Industry Committee on March 3rd, 2014

[The Chair, Conservative, David Sweet]

Good afternoon, ladies and gentlemen. Bonjour à tous. Welcome to the 13th meeting of the Standing Committee on Industry, Science and Technology.

Colleagues, as I've mentioned before in other rooms, you will see we have slight deviations of the clocks so the time on our BlackBerrys will be the time we synchronize with.

Before us today we have five witnesses. We have two witnesses from ACTRA - National. One is Marit Stiles, director of public policy and communications, and the other is Simon Peacock. From the Canadian Interactive Alliance, we have Serge Landry, president and chief executive officer, and Deirdre Ayre, member of the Other Ocean Group Canada. By video conference we have Jocelyn Benoit. He's a professor at École des arts numériques, de l'animation et du design.

I will follow the schedule as it is before us, and so I will begin with ACTRA. Marit Stiles, I understand you are going to be sharing your time. Please begin.

[Marit Stiles, Director, Public Policy and Communications, ACTRA - National]

Good afternoon. My name is Marit Stiles. I'm the director of public policy and communications for ACTRA, which is the Alliance of Canadian Cinema, Television and Radio Artists. Also with me today is Simon Peacock, a noted performance director and video game actor from Montreal.

Thank you for inviting us. It's an honour to be here as the voice of 22,000 professional performers, members of ACTRA, whose work entertains, educates, and informs audiences in Canada and around the world.

Today we're here to talk with you about the role our members play in the video game industry, its growing significance, and how we think government could support and nurture this sector here in Canada.

ACTRA is proud to have jurisdiction over this work. Our members provide the voices for characters in a large variety of games, from simple apps you carry around with you on your phone to award-winning international best-selling console games like Assassins Creed and the Prince of Persia, produced in Montreal by Ubisoft, or Deus Ex by Eidos.

Not only are our members delivering voice performances and background work for these multi-million dollar ventures, they are increasingly producing full-body performances through the use of performance or motion capture technology and cyberscanning.

You might have some idea of what performance capture technology looks like, actors dressed in full-body stockings with small sensors built into their clothing to help sophisticated computers track their movements around a sound stage, and you wouldn't be far off. This is the same technology and skills that are used in movies like Oscar winner Gravity.

More and more our members are finding they can make a living from this category of work. As I said, it actually expands into other kinds of performances, such as in television and on movie screens as well.

We have strong relationships with many of these game companies, most notably Ubisoft, the multi-national industry giant with a strong commitment and investment toward developing game production expertise here in Canada.

Our partnership with Ubisoft is a long one, dating back to 1997. We've worked hard to guarantee the safe and fair working conditions of our members while ensuring stability in the sector and trying to develop this important and flourishing industry.

In fact, our latest agreement with Ubisoft features an innovative pilot project to help Ubisoft utilize professional performers in the development of hand-held mobile games, which is a quickly expanding area.

This is a good example of industry cooperation that will help Canada shine on the international scene and create good jobs. Close to 400 members of ACTRA currently earned more than $2 million in total in 2013 by working on video games. That's up 10% from 2012, just a year prior.

I would now like to turn this over to Simon Peacock to speak about the reality of working in games and the work opportunities presented.

[Simon Peacock, Member, ACTRA - National]

Thank you, Marit.

Thank you all for the opportunity to speak to you today.

Over the past few years, work opportunities for Canadian performers in video games have seen tremendous growth. As Marit mentioned, we've been lending our voices to video game characters ever since Ubisoft opened its offices in Montreal in 1997. More recently ,we've also been providing our performances through motion capture technology and our likenesses through 3-D facial scans.

As more and more companies come to Canada to set up shop, the number of work opportunities available to actors has exploded, as has the type of performances we are required to provide. New opportunities bring new challenges, and with this industry's unparalleled growth, we foresee some potential bumps in the road that we think the government can help us with.

I've worked with all the big game companies in Montreal. They all want to work with professional performers, because they realize that we save them money, we deliver high-calibre performances, and we understand how this business works. But these companies need more from us. They need a larger pool of professional talent who are skilled at the specialized requirements of video game production. It's a different set of skills, often in complete contradiction to what we were taught at theatre schools.

For example, when working on a motion capture studio, you have no sets, no makeup, no costumes. Your performance is being captured in 360 degrees by up to 200 sensors, all whilst you're wearing a helmet-mounted camera and a tight suit with dozens more sensors mounted to it. You have pages and pages of dialogue to deliver playing multiple characters, all done at a speed film sets couldn't even comprehend. I've been on film sets where they have been pretty happy to get three or four shots done in a day. I've been in motion capture studios where we've recorded over 100 in a day. The speed is completely different. Add to that the complexities of constantly changing technologies, and many actors find themselves suddenly in over their heads.

These kinds of working conditions require a very specialized skill set from actors, one that takes training that is just as specialized to acquire. To respond to this need, ACTRA has begun to offer video game-specific training and workshops for members so they can provide the very skills these companies are searching for.

In Montreal, in a cooperative venture with ACTRA, Eidos, Game On Audio, and the provincial government, we have just trained 32 performers in the art of acting for video games, but more needs to be done.

Theatre programs at our colleges and universities must start offering relevant training to their students, training that provides the kind of sturdy foundation that will be instantly applicable in the real world. They must step up to the plate. Likewise, governments should be providing access to mid-career training for performers in order to teach them the skills they are clamouring for. This would provide the gaming industry with the depth and variety they are searching for in their drive to develop, flourish, and compete globally.

[Marit Stiles]

Thanks, Simon.

This committee asked how the industry continues to be a model for growth and technological innovation, commercial success, and the creation of highly skilled jobs.

According to the Nordicity report commissioned by the Entertainment Software Association of Canada, there were 329 small, medium, and large studios in operation across Canada in 2013. In 2012 the video game industry directly employed 16,500 full-time equivalent jobs and indirectly a total of 27,000. In total, the video game industry generated over $2.3 billion in gross domestic product for the Canadian economy. In 2013, Canada's video game sector became the world's third largest in terms of employment.

How do we continue to ensure the success and growth of this industry? Simon has outlined some ways the government can provide support through training and education. Of course, we are working at the local level in other provinces as well—in Toronto, through partnerships with Sheridan's Screen Industries Research and Training Centre, SIRT—to develop training programs for students and working performers.

Since the inception of this innovative collaboration which includes government, post-secondary institutions, video game production companies, unions, and guilds, SIRT has put over 120 performers through a three-level training course. Tomorrow, another 40 performers will take part in the latest course being offered at Sheridan.

As the government has developed Canada's film and television industry through its support of the Canada Media Fund, Telefilm, and tax credits, we think similar measures could also stimulate this country's video game industry. This view is supported by the House of Commons Standing Committee on Canadian Heritage in its April 2013 report on the entertainment software industry, after hearing from many of the same participants here today. The report makes recommendations including that the Government of Canada continue to support and promote the success of the industry through labour training and possible federal tax credits.

A labour-based tax credit has been extremely effective in helping build the gaming industry across Canada, including centres of excellence in British Columbia, Ontario, and Quebec. The tax credit is based on the producers' labour expenses for a qualifying interactive product. It encourages companies to hire and develop local talent rather than bring in temporary workers from outside the country. We strongly support measures that would not only allow video game companies to flourish in Canada, but also would work to create a robust and accomplished domestic talent pool.

It's key that any support the government is looking to offer the Canadian video game industry should prioritize the hiring of Canadian talent. It's not enough to support the companies and the production of video games. These initiatives need to be paired with development of performers who can do the specialized work that needs doing, and most importantly, keep that work here in Canada.

[Simon Peacock]

As I talked about earlier in terms of how we can grow and develop that talent pool and the very unique skills that are required, we would welcome the opportunity to work with the government to create any training program that would develop these abilities among Canadian performers. If we don't, these jobs and this work will go elsewhere. We cannot afford to let it slip away.

Our members, Canada's professional performers, can do this work, and we are looking forward to doing more of it. We are building up our expertise and becoming a workforce that the game companies rely on, but we need to keep up with the demand as it continues to grow.

Let me finish by saying that we are very excited about the opportunities that exist for our members in video game production. It's good work. It's hard work. It's rewarding work. This is a sector that would benefit from federal support in education and training, provided that we work to keep the jobs, from the developer, to the writer, to the performer, here in Canada.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Peacock.

Now we'll move to Mr. Landry.

[Serge Landry, President and Chief Executive Officer, Canadian Interactive Alliance]

Mr. Chair, I'm thankful to the committee for inviting us to express our opinion on this subject of the entertainment software industry and video games.

I'm the chairman and CEO of the Canadian Interactive Alliance, which is a trans-Canada association for all the interactive media associations in nine provinces. I'm also a co-founder of my own video game studio.

In the presentation we have distributed to you, we have provided some data about the Canadian interactive industry profile that was published early in December. I'm not going to go through each of these statistics, but I find it very important to share these numbers, and you can see all the details of our study on our website at ciaic.ca. All of the slides until page 12 are the broad data for and the definition of our industry, which I will not go into detail about.

The video game industry represents a big chunk of our members across Canada. Our member, Deirdre Ayre, representing Newfoundland, will introduce herself and cover some of the issues you'll find starting at slide 13.

Go ahead, Deirdre.

[Deirdre Ayre, Member, Other Ocean Group Canada, Canadian Interactive Alliance]

Hello. I'm delighted to support Serge today as a member of the board of the Canadian Interactive Alliance representing Newfoundland and Labrador. I'm studio head and part owner of Other Ocean Group Canada Limited, which operates a video game development studio in Newfoundland and Labrador, and a video game quality assurance company in P.E.I.

We employ about 100 talented people. Last year we sold the assets of our other Atlantic studio, which employed about 45 people, to Electronic Arts. Our company also has a business development office in California, near the hub of the industry.

Video game development is an increasingly competitive, multi-billion dollar global industry. In pursuit of market share, there's tremendous competition among the platform manufacturers, publishing companies, and independently owned development studios. This translates to fierce competition for investment capital to spawn enterprise and intellectual property, as well as national and global competition for human resource talent.

In our country, the Canada Media Fund experimental stream is one of the only viable funding programs for small and medium-size innovative creators of original IP. Of the around $365 million handed out by the CMF each year, funding for this particular stream is limited to about $38 million. An interesting note, and although all streams are important for different reasons, is that we are told that projects supported under the experimental stream provide a higher payback ratio than other genres funded by the CMF.

In essence, many projects funded under the experimental stream allow for a return that should enable even more projects to be funded. However, there is concern that given the main revenue stream is from the cable and satellite operators, this fund might decrease. This would be very damaging and would hinder the growth of many small and medium-size developers, who are quite often the most innovative and creative contributors to our industry.

Another serious challenge is the skilled labour shortage, which means that companies are pitted against companies, and provinces and regions are pitted against other provinces and regions. The shortage can be particularly crippling for regions of the country such as Atlantic Canada, where we operate, but it's also true for provinces like Manitoba, where the industry is relatively new. These regions often have trouble attracting the talent, because the companies tend to be smaller or in start-up phase, so the move is seen as being riskier.

In addition, where foreign workers are sought to help alleviate the problem, often these regions are used as an entry point for immigration, but once individuals are successful at gaining permanent residency, many migrate to the larger centres that are more multicultural and where the larger video game companies operate. So the retention of foreign workers can be very difficult for smaller companies and certain regions.

Despite the fact that retention can be difficult, recruitment of foreign workers is absolutely essential for companies to fill skill gaps, and to have the human resources necessary to meet project needs and to ensure the quality of work and our ability to be competitive.

As well, and perhaps one of the most important benefits to hiring a globally recruited workforce, is the strength it brings to the development of the local workforce. Mid-level and senior-level employees hired from beyond our borders act as mentors to those hired locally. Spinoff in skills transfer and project growth from one senior hire can mean three or four juniors hired locally, juniors who would not have been hired otherwise. Some companies put spinoff numbers as high as five or six.

In the case of our company, and I'm sure this is the case with others as well, many of our global recruits have gone on to teach at universities and colleges, further transferring skills and valuable industry experience to up and coming Canadian developers. This is a benefit far too hard to measure.

Serge.

[Serge Landry]

I'd like to cover the last few minutes of our presentation with three other issues that are relevant to our industry.

On slide 13, issue number one which I highlighted is access to early funding. The problem right now is there is a new innovation fund that was put together to fund companies through VCs, but this does not respond to the needs of early stage companies that need seed funding from around $100,000 to $2 million in order to reach the next level.

We also should review and think about implementing an equity crowd-funding policy, like it already exists in the U.K. or in Australia, to democratize access to the equity funding here in Canada.

There are also some countries that do very well in the video game industry, especially Finland with their Tekes fund, that creates tremendous IPs and brands that are known across the world.

I'll briefly speak about the issue mentioned on page 16. It is important for us to develop original Canadian intellectual property, to create brands that people can recognize and that the company can build on for several years to come. It is an important source of creativity and potential growth for the industry here, and we believe there's room for a tax credit, a little bit like what's been done in some provinces to help create Canadian intellectual property.

Finally, we are also urging the government to seek new ways to better market the products. The content is something, but the marketing of the product is as important as the content itself. We believe that some initiatives could be done to help the trade commissioner service to market these products abroad. We also believe there are possibilities for the BDC and EDC to better understand this fast evolving market and be willing to take more risks.

More direct funding needs to be done in order to publish the titles that are done here. Unfortunately, in Canada we're developing great products, but we have almost no publisher to publish these titles abroad. We also think there is room for the Government of Canada to help support the local events of our industry, namely the Montreal International Game Summit, and the GameON: Finance conference in Toronto, and their supporting and presenting associations.

Thank you very much.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Landry.

Mr. Benoit, you have the floor.

[Jocelyn Benoit, Professor, École des arts numériques, de l'animation et du design, As an Individual]

Good afternoon. I would first like to thank the committee for allowing me to be part of this study on the entertainment software industry in Canada. I believe that the study is necessary for the long-term viability of our industry.

I have been a professor in the École des arts numériques, de l'animation et du design at the Université du Québec à Chicoutimi for three years. I teach game engines and video game design methods.

Our training institute, formerly called the Centre NAD and based in Montreal, has been working in the area of 3D animation for more than 20 years, in visual effects, in cinema or in video games.

I would like to start by giving you my view of the reasons for the success of the industry in Canada. Then I will talk about future challenges and I will provide the committee with some recommendations.

First, in my view, the success of the entertainment software industry in Canada can be explained by a number of factors. As the previous speakers have indicated, the entertainment software industry is multidisciplinary. A number of different people have to be involved in bringing a product to fruition. One of the aspects of our success is the quality and diversity of the workforce. It is highly skilled, and that has certainly contributed to the success of our projects.

Take Montreal as an example. The city has both talented artists with a lot of creativity and imagination and highly skilled programmers and technical people. Additionally, the fact that companies have been able to take advantage of a favourable tax system has encouraged them to settle in Montreal and in other places in Canada. The number of jobs associated with the sector has grown dramatically since the beginning of the century. We are now talking about approximately 10,000 jobs in Montreal alone.

In the coming years, the industry will have to face a number of challenges. One of them is access to labour, from less experienced employees to experts. Demand will be strong in the coming years. To allow for the hiring of highly qualified people, it would be desirable to encourage companies to free up employees so that they can teach in a university setting. It can often be difficult for companies that focus on profits and income in the short term to free up their best employees so that they can teach. But we have to think in the long term.

Second, we have to come up with training programs that will allow the transfer of highly qualified staff from other areas to the entertainment software industry. Many developers and programmers in other areas have very specific skills, in fact. That said, the video game industry is unique. If there were training programs that allowed those skills to be transferred to the video game industry, it would allow experts to be hired in greater numbers.

Third, the development of employees' skills must be supported as an ongoing process. As well as its programs at bachelor’s and master’s levels, the Centre NAD also offers private programs intended for a range of companies.

Finally, there must also be support for internships in the industry. Currently, and for various reasons, it remains difficult for lower-level students to find an intern position in a company.

Another major challenge will be to establish Canadian intellectual property. Until now, most of the companies that have set up in Quebec or in Canada have been foreign. Certainly, we are seeing more and more local companies, but few Canadian intellectual properties have been created. Research and development partnerships between the industry and the Canadian university system must be developed, both technologically and artistically.

A lot of funding is available for so-called applied research in engineering and programming, but there is little funding in the artistic areas, in video game design and in level design. Research funding in the visual and narrative aspects of video game production must be made more accessible.

Thank you.

[The Chair, Conservative, David Sweet]

Merci, Professor Benoit.

Now we'll move on to our rotation of questions from our members. Remember, colleagues, we just go straight through all members, eight minutes a piece.

Ms. Bateman, for eight minutes.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Thank you to all of our witnesses.

This is very interesting. This is a major industry.

I'm fascinated because there was a difference of opinion in terms of the funding necessary for the training component. Mr. Peacock and Mr. Landry had different points of view. Obviously your colleagues can join in with the response.

If I heard this correctly, one said that this is an industry where we have to hire Canadians. I think it was Ms. Ayre who said that we have to make sure that we recruit the right skill set for this growth industry, wherever that might be. This is something we're very cognizant of; we have a lot of jobs without people to fill them with the right skill set, and yet we have people without jobs.

Perhaps you could start, Ms. Ayre, and expand on the point you were making.

[Deirdre Ayre]

I think to some degree it depends on the region of the country where you're operating. It depends on the size of the company that you're working for. It sounds to me like a lot of the work that these people are doing is with the very large companies in Montreal, which is not the perspective I come from, because I'm operating in a different region.

Although we do third party development work for companies like Ubisoft and have a great relationship with them, our needs in Newfoundland and in Prince Edward Island would be different from what they would be for some of the larger companies in those regions. Also, they're talking to a very specific.... I don't want to speak for them, but I'm talking about the typical jobs that you would find in a development studio, which would be your programmers, artists, and designers, while they're talking about very specific voice-over work and actors, which is not what the companies that I own would be involved with. It's quite different. I don't think that we would necessarily disagree so much. It's just—

[Serge Landry]

Different traits.

[Deirdre Ayre]

Different traits, yes.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Thank you for that clarification. I appreciate that.

I want to go on to the intellectual property piece that you spoke to, Monsieur Landry. You were talking about how crucial a tax credit would be in terms of the creativity and the growth. If you could you expand just briefly on that point, I would appreciate it.

[Serge Landry]

Yes. We spoke about the CMF. They funded about 80 projects last year, but there were over 500 projects submitted, so there is a lot of need among the young start-ups that are putting forward innovative and creative content. These start-ups need early stage funding to create these IPs.

I would like to give you the example of a company out of Finland called Supercell. They've created two games since 2009. Supercell sold 51% of their company for $1.5 billion last November to SoftBank of Japan. So you can imagine what kind of wealth you can create when you create a brand, an original IP.

I do not want to speak ill of the products made in Canada by foreign companies, but it is possible to make more profit, in the longer term, from the intellectual property developed in Canada than from the intellectual properties developed by foreign companies.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

How can we provide more protection for Canadian taxpayers, in your opinion?

[Serge Landry]

By creating wealth in Canadian-owned companies that will stay in Canada because their shareholders feel an attachment to their home and native land, so to speak. By so doing, I feel that it is possible to create a much more solid industry that is capable of producing and marketing a much greater number of products.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Okay.

You made a third point that I may get to, but first of all, for all of you, I want to tap into your expertise. This is a growth industry. This is an opportunity. There has been incredible growth recently.

What can we do right to maintain that growth? What actions would end up killing the growth? That's so important for us. We're all about creating jobs, creating growth, and creating long-term prosperity for all Canadians. We don't want to get it wrong with government intervention. What would be the right kind and what would be the wrong kind in terms of making sure that jobs are created?

[Serge Landry]

As we said about the skills shortage, what we have to understand when we bring in a creative director, a senior creative director, let's say, is that this guy is going to be surrounded by juniors. There is a transfer of knowledge, and the juniors can become seniors themselves, to show to others.... We believe that's how we can create a sustainable industry for the longer run. We have to be careful not to be too inter—

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Interventionist. Hear, hear.

It is better not to get involved.

[Serge Landry]

Yes, thank you.

Leave room for the creators to get off the ground and, as I say, market some great content and brands.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Could we have a perspective from ACTRA?