Industry Committee on Feb. 26th, 2014

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Okay.

Ms. Verge, this was brought up before the meeting started. You talked a bit about the scientific research and experimental development program. Two years ago, the federal government made some major changes to the program.

Could you tell us how this new environment has changed your approach? Has it influenced the decisions you could have made or those you will have to make in the coming years?

[Nathalie Verge]

That's one of the factors, but the changes have not prevented us from pursuing some fairly intense research and development projects. However, the credit should not lose too much of its competitiveness compared with what is being done elsewhere in the world because some of our studios are in a good position to land major projects. We need to think of our company as being in competition with itself, since Ubisoft is present in 28 countries. Our studios are competing amongst themselves.

The credit should not fall below a certain threshold so as not lose Canada's competitiveness, but I cannot tell you what exactly that threshold is.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

I would now like to talk about the workforce issue.

Labour mobility has been discussed. When Mr. Dupuis appeared before the Standing Committee on Canadian Heritage, he talked about major issues in terms of processing times for entry applications and in terms of just bringing in immigrants to help sustain your activities. We know that job qualifications are often so specific that candidates cannot be found in Canada right away. So the company has to seek help abroad, where various sectors are competing for a handful of experts.

Has the situation regarding processing times gotten worse? Is it still as difficult to convince candidates to come work on projects in Canada?

[Geneviève Poulin]

In recent years, things have not been easy for us in terms of labour mobility. Delays are getting longer every year, so it is very difficult to know when people will be able to start working on our projects. They sometimes arrive too late. This has been a topic of discussion for a number of years. The workforce issue is still very current. Sometimes, changes are made that help us in one area and hurt us in another.

A few issues have had an especially strong impact on us recently. Authorities take a very long time to issue work permits, both here in Canada and in various Canadian embassies. In addition, there is a lot of red tape standing in our way.

All kinds of other measures have been implemented recently. For instance, work permits are limited to four years, and constrains have been proposed to the intra-company transfer program. All those things complicate the situation in terms of labour mobility.

Again, hiring abroad is really our last resort. The process is extremely expensive and long. If we could find people locally, we clearly would.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Family reunification is another important issue. People who have been living for years in my riding, that of Beauport—Limoilou, or who came to Canada hoping to bring their wife and children here, are facing undue delays.

Regarding recruitment, is the fact that those individuals cannot bring their family to Canada an important factor in the loss of expertise? Have the conditions deteriorated?

[Geneviève Poulin]

We don't really have any problems when it comes to that, but the permanent residence process is cumbersome. We strongly encourage well-integrated individuals who decide to stay here to become permanent residents. Of course, we do not force them. However, the process is very long. Few people complain to us about family reunification issues. Most of our employees are qualified workers for whom the permanent residence process is facilitated and whose family members can become permanent residents under the same process.

However, there are some problems for Canadian experts returning to the country. They cannot automatically obtain a work permit, like foreign workers who come to Canada, so that has caused us some problems. We sometimes have a hard time convincing a Canadian expert who, for instance, has been living in Romania and has a Romanian wife to come back to Canada. Their wife will only be able to obtain visitor status, and it could take up to 18 months for her to become a resident. That's something we have seen over the past few years.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you very much.

Thank you, Mr. Chair.

[The Chair, Conservative, David Sweet]

We're way over time. We now go on to Madam Gallant for eight minutes.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you, Mr. Chairman.

I don't have a lot of hands-on experience playing these games myself, Mr. Chairman, but I do have a constituent, a local app developer, Red Barn Games, which recently launched What a Wonderful Word on the App Store. I may, for the purposes of research, investigate this. They're down in a very rural and farming community called Westmeath.

I guess you have as many four- to nine-letter words as possible, using jumbled letters and so on. They're actually selling this, as opposed to offering it for free and then charging more as you want to get it faster, such as we heard about in previous testimony.

We've heard a bit about the need for tax credits. In what ways can the government promote the video game industry in Canada, other than through tax incentives? Are there any barriers to new development?

I'll hear from each of the companies.

[Jason Della Rocca]

Yes. Particularly for a start-up like that one, working on games for the mobile devices, tax breaks aren't terribly relevant. They need to survive for the next 10 to 12 months to even file their taxes. In those cases, whether or not it's through the federal government, they need more early-stage opportunities, such as venture-oriented funding or programs like the Canada Media Fund that are providing dollars to actually produce stuff at the start.

A young start-up has no money, and they don't have a foreign head office investing in the region and planting and building up a studio. They are just five guys in a basement with a dream. To the extent that there are support mechanisms, a big part of it is access to capital. That would constitute one thing that would certainly help to generate new start-ups that create new intellectual property. Concerning the IP you mentioned, if the word game that is Canadian-owned makes millions and millions of dollars, that money is going to flow back into the Canada ecosystem and economy. That's one piece.

Then, you can start looking at other areas: linkages with universities, which we touched on; having more entrepreneurial-oriented educational programs, so that when these kids come out of university they can contemplate starting something of their own and generating their own media games; funding research. There's a lot of stuff that could be done.

Certainly, on the funding side, facilitating access to early-stage capital would have a dramatic effect on the volume or velocity of start-ups and the creation of new intellectual property.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Did anyone else want to add to that?

[Nathalie Verge]

Funding should be provided for incubators like Mr. Della Rocca's company, for people who provide very small companies with guidance and mentorship, help them secure funding, develop marketing skills, and so on. Those are also ways to encourage small networks of small companies that will become large. So I think incubators have a role to play in Canada, as well.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

I note that in budget 2014 we have funding for business incubators and accelerators. I don't know that this company, Red Barn Games, is still considered a start-up, given that in addition to the word game I mentioned it also has Rodger Dodger, Egg Foo Yung, and Good Ol' Days Soapbox Racing.

We have that in the budget. Additionally, we have some regional development corporations.

For example, in Ontario we have FedDev. They have a variety of programs that any entrepreneurs can access. In eastern Ontario we have the eastern Ontario development program, which is specifically designed to increase capacity and jobs. It's not just jobs for as long as the grant lasts; it's to provide capacity so that the businesses will grow and need more jobs. I have an idea, if developers come asking for some access to capital, where to direct them.

In the news these days there has been quite a bit of ink devoted to this currency called “bitcoin”. Do any of you accept that currency, or is it impacting upon your companies currently, or do you see a potential impact in the future?

[Nathalie Verge]

I don't think we accept Bitcoins, and I don't think that will have an impact. Of course, if virtual money someday became popular and sustained by a market, gaming companies would explore that market, I am sure. That's what we do. We explore anything new. This is currently not an issue in my company.

[Jason Della Rocca]

This is a secondary level. I think the question is more relevant to someone like Apple or Google. If all of a sudden Apple accepts bitcoin payments through their App Store, then all of a sudden we're all going to be using bitcoin. We don't generally take money directly from the hand of the consumer. There is usually an intermediary, such as Apple with the App Store. The consumer is paying Apple. Apple is keeping its slice and then sending us the rest, so most game companies are not touching bitcoin.

We are somewhat at the mercy of these larger platforms' deciding to use it or not. I think in the future it will become pervasive. Is that two years from now or 20 years from now? Who knows?

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

What percentage of the cost or the price of the game does the App Store take?

[Jason Della Rocca]

It's 30%.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thirty per cent.

[Jason Della Rocca]

Yes. In the case of the start-up you mentioned—Red Barn Games—for every dollar they make on the App Store, they're only getting 70 cents. That's pretty standard. The cut that Apple takes is the same cut that Amazon takes; it's pretty much the standard.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

For tax treatment, they would receive the same considerations as other small businesses, would they?

[Jason Della Rocca]

I would imagine so, yes.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Are the employees treated the same as any other employees? Would they would have the source deductions made from their...?

[Jason Della Rocca]

It depends on the nature of the company. Some companies will use freelance labour or contractors. The majority of Ubisoft workers are probably on full-time salaries, from which they pay deductions at source as appropriate. It really depends on the nature of the business.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you very much.

[The Chair, Conservative, David Sweet]

Thank you.

We'll move on to Mr. Larose for eight minutes.