Industry Committee on Feb. 26th, 2014

[The Chair, Conservative, David Sweet]

Thank you, Mr. Van Kesteren.

Mr. Maguire, you have two and a half minutes.

[Larry Maguire, Conservative, Brandon—Souris, MB]

Thank you, Mr. Chair.

Thank you to Mr. Van Kesteren for giving me a few moments. I just have a couple of questions.

I'm really interested in this and I know some extended family who's interested in this particular part of the industry, so it's pertinent to be able to have the opportunity to ask you some questions.

You've indicated that even though we have a good tax credit program for seeking out new employees to come into companies and the labour that you can hire, we're still short of people in the industry to come forward. I believe that's what you indicated.

How do you see us being able to change? What else could you change and what else would be an incentive to get that extra? Are you doing all of the training yourselves of the people that you have? You're picking up from foreign countries, people coming in as well; 20% in Ubisoft's case. How else can we get the people trained who you would need to hire?

[Jason Della Rocca]

There are a lot of elements to that. One, I think it's important to recognize that tax incentives are almost irrelevant from a start-up and entrepreneurial point of view. For tax breaks you have to have money, spend money, and survive for 18 months; then you get a cheque. Much of the best kind of training you can have is on the job in the studio working on stuff.

I think to a certain extent the more we can do to support start-ups and entrepreneurship, the better, because that's where a lot of the talent will have their first chance coming out of school. In some sense the big studios like Ubisoft don't necessarily want complete rookies, and to the extent that they can learn and grow on their own, then you get the advantage of some fluidity of talent.

I would look at not necessarily thinking of the tax break as the thing we need to optimize, but more diversifying the types of programs and things you do to intervene in the industry to kind of balance out, not only tax incentives but also prototype funding and early-stage investment, etc.

[The Chair, Conservative, David Sweet]

You have 30 seconds more.

[Nathalie Verge]

I think strategies have been developed across Canada to attract more young people to sciences. That will help all kinds of industries, both in health and in video games. We are trying to educate young people and their parents about the importance of studying mathematics and taking business courses. As Jason pointed out, business skills are a requirement in our industry today. That's also the case for large companies. Our games have to make money. The challenge lies in learning to develop free games that can make money.

[The Chair, Conservative, David Sweet]

Thank you, Ms. Verge.

You're over time on that.

Now on to Madam Sgro for eight minutes.

[Judy Sgro, Liberal, York West, ON]

Thank you very much, Mr. Chair.

Again, welcome. It is fascinating, as my colleague said. It's an industry that I think we all see a bit of whether we're on a bus, or on subways, or looking at our own kids. Everybody seems to be playing a game one way or the other. It's certainly quite an industry and it's great to hear so much about it. It's very promising.

What would you estimate the value of the industry is in Canada today?

[Jason Della Rocca]

There was a recent study done by the Entertainment Software Association of Canada. I think it's $2.9 billion...?

[Nathalie Verge]

Its value is $3.2 billion.

[Jason Della Rocca]

It's $3.2 billion. There's a contribution to GDP of $3.2 billion from the Entertainment Software Association of Canada.

[Judy Sgro, Liberal, York West, ON]

What provinces, other than Quebec and I'm assuming Ontario, offer provincial tax credits?

[Nathalie Verge]

British Columbia and Manitoba do, and some of the maritime provinces also—P.E.I. and Nova Scotia, I think. Alberta doesn't have one yet. No.

There's a lot of competition. Everyone looks at everyone and....

[Judy Sgro, Liberal, York West, ON]

How important are the tax incentives when it comes to companies like yours that are already settled in Quebec, in Montreal, or in Toronto, as an example?

[Nathalie Verge]

The situation is probably different for start-up companies, but for subsidiaries of large corporations like ours, those incentives are very important because we are taking huge risks by developing video games, as we don't know whether they will sell. Their development takes several years, and that requires large investments. Some games don't work out at all. As in the movie industry, some of our products flop.

Those incentives are very important because they enable companies to take risks. Our industry, which is creative and innovative, must take risks.

[Jason Della Rocca]

Just to corroborate that, in terms of the foreign direct investment efforts of the various provincial bodies, as well as the Department of Foreign Affairs, tax breaks have been absolutely critical.

From a start-up point of view, they have no impact. In fact, when I was doing consulting with governments around the world, they would often look at the success of Canada, see the tax breaks, and assume that was the silver bullet. Most of my effort as a consultant would be to get them off the idea of worrying about tax breaks, because they had no industry, no ecosystem, and no talent base. There were a hundred other things that they had to do and resolve before a tax break even became relevant.

I think it's important for the committee to recognize. It's an ecosystem. There are synergies between the big and the small, and everyone all sort of works together, but from a business structural point of view, how you incentivize and promote start-ups is dramatically different from what you do for large companies.

[Judy Sgro, Liberal, York West, ON]

Yes, very much so.

What role would you see the Government of Canada showing in response to a growing industry? Or do you see a role for the Government of Canada?

[Jason Della Rocca]

Yes.

[Voices]

Oh, oh!

[Nathalie Verge]

Geneviève talked about workforce mobility, which is of the utmost importance. Research and development credits are also essential. We have to convince our head offices that research and development—which increases our products' value—must be done in Canada. That's an important factor.

We need a national long-term vision to develop young talent and careers. The video game industry in now fairly large in Canada. A comprehensive Canadian strategy would help us. The provinces have taken on such important roles in this industry, so the strategy should be developed jointly lest it become a Tower of Babel.

[Jason Della Rocca]

Again, given my opportunity to see other governments and industries around the world, definitely the ones that had rich collaboration and communication among industry, government, and academia were the ones that were the most healthy and moved the quickest. Absolutely, there is a role to play.

[Judy Sgro, Liberal, York West, ON]

Do you ever have the opportunity to participate in round tables where you have all of those different partners together?

[Jason Della Rocca]

Do you mean governmental...?

[Judy Sgro, Liberal, York West, ON]

Yes, governmental, academia, and businesses like yourselves on the entertainment issues.

[Jason Della Rocca]

I don't know about Ubisoft, but it's hard to get all of them in the room at the same time.

I'm very fortunate that I do cross into many different fields. We get us in the room at one time and we get all the industry in the room and all the academics. I'm leaving for Toronto tonight because there's a research consortium board meeting of all the universities across Canada doing games-related research, but it's a bunch of academics and one or two industry people. It's challenging.

[Nathalie Verge]

There is still work to be done in that area, but everyone today understands the benefit of developing those types of relationships.