Industry Committee on March 3rd, 2014

[Charmaine Borg, NDP, Terrebonne—Blainville, QC]

My next question is about research and development funding.

Recently, there have been changes to research and development programs. How have those changes affected your businesses?

[Serge Landry]

Frankly, I am not very familiar with that aspect of the industry. Of course, research and development is a key element in the growth of our industry, in light of all the emerging technologies, such as 3D printing. In my studio, we work with augmented reality and we invest a lot of money in this area.

Perhaps Mr. Benoit can add to that.

[Jocelyn Benoit]

Yes, we have invested a lot of money in applied research and a little less in basic research, which means that 3D animation, the arts and design have been sort of left on the back burner. However, they are major components of video games. The same goes for research in dramatic arts, for theatre and actors.

[The Chair, Conservative, David Sweet]

We'll go to our final questioner, Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Chair, providing that the responses are not too long, and even worse, that the comments from the questioner are fairly brief, I'll share my time with Ms. Bateman.

As a prologue, my good friend Monsieur Côté made a comment. He and I sat on the international trade committee together. He made a comment about the importance of trade and the challenges of emerging markets.

At some point it would be interesting to get some of you also before the international trade committee as witnesses to get a sense of what issues on CETA could impact upon your industries.

Perhaps I misunderstood, but I want to make sure that the record is clear. I would say that there is a strong emphasis on the part of this government to promote more and stronger trade deals. As a result of CETA, our European comprehensive economic trade agreement, we will now have, between NAFTA and CETA, the two strongest economic markets in the world, of some 950 million or close to a billion people.

We're not done. We have the Pacific alliance and the Trans-Pacific Partnership that we're focusing on, as well as the attention we are putting towards Japan, India, and South Korea. You probably didn't need to know that, but I heard my colleague and friend make that comment. I just wanted to clarify.

I've learned a lesson through all of this, that the prototype of the individual who is the perfect digital gaming employee is not 23 years old, does not necessarily wear jeans, although I'm curious, and doesn't wear thick glasses. They look a lot like Dan Harris, actually, I'm told. God help you all, if that's true, but it is what it is.

Here is the question I have for our friends here.

Mr. Peacock, you made a comment in earlier testimony. You said that TV is suffering. I thought about that long and hard, but you said that video gaming has picked up the slack to some degree, because actors have gone into it to some very positive degree. I hope it's financially rewarding.

But isn't this logical? I was thinking of Canada Post. What are some of the challenges of Canada Post? It's a million fewer pieces of mail every year. What is the challenge facing television? I think people are going towards computers, and the little kids are watching TV less and playing the games more.

Isn't this logical? Is this just a kind of evolution? Would you imagine, or could you imagine a push back to TV, or is that the good old days at this point? You are young, but is that the good old days?

[Simon Peacock]

In my opinion, that's probably the good old days. With the changing media, I think we're going to find that television is going to be harder and harder to carve out as a niche. You can see the model already with Netflix with House of Cards, for example. That is how people want to watch television now. The product itself, the end result, is very similar, but the delivery mechanism is changing.

[Ed Holder, Conservative, London West, ON]

That's a very compelling comment.

I heard Ms. Stiles say that one thing that might be useful would be something like a federal labour-based tax credit, if I heard correctly. You made reference to there being four different provinces that have it, but I missed the fourth. One, I think, was British Columbia—

[Marit Stiles]

Did I say four? I thought I said three, but I'll double-check. I'm familiar with B.C., Ontario, and Quebec. I don't know whether there's another province.

Do you know, Simon?

I can double-check that for you and get back.

[Ed Holder, Conservative, London West, ON]

Since I'm the total opposite of Mr. Harris, which means I'm quite old, my hearing could have gone at that point. But I'm going to tie this in.

Mr. Peacock made the comment, concerning training programs, that education and training should be federal. In both those cases you made reference, Ms. Stiles and Mr. Peacock, to the provincial education and training. Yes, we give blocks of money to the various provinces, but it is provincial.

While there are certain issues, such as interprovincial trade barriers related to labour mobility and the like, I'm not sure that your industry experiences them, but perhaps I could ask you. Is labour mobility a problem for you?

[Marit Stiles]

Did you say labour mobility?

[Ed Holder, Conservative, London West, ON]

Yes. If you want to bring somebody from Prince Edward Island or Newfoundland, just say for fun, to Toronto or Montreal, is it problematic? Is that an easy thing?

[Marit Stiles]

It generally is. It's true that when you have a labour-based tax credit that is based completely on residency, it could be an issue, but generally speaking, that's not on 100% of labour, so I don't think it actually means—

[Ed Holder, Conservative, London West, ON]

That may not be the issue per se. Isn't the argument more—

[Marit Stiles]

We're not the full-time employees.

[Ed Holder, Conservative, London West, ON]

—that what you need to do is to encourage more provinces than the ones you cited to participate more in labour-based tax credits, if you think that's the way to go, in part?

[Marit Stiles]

Yes. I mean we certainly continue to work with the provinces, but as in the film and television industry, the federal government can implement tax incentive programs as well. What we've seen happen, of course, is that competition arises among the provinces. What we'd like is to see ourselves across the board as competitive globally and also to have tax credits, as I said, that are tied, in the case of our members certainly, to their residency in Canada.

[Ed Holder, Conservative, London West, ON]

Mr. Landry and Ms. Ayre, it's interesting. This seems to be a relatively new industry by all accounts. I think all of us have agreed that relative to the age of Canada as a country, it's relatively new, but probably from every group I've heard that the only thing that makes this live is tax credits.

My wife has the oldest flower shop in Canada, 1869, in case you were curious. I share that because she doesn't get a tax credit. My daughter owns a beautiful Belgian chocolate shop. You'd like some. I should have brought some for you and I apologize that I didn't. Next time I will though. She doesn't get any tax credits. By the way, she gets what any business gets, which are the federal tax advantages where, thank God, federal taxes have gone down, which is good.

What sets you apart from my wife's flower shop or any business down the street, even relatively newer companies? Frankly, shouldn't they be getting more of these tax credits as well? I'm trying to understand that.

Mr. Landry, do you have a thought on that?

[Serge Landry]

I have to be careful. There are two ways to look at it. You want to attract the bigger players, and it is important for the bigger players investing in any country to be able to sustain their investment in the long run. That said, video games or the oil industry need those tax credits to make those kinds of investments for the longer term.

Those tax credits also help the smaller players push forward, to be able to work on the few dollars they have to make them work longer. You have very limited capital, so you need to make this capital go a long way. That's why the tax credits are important.

[Ed Holder, Conservative, London West, ON]

Perhaps you might join me in a conversation with my wife when I tell her she's going into a new industry now, perhaps with you.

You referred to a company that was sold to a Japanese company for $1.5 billion. Was that a Canadian company? It was a Finnish company.

[Serge Landry]

Yes, a Finnish company.

[Ed Holder, Conservative, London West, ON]

What was the name, please?

[Serge Landry]

Supercell.

[Ed Holder, Conservative, London West, ON]

Here's what's interesting. Do we raise the value of a Canadian company? Let's say we all believe that we want Canadian companies to grow, to hire more Canadians. I'm with the actor folks on this. I really like the spirit of that. Hiring more Canadians is a good thing, and putting Canadians first is a very good thing.

But when you get to that point, all of a sudden do you move your operation down to California because you get a better tax credit? Or do you sell it for a whole lot more money and all of a sudden all those Canadian jobs are gone? Is that the risk? Is that just normal business, or—

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Holder.

I'm sorry, but we're out of time now.

[Ed Holder, Conservative, London West, ON]

Is there time for a response, Chair?