are undertaking a study of the entertainment software industry in Canada.

We have witnesses before us in person today. From Frima Studio, we have Pierre Moisan, vice-president, strategic and business affairs. From Project Whitecard, we have Khaled Shariff, the chief executive officer. By video conference we have Donald Henderson, president and chief executive officer, Interactive Ontario, and joining him is Sara Morton, a director. By telephone we have Mr. Jonathan Lutz, vice-president and chief financial officer, Electronic Arts.

I would remind colleagues that it's easy to lose track of those folks who we have with us remotely. We have one witness—with two individuals—by teleconference, and then we have Mr. Lutz only telephonically. Please bear in mind that when you're asking questions, etc., you can refer to those who are joining us remotely as well.

Ladies and gentlemen, as witnesses you are given 10 minutes each for your opening remarks, but if you could keep them more succinct, that would be great, because we have four presentations for opening remarks.

I take it, Mr. Henderson, that you'll be giving the opening remarks for your organization. Is that correct?

[Donald Henderson, President and Chief Executive Officer, Interactive Ontario]

Both I and Ms. Morton will. I'm going to start and then she will—

[The Chair, Conservative, David Sweet]

You will share the time.

[Donald Henderson]

Yes. We'll combine it into the 10 minutes.

[The Chair, Conservative, David Sweet]

That's great.

You are given 10 minutes. If you could make it six or seven, I would be one delighted chair, but whatever you're able to do.... I understand that you've already prepared them. Try to keep them as brief as possible. That said, I also don't want you to rush through too much, because we do have active translation as well.

We'll follow the orders of the day. I'll begin first with Mr. Moisan.

Go ahead with your opening remarks, please.

[Pierre Moisan, Vice-President, Strategic and Business Affairs, Frima Studio]

Good afternoon. I am Vice-President of Frima Studio, a business in Quebec City which started up with video games. Frima has 350 employees and is the largest independent video game design studio in Canada. The business extended the scope of its activities by moving on to animation films with its first feature film entitled Le coq de Saint-Victor.

Frima has clients in the United States, Europe and Japan. We began by providing a lot of services for large companies like Warner Bros., Electronic Arts and Disney. We still work with them, but increasingly we work on the creation of original intellectual properties. My main objective in this presentation is to explain the reasons why we started doing that.

As you know, Canada has become a very fertile video game design hotbed. This began in Quebec thanks to some very interesting tax credits for businesses, and the other provinces followed suit. For instance, Electronic Arts, one of our clients, settled in Montreal. Ubisoft and Warner Bros. are also there, among others. These businesses settled in our area in order to take advantage of the very interesting tax regime and very competent employees.

This type of fiscal framework is now offered in Ontario, British Columbia, Nova Scotia and Manitoba. The Canadian provinces are attempting in this way to attract and help video game companies and digital entertainment product companies, and that is a good thing.

In Vancouver, that has been called Hollywood North because of its very strong film industry, this type of tax credit was not being offered and this recently led to the closure of some companies. Consequently, British Columbia has decided to offer tax credits also.

It is extraordinary to have attracted all of these businesses here to Canada and to have created expertise in programming and animation, particularly. The only risk is that we may not further the creation of Canadian-owned businesses that create Canadian brands. Tax credits are an interesting tool, but you know as I do that businesses are now inclined to shop around everywhere in the world to find superior tax advantages or more interesting ones, which can sometimes lead to a slew of business closures here, which then open elsewhere.

Competition is becoming increasingly fierce, be it in Asia or in Eastern Europe. Canada remains competitive on tariffs, thanks to the tax credits it is offering. Without those tax credits, we would be competitive because of the creativity and expertise we offer, but we would have a problem with keeping companies here.

I want to emphasize the importance of this rootedness. We have to continue to invite businesses from other countries to settle here because that is an excellent thing. However, we have to be aware that even if a video game that is created in Montreal sells very well, for instance, often the design of the game or the marketing plan was done abroad. This means that the business intelligence does not benefit Canada, and France or Santa Monica instead of Canada will be pocketing the profits. We thus have to ensure that we create Canadian brands, while welcoming foreign businesses.

One of the federal government's initiatives I find particularly interesting is the Canada Media Fund. It is managed by Heritage Canada and offers programs that support the creation of original intellectual properties. Any business may submit a funding request as long as it is Canadian-owned. Thanks to this initiative we can create brands here and prepare our marketing strategy here and thus keep our profits here. This type of rootedness is essential if we are to ensure the durability of our industry. That is the main point I wanted to make.

We work a great deal to export our products. Assistance to exports is very important. As you know, in the video game industry, business models have changed enormously. In the past, a game was created on a disc, on a physical support, it was put in a box and placed on shelves at Walmart, and we had sales. Now, games are living organisms because of data exploration and management. People no longer pay for the games at the outset; they will pay if they like them. There is a tendency toward free-to-play games which makes marketing games much more difficult.

With Google Store or Apple Store, for instance, access to games is easy, but there are so many apps that in order to be noticed in the crowd, we have to make considerable marketing efforts. This is another area where Industry Canada could intervene. The department could help market Canadian products so that they could be sold throughout the world.

We are not hiding it: we want to broaden our markets. Even the United States has become a small market for certain games, given all of the extremely promising new markets such as China, South Korea and India. We have to compete with their businesses and conquer those markets.

Consular offices, embassies or trade attachés could help us to establish contacts in these large markets. That is another useful thing the federal government could do.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Moisan.

Mr. Shariff, please go ahead with your opening remarks.

[Khaled Shariff, Chief Executive Officer, Project Whitecard Inc.]

Thank you for having me.

My presentation is entitled “A Digital Highland”. The first half is about me, and the second half is recommendations.

I'm the CEO of Project Whitecard in Winnipeg. Project Whitecard is a company that's been around for eight years. We specialize in creating learning games for children, so you may not have seen our games but your kids have seen them.

We did a project with the Canadian Space Agency and Julie Payette, which went to over one million kids. We have just completed a project depicting the International Space Station with Chris Hadfield that went to over one million kids.

We are now funded by the Canada Media Fund to work on a new brand, working in conjunction with NASA to create a worldwide project called Starlite.

We have investment from the Canada Media Fund, the Manitoba tax credits, the Bill and Melinda Gates Foundation, and the MacArthur Foundation.

We're an overnight success, but eight years in the making. We're quite happy to be developing our own brand now. It's wonderful to be in that place.

Why did I choose to do games? I was actually at the Canadian Broadcasting Corporation for four years and decided I should do something that would change people and maybe make them smarter. I researched and when I looked at UNESCO results on the direct impact of mathematics on the gross domestic product, I found that perhaps I could use technology to make people smarter.

Did you know that the average Canadian child spends over 40 hours a week in front of screens? That's a stat from Active Healthy Kids Canada. Maybe we could find a way to make that more meaningful.

Our goal is simply to revolutionize learning with new and more intelligent technology as we work on this learning project. With the MacArthur Foundation, NASA, and the Canada Media Fund, we are trying to implement a digital badging system that will give accreditation across the board to science standards that kids acquire while they play these games. It is possible. We want to inspire both students and adults to create a better tomorrow through science, technology, engineering, and mathematics.

What do I see a digital highland as being? Yes, it would be a northern Silicon Valley model. We would like to revolutionize accreditation for IT professionals and young learners across Canada. For Canada in general now, I think we should look at improving the national communication between IT leaders and start-ups.

We should maintain or increase funding envelopes such as the Canada Media Fund. I found out just before I left for this trip that we were accepted into the Canada Media Fund accelerator program with an accelerator program in Winnipeg called LaunchPad. That is fantastic and will help us go to market. We should facilitate career opportunities for accelerator programs and mentors.

In the video game industry, just as an example, CMF now has eight, and now nine with one in Winnipeg, of these accelerator programs they are supporting. It's very important in establishing our own brand for the first time, we realize that we now need to re-emphasize our efforts and our intellectual efforts on how we are going to align this product to market.

I applied to the Canada Media Fund for three years in a row—hundreds and hundreds of pages, maybe over 1,000 pages of applications—before we were accepted. Maybe more emphasis on the actual alignment with the market....

Regarding accreditation, many of the people I hire come directly out of working on this technology themselves. They're just good at it.

I spent three months, thanks to a Canadian program, in Silicon Valley on an accelerator called Plug and Play. I think David had a small part in that. I think he was in the room when I won that, down at GDC.

Quite often, people there who have successful IPs, who make billions of dollars on Dropbox or Facebook, have just come out of a university environment. The provenance of higher learning is moving to social communities of digital literacy, but we don't really have a way of tracking who knows what.

Part of the project I'm doing with the MacArthur Foundation is simply to acknowledge people's skill levels in that region.

It's a question of do we need better standards? Do we need better peer recognition?

Project Whitecard delivers a program in serious games at the University of Winnipeg. It's a full-time certificate program. We're also proud of that.

Mentorship should be sustained, local, and connected to venture capital. The example I gave you was Plug and Play in Palo Alto. There will also be Plug and Play in Calgary, and LaunchPad in Winnipeg.

What can the government do?

The role of trade commissioners should evolve to be aware of the broad spectrum of activities as we try to create start-ups. Remove the barriers to start-ups on RFPs, government and otherwise. Responses of 100 pages are too large. I competed with 180 companies for the NASA project and we won. The response was 15 pages long, and a presentation. We won that, so that's good. We were able to compete with the biggest companies in the world on that project.

Simultaneously, connect educational leaders and entrepreneurs in the IT sector.

Increase the digital fund envelopes. Why? It hones us. Smaller companies, like my company which has 10 to 20 individuals at any given time, and is moving to 100 individuals, were honed over the last three years because there was the competitive environment with the Canada Media Fund where everyone across Canada can compete. It wasn't easy, but we picked up the skills we needed.

In summary, breed 100-plus more Canadian start-ups every year. We already know what a digital highland is, right? We know that a nearby university or college with evolved programs in business and IT, together with a local accelerator program and business capital, combined with legislation, is what a digital highland is and that's what Canada can be.

Many start-ups leaving the nest means more will flourish, more jobs, and Canadian leadership in the world.

Thank you.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Shariff.

Now we'll move on to Electronic Arts, and Jonathan Lutz, who's with us telephonically.

Mr. Lutz, please go ahead with your opening remarks.

[Jonathan Lutz, Vice-President and Chief Financial Officer, Electronic Arts (Canada) Inc., Electronic Arts Inc.]

Good afternoon. My name is Jon Lutz and I'm the vice-president and chief financial officer for EA Canada.

I've been with Electronic Arts for sixteen years, and I've spent the last eight years here in Burnaby, British Columbia, where we make world-renowned games such as NHL, FIFA Soccer, as well as the Ultimate Fighting Championship title, which is currently in development.

EA also has a number of other studios across Canada, including studios in Edmonton and Montreal, a location in Kitchener, Ontario, and our Charlottetown, Prince Edward Island studio. They make games such as Dragon Age, Mass Effect, and the widely popular mobile title, The Simpsons: Tapped Out.

Combined, EA employs close to 1,800 employees in Canada.

EA began its presence in Canada way back in 1991 with the acquisition of Distinctive Software in Burnaby. Distinctive Software itself was founded in the 1980s. Since that time, the studio has grown to be one of our largest in the world, and our company has continued to reinvest in Canada by opening, expanding, and acquiring new studios.

In the 1990s, the attractiveness of Canada was the incredible talent that existed in greater Vancouver, but also the proximity to our corporate headquarters in Redwood Shores, California, and the favourable currency exchange rate that existed at that time.

While our headquarters is still in California, many things have changed in our industry.

The macroeconomic environment that existed at the time has changed, with the dollar reaching close to parity and eroding some of the advantage we had when it was lower. Perhaps one of the biggest things that has changed is the size and importance of the Canadian industry as a whole. When we set up EA Canada in 1991, there weren't many video game companies in Vancouver, let alone across the country, but that has changed dramatically.

We've seen Vancouver grow its industry too. Where at a time it was the largest in Canada, we've seen the rise of the Montreal industry, which is now a world leader in our sector, boasting roughly 60% of all video game employees in Canada.

Perhaps the biggest change is that Canada as a country now boasts one of the biggest video game industries in the world.

This hasn't happened overnight, but it has happened rapidly due to a number of very strong economic policies, such as provincially administered targeted tax incentives that have helped our industry grow and stay competitive in an ever more globally competitive industry. But it remains the quality of employee we can find in Canada that keeps us here and compels us to reinvest.

As our industry grows, it has become harder and harder to find the intermediate and senior talent to fill all of the positions we have available. In order to produce the best products we can and stay ahead of the evolution of technology, we need access to a global labour pool.

Talent is the natural resource that we thrive on, and while we do everything we can to find that talent in Canada, sometimes for a number of reasons we need to look globally. Being able to take advantage of programs through ESDC and CIC that are efficient and reliable, and to prioritize highly skilled employees are vital to the continued growth of our company.

Recent changes have caused delays in this process; however, after hearing recent comments by Minister Kenney and talking to our trade association, which has been working hard on this issue, I'm now optimistic that the message is getting through.

We pride ourselves on being an innovative company that is on the cutting edge of our industry. We invest in R and D in Canada and take advantage of the SR and ED tax credit program to help offset some of the cost of this investment.

While the program is very valuable, it denies multinational enterprises the same benefit that is given to wholly-owned Canadian firms, even though very important and innovative R and D is being conducted here in Canada by companies such as ours.

Providing global companies with the same percentage tax credit in a refundable manner would make Canada much more competitive for investors to serve their increased R and D expenditure.

EA is a company that designs and produces intellectual property that is sold all over the world. As the economy moves from a brick and mortar model to a digital economy, the protection of intellectual property has become even more important than in the past.

Countries with the strongest intellectual property protection laws will be the ones that thrive in a digital economy. Canada's Bill C-11 on copyright reform was a strong first step toward improving Canada's protection of intellectual property.

I encourage you to continue to work to ensure that rights holders in Canada are protected and have the confidence to continue to produce innovative products here.

We believe that Canada has a number of key advantages that allow it to continue to be a world leader in the production and development of video games. We've shown our commitment to Canada by expanding from being a small acquisition 23 years ago to having multiple locations spanning from Vancouver to Charlottetown.

We employ a broad range of experience levels, from the recently graduated junior employee to the senior producer responsible for the overall product management of our games.

We invest in our employees, and EA works with local universities to help ensure the curriculum is up to date and reflective of what our industry needs from new employees.

We provide internships to help advance the skills of students while they're still in school. We ensure our employees continue to have access to the education they need to advance their careers and become more valuable within the company.

Initiatives like EA university, which puts employees through rigorous courses that enhance their skills in programming, art, and production, are huge investments by EA, which we believe benefit the employee and the company in the long term.

We hire Canadians whenever we can. It is much more expensive for us to recruit prospective employees living abroad and then relocate them and their families to Canada, but in some situations when we cannot find these people in Canada, we have no choice.

If I can leave you with one final thought today, it is that we exist in a global industry, within a global economy that is in competition for the best people to produce the most innovative entertainment experiences.

Without support like SR and ED to invest in those experiences and without efficient access to the best talent, our industry will not continue to be the Canadian success story that it is today. We can work together to ensure that this industry goes nowhere but up.

I appreciate the opportunity to speak with you today, and I am open to answering any questions you may have about Electronic Arts.

Thank you.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Lutz.

Now, we'll hear from our final witnesses.

Mr. Henderson, from Interactive Ontario, please go ahead with your opening remarks.

[Donald Henderson]

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.

[Sara Morton, Director, Interactive Ontario]

Thank you, Don.

Good afternoon, everyone.

Don has identified some of the things we know about the IDM sector in Ontario. I'd like to touch briefly on a number of things that we still don't know about IDM in Ontario. Surprisingly, one of these things is the precise size and scope of the interactive digital media sector in Ontario and in Canada.

Over the past year, IO has been active in research into the industry, including through our involvement in the latest Canadian Interactive Alliance industry profile and also a research project that's being funded by the Ontario government. That will provide a more detailed mapping of the companies in Ontario, identifying their size and scope of their activity and information about revenues, use of government support, and other factors.

A second thing that we don't know is precisely how synergies work between subsectors within the interactive digital media industry and between the IDM industry and traditional media. We know they do. There are many examples of books being turned into digital media games, and of course many examples of film and TV projects having interactive digital media components. What we don't know is precisely how they can be encouraged, or indeed whether they need to be encouraged.

The third thing we really still do not know is precisely the best way for government to provide early-stage support, whether this relates to the start-up of a company or development of innovative, new interactive digital media content. We do know that financing is identified as the most significant issue for the sector. Our colleagues at the Canadian Interactive Alliance have done some research on this. Some of the earlier witnesses have referred to the importance of provincial tax credits, and we certainly agree with that. We understand that our colleagues at the Entertainment Software Association of Canada have been advocating for the creation of a federal IDM tax credit that would work in concert with the existing provincial credits. Of course we fully support that suggestion.

The Canada Media Fund has also been referred to, and we absolutely agree that this is a very important source of funding for the IDM sector. As well, for start-ups, both Ontario and the federal government have launched VC funding programs. We haven't seen analyses of the returns on these investments, but we feel that VC matching funds might be a better approach than the government trying to pick winners. As well, it's important to note that VC funding is not for everyone. Most young entrepreneurs get their first funding from their own resources and friends and family. However, tax measures in support of this kind of early-stage funding might also be worth considering.

Finally, we don't know what gaps, if any, exist in the case of projects that push both technological and artistic boundaries. We do know that in such cases companies tap into R and D support like the SR and ED program, as other witnesses have mentioned, and also content support, like Ontario's digital media tax credit. Is this just a wonderful confluence of things working ideally together, or do these supports not fully provide a basis for the necessary components of the projects? We just don’t know enough about this yet.

Finally, I'd like to say that whatever we do, we need to be nimble in the government support for the IDM sector. We need to be prepared to experiment, to examine, and to make refinements. In our view there's no shame in not getting it exactly right the first time. If we want leading-edge interactive digital media companies in Canada, our public policy frameworks need to be leading edge as well.

Thank you for your time. We look forward to your questions.

[The Chair, Conservative, David Sweet]

Thank you very much, Ms. Morton.

Colleagues, this is our first attempt at our new model. We have just enough time for eight minutes per person. It'll be one round straight through at eight minutes per person, and then we're going to business at the end. I'll need to cut you right off at eight minutes for us to maintain our schedule.

Please go ahead, Mr. Lake, for eight minutes.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thanks to all the witnesses for being here.

After listening to all the testimony, the main thing I want to focus on is distribution revenue. I want to get a bit of an understanding.

Mr. Moisan, I'm curious about your organization. You're based in Quebec City. You have 350 employees.

I had the opportunity to visit Ubisoft in Quebec City and do a tour from floor to floor. I was amazed at how many people were working on video games there and just how intense the activity was.

Tell me a bit about what the 350 employees are working on, and from a distribution standpoint, how you sell your product.

[Pierre Moisan]

At first we started doing servicing. That servicing helped us gain some expertise in programming and animation. We do 2-D and 3-D animation. We create our own technology. We have our own game engines—that's what they're called—so our technology is adapted to many types of game mobiles.

Games now have to be able to communicate together, whatever the platform is. If you want to play on your mobile device and then come home and start playing on your computer, the points you made while you were on the bus have to accumulate in your game and your computer. Otherwise, you'll use all sorts of mobile devices. It's every screen.... People now want to have access everywhere at any time. Increasingly, it's going to be the same with television, this revolution.

Also, there's the fact there was a period where there were garage companies that could make games. Then there was that trend for triple-A titles and only big companies could make blockbusters, which were quite risky, but now it's back to garage companies for many mobile applications. That's what our marketing efforts have to fight, because we are stuck with the fact that there are hundreds of thousands of apps.

Because of that, how can you stand out, apart from big successes like Angry Birds, which everybody knows about and was very viral from its inception. Some other products are as good as that or even better, but nobody will hear about them. You have to find ways, a lot of them through social media. We now have hired people who have worked with Procter & Gamble, Ubisoft, and other companies like that. They spend their days creating a buzz and trying to get people to become aware of our products. They'll go on Facebook and YouTube; they will make videos and spread the word and stuff, but it's very difficult.

The other thing that's difficult is the free-to-play model. It makes you successful sometimes, but kids are used to free, to not paying on the Internet. They'll try your game, and when it's time to pay, they'll stop. For example, we have a super good title called Nun Attack, which is quite irreverent but very decent. It's a humoristic title. We have seven million downloads, but the money is not there to match those numbers.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

That's what I'm curious about. That was the crux of my question. For this offering, you have seven million downloads. What's the distribution system for your downloads? Where are consumers buying?

[Pierre Moisan]

They go to the Apple store.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

The App Store, okay.

[Pierre Moisan]

They go to the Google store. One of the keys things—and it's happening right now to one of our brands for preschoolers, CosmoCamp. You want to be featured as one of the top 10 games. If you manage to convince them to feature you, then people will see you when they go to the game, but if you're number 375, nobody will ever hear about you.

The game is to convince those people. When you think about it, there are only a few. It's Google or Apple. Microsoft is there, but not as much; they try to be there increasingly. Or you go online, and again, it's how you create awareness: that's the new challenge.

One of the key elements is that, as I said, we have seven million, but the sales are not nearly as high. Now we have clients, and that's how we....

You've heard about FarmVille by Zynga. It was very successful on Facebook. What they did was that they had success, but now they also own the clients. We are becoming increasingly a database model of a business. We have our clients and when we have a new game, we promote it or show it to our seven million clients without any effort. We just spread the word.

You need to have your own crowd, and you need to grow your crowd increasingly. The business model has changed dramatically. Before it was being in the aisles of Walmart, and being at the best place, but now we're nowhere, right? We have to find our place there.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I'm going to stay with you, because this is interesting. I'm learning something here.

If I go to the app store and buy something, I can use it on my iPad. I'm used to doing that, but how does that interactivity work with other systems? How many different versions of each game would you have to make? Are they the same from one platform to another? Is there an interactivity?

You talked about someone using whatever device they're using on the bus, and then coming home to use their PC. I imagine the software, or the code for that, would be different. Maybe you could explain that a little bit.

[Pierre Moisan]

We have engines for mobile games. Then we'll program.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Yes.

[Pierre Moisan]

We call it porting. We port a game from a platform to another. We have another engine that will use the code and change or transform the code into that other platform.

As well, we need communication capabilities, because we want them to communicate, but sometimes the game will be different. For example, if you play with your finger on a screen, or you play with a mouse on a table, you won't have the same interaction. You have to adapt the game. It's not only translating code; the graphic design, the human interface, the relationship has to change too.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

How do you monetize the game, just using the example of the game downloaded seven million times that you talked about?