The Canadian Video Game Industry: A 2020 Analysis
By: Akash Sidhu
Tags: Government, Technology, Videogames, Culture, Policy

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Introduction

The Canadian video game industry has been booming. In 2019 Nordicity commissioned a report titled The Canadian Video Game Industry 2019 that found there were 692 active video game companies in Canada. Of the 692 companies more than half about 55% had fewer than five people. The entire sector brought in approximately 3.6 billion in revenue in 2019 and 76% of revenues came from markets outside of Canada. The sector employed 48,000 full time employees in 2019 and the average age of the workforce is 31 years old. The makeup of women in the workforce sits at 19% and the industry overall contributed 4.5 billion in GDP contribution[1].

Each of the metrics mentioned have increased greatly from 2017 and showcase the raw growth and size of the industry. The Canadian video game sector represents a massive opportunity for Canada and to allow the sector to succeed there have been a variety of policy decisions taken. The world of game development and video games has been changing dramatically over the course of the past two decades from various technological and economic factors.

What has stopped game development from thriving in other markets outside North America and Japan are the lack of government supports for the industry and censorship rules. Canadian game development has succeeded in large part due to the federal and provincial governments providing strong incentives and the opportunities for growth in the sector. In this paper we will analyze important factors affecting the industry, key players, policy decisions taken and the future issues that need to be addressed. The main questions this paper focuses on is: what has been successful for the industry? And what will allow the Canadian video game sector to continue and succeed?

Analysis of Key Issues and Trends

Opportunities Analysis

Today, video game related content permeates YouTube’s trending page globally, and allows for widespread exposure in regional markets across the world. In fact, the popularity of gaming content on YouTube has grown exponentially and a significant portion of top subscribed channels on the platform are gaming related channels. The growth of e-sports, digital streaming with Twitch as well as the global uptick in playing games during the pandemic has led to massive growth for game communities and sales for the industry[2].

Many older gamers have fond memories of playing games in an arcade or purchasing game cartridge and CDs. Today, thanks to digital video game platforms such as Steam millions of people can download the most popular games. There has been increasing interest and development in other digital platforms as well such as Playstaiton Now, GeForce Now and Google Stadia. Physical games are still around, but the industry has accepted the digital first narrative and major game studios and developers have focused on providing a variety of options for how players can experience their content.

In Canada, resides a nation of gamers with diverse play styles for all segments of the population. 61% of the Canadian population plays video games and the split of gamers is 50% female and 50% male according to The NPD Group[3]. Matching the enthusiasm of playing games is the video game development that happens in the country. Canada is the third largest game developer in the world and has been behind the success of some of the best-selling international gaming franchises including Mass Effect and Assassins Creed.

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Threats Analysis

As traditional forms of media in Canada such as television were being hit hard with cord cutting as well as the growth of digital streamers it led to the Broadcasting and Telecommunications Legislative Review (BTLR). Broadcasting and telecommunications members wanted to zero in on the lack of oversight in the creative industries in Canada to help keep jobs in Canada. In February 2020 when the BLTR panel released their report in the description of audio-visual content there was the inclusion of interactive media[4]. This meant video games may potentially fall under the broadcast regulatory framework.

Furthermore, in Canada video games are played in an equal split of 50% each between both men and women, but the makeup of the video game industry in Canada does not reflect that reality. Currently, in the industry only 19% of the direct workforce are women, which showcases that the industry has a long way to go to be reflective of the community it represents. In a similar area to gender representation is the need for more diverse BIPOC representation in the industry. Major gaming studios need to step up alongside the rest of the media and cultural sector with diversity of their workforce. With the growth of the industry has also come copyright and privacy issues. Many small game studios are not well versed with protecting their intellectual property and many large studios deal with “crunch” related problems. In addition, within the video game community globally there have been many a disturbing rise in cases of privacy breeches, safety concerns and hate speech[5].

Industry Firsts: Canadian Game Awards and Canadian Screen Awards

2020 represented an important year for the growth of the industry in number of players and policy decisions but also from the recognition it received in Canada. This is important to mention because it showcases that from now onwards mainstream video games are officially recognized in Canada as cultural media that is embedded into Canadian social and cultural fabric.

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In April 2020, the first annual Canadian Game Awards (CGA) produced by Northern Arena was set to take place to celebrate Canada’s video game industry at TIFF Bell. However, due to COVID-19 it was cancelled and was done through digital stream in September 2020. The award show was set to be broadcast on major channels such as Amazon Prime, Bell, Rogers, Shaw and Telus showcasing the mass appeal and potential the industry has to be something like a Juno Awards. The Academy of Canadian Cinema & Television each year in March produces the Canadian Screen Awards which was also delayed and later done virtually in May 2020. Watching the stream revealed that there was the inclusion for the first time of Best Video Game Narrative[6].

Video Game Policy in Canada — Federal and Provincial

Federal Initiatives

In February 2020 when the BLTR panel released their report there was the inclusion of interactive media which could have led to video games being put under the broadcast regulatory framework. The Entertainment Software Association of Canada (ESAC) was able to work with the Minister of Heritage’s office to ensure that video games specifically be excluded from any legislation. The purpose of the review and subsequent legislation to follow is to provide better jobs for Canadian creators and that mandate is being achieved and exceeded by game studios compared to other traditional forms of media. Had video games been included there could have been major ramifications for foreign owned studios that could have led to a shakeup in the industry. ESAC has been advocating for less oversight as they understand the importance of not placing content requirements and restrictions that have failed in other countries. The gaming industry has thrived in Canada because of the lack of restrictions and traditionally has focused on making games that can sell worldwide as more than 76% of revenues come from international markets.

Members of the industry such as ESAC also successfully lobbied so video games were defined as a technology product and not a cultural product in the United States-Mexico-Canada Agreement[7]. The federal government also introduced the Global Talent Stream of the Temporary Foreign Worker Program, that has made the application process for international talent joining Canadian companies easier[8]. 2015 data from ESAC showed that 13% of the Canadian video game industry’s workforce had foreign workers who are essential to the industry for niche skill sets.

Ontario Provincial Policy

In 2019, Ontario provided an important policy change for small to mid-size game development studios. Prior, to the new policy studios in Ontario could apply for funding only after completing a game project and spending at least $1 million in each fiscal year for labour related costs. If they were able to meet those requirements they could qualify for the province’s credit. However, understanding the changing nature of the industry and the increasing average development time for game projects the Ontario government set out new rules[9]. Applying for the Ontario Interactive Digital Media Tax Credit was changed so applicants would not need to be done a project and could also apply annually during the project. In addition, the qualifying cost of $1 million for labour costs was reduced to $500,000 per year allowing smaller studios the opportunity to qualify.

Game studios had previously been vocal in Ontario about the complex process to apply, but the new system has listened to those concerns and made it easier to qualify and complete the application. For some studios, the credit from the provincial government can cover a significant portion of their total labour costs for game production. This can allow gaming studios who are looking to grow quickly hire the necessary talent and make a quality game product.

The Ontario Media Development Corporation (OMDC) has been a big support for studios as well with grant funding from the Interactive Digital Media (IDM) fund. Through the IDM Fund there are four streams offered including a stream for production and conception definition[10]. 50% of eligible project expenses to a maximum of $50,000 are available for concept definition projects and $250,000 for digital media production project. On a policy front previously, Ontario Creates was having difficulties with too many irrelevant companies accessing the tax credit. As a result, Ontario Creates switched to a funding model and included more specific eligibility criteria and qualifying expenses for more oversight. Between 2018–2019 it was reported Ontario Creates invested a total of 8.9 million in 149 IDM projects across the four different streams[11]. Funding for the companies included areas such as early-stage development, market-ready content development as well as global market development.

Ontario has also set itself up well with strong domestic talent with established engineering and game production related programs in Ontario colleges and universities. For example, in animation Sheridan is one of the best in the world and has churned out many skilled animators through their program who have even gone on to work with Disney and Pixar[12].

Federal Incentive Programs

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From the Creative Canada Report from 2017 the Canada Media Fund was given specific directive to increase funding for innovative and digital media content such as video games. As a result, the CMF specifically opened streams and programs that make it easier for video game studios and independent developers to apply[13]. These streams give an opportunity to test concepts quickly and are helping accelerate the growth of innovation in the sector.

The Federal government also has the Industrial Research Assistance Program (IRAP) and Scientific Research and Experimental Development Tax Incentive Program (SR&ED) that can also be applicable to game studios. IRAP and SR&ED can provide innovative game studios with between $50,000 to $500,000 each year to help with supplementing development costs if they meet the specific criteria. Beyond those two programs game studios have also found an ally with Canadian banks such as the Busines Development Bank of Canada (BDC) which has shown strong support for Canadian video game studios. The past few years within BDC’s venture capital portfolio, Execution Labs, a hybrid game incubator has invested through fund investments in independent game studios or directly into game IP[14].

Future Issues and Policy Considerations

There are four key areas that will affect the immediate future of the industry that need to be zeroed in on. Those are privacy and safety concerns, reflecting diversity, work conditions for employees as well as intellectual property challenges for game studios.

Privacy and Safety Concerns

For privacy and safety concerns the next steps for game studios are to become familiar with the newly rolled out Digital Charter in Canada from the Digital Charter Implementation Act announced by the Minister of Innovation. The charter has ten commitments including safety and security and free from hate and violent extremism[15]. Game studios in the coming months will need to reflect deeply on their policies to protect the privacy of game users and the data they collect. Especially for multiplayer games this is especially important, as there have been increasing reports in large multiplayer games of safety and security concerns as well as hate speech appearing in games. These issues have hurt the global industry and it is important for Canadian game studios to work internally for mechanisms to combat these concerns and match the principles of the Digital Charter.

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Gender Diversity and BIPOC

Furthermore, the industry needs to contend with the reality that only 19% of the overall workforce in 2019 consisted of women. There was a slight improvement from 2017 when the overall percentage was 16% but much more is needed to be done. The disparity is largest in British Columbia’s workforce which had 14% of women representation and Ontario had the highest at 26% out of the provinces[16]. In addition, it is important to note large and very large game studios employ the smaller overall percentage of women when compared to small and medium sized game studios. As a result, two areas of improvement on a policy perspective is for the province of British Columbia to learn from Ontario and play catchup. In addition, large and very large game studios need to work specifically to address this gap in their corporate hiring practices. Potentially, options to consider are having funding tied to specific representation goals such as having female executives or founders in game studios.

In the same vein of gender representation, the need for more diverse BIPOC representation is also important. Major gaming studios need to step up and learn from the polices set recently within the media and cultural sector with diversity of the workforce being a priority such as with Bell Canada’s recent commitments. The Canada Media Fund this year showed a potential model for tying specific funding requirements to specific BIPOC goals that can also be modeled[17]. The industry is showing positive steps forward already for example, Ubisoft recently started a BIPOC online series that features diverse voices and profiles at the company[18]. This is a step in the right direction for the organization and the diversity polices for major gaming studios need to continue to reflect the people that play and use their products.

Crunch Time

There have been recent reports of employees in Canadian game studios having to work extremely long hours specifically during “crunch time” when project deadlines are approaching. In some cases, game design jobs can be 14–16-hour long workdays and large Canadian game studios such as Bioware are taking notice of the burnout that can occur and are taking steps to mitigate this issue. Chapters of Game Workers Unite that support a union for the industry are growing traction in Montreal, Toronto, and Vancouver[19].

Copyright

In March 2017, the Canadian Federal Court ruled against Go Cyber Shopping Ltd, the video game copier and seller for downloading copyrighted content from Nintendo of America Inc as being illegal under Canada’s 2012 Copyright Modernization Act[20]. This was a precedent setting case and sent a signal to the industry of the robust protection for intellectual property for video games. In fact, all elements of a video game are entitled to distinct copyright protection including the source code, story, music, voice acting, character design and level design. Problems however arise for small and medium sized game studios who do not understand the intricacies of IP and licensing for their games. The important steps for all studios need to take are creating IP assignment agreements to ensure they assign the game IP to the studio specifically, so it has the legal ability to own and sell the game. In addition, when studios work with independent contractors their agreements must specify that the studio owns all the contractor’s work. It is important that lawyers assist with drafting contracts and reviewing publishing agreements. There have been cases such as in the Superior Court of Québec case in 2015 where an artist who contributed visual content for a video game, was awarded $10,000 in compensation for the work since they still owned that copyright[21]. Potential policy considerations for this issue are public private partnerships that can work to provide resources and legal mentorship for smaller game studios. Already Ubisoft and Microsoft in Canada have started initiatives to help provide mentorship to independent game studios and including legal to the package is the right step for the industry.

Conclusion

The Canadian video game sector is primed for explosive growth in the next decade and continues to be a global force in the video game sector. The federal government of Canada as well as the provincial government of Ontario have set up enticing and helpful incentives for both small and large game studios. For the industry to reach even greater heights it needs to iron out these four important policy issues through a combination of internal reflection, support from others in the industry and government policy.

References

[1] ESAC. (2020). Entertainment Software Association of Canada Annual Report 2020. Retrieved December 16, 2020, from https://theesa.ca/wp-content/uploads/2020/08/ESAC-Annual-Report-2020.pdf

[2] CRTC (2016, October 06). The online video gaming industry in Canada: What are the trends? Retrieved December 17, 2020, from https://www.youtube.com/watch?v=0-ZKYWXUbw0

[3] NPD Group. (2020). Real Canadian Gamer Essential Facts 2020. Retrieved December 16, 2020, from https://theesa.ca/wp-content/uploads/2020/11/RCGEF_en.pdf

[4][4] Sector, S. (2020, January 29). Canada’s communications future: Time to act. Retrieved December 17, 2020, from https://www.ic.gc.ca/eic/site/110.nsf/eng/00012.html

[5] Mintel. (2019, March 14). Canada is a nation of video game lovers — despite worries of addiction and online insults. Retrieved December 16, 2020, from https://www.newswire.ca/news-releases/canada-is-a-nation-of-video-game-lovers-despite-worries-of-addiction-and-online-insults-827292822.html

[6] ESAC. (2020). Entertainment Software Association of Canada Annual Report 2020. Retrieved December 16, 2020, from https://theesa.ca/wp-content/uploads/2020/08/ESAC-Annual-Report-2020.pdf

[7] ESAC. (2019, November 15). Video Game Development Industry Contributes $4.5B to Canada’s Economy. Retrieved December 17, 2020, from https://theesa.ca/2019/11/15/video-games-contribute-to-canadas-economy/

[8] Canada, E. (2017, June 12). Government of Canada. Retrieved December 17, 2020, from https://www.canada.ca/en/employment-social-development/campaigns/global-skills-strategy.html

[9] Whan, C. (2019, May 29). Ontario government easing access to tax credits for video game developers. Retrieved December 17, 2020, from https://globalnews.ca/news/5326157/ontario-government-tax-credits-video-game-developers/

[10] Ontario Creates. (2020). Interactive Digital Media Fund. Retrieved December 17, 2020, from https://ontariocreates.ca/investment-programs/content-creation/idm-fund

[11] Ontario Creates (2019). Ontario Creates Annual Report 2018 | 2019. Retrieved December 16, 2020, from https://ontariocreates.ca/uploads/About-Us/Eng/Annual-Report/Annual-Report-2018-19_en.pdf

[12] Sheridan. (2019, May 14). Sheridan College ranks as number one animation school in the world. Retrieved December 17, 2020, from https://www.sheridancollege.ca/news-and-events/news/sheridan-college-ranks-as-number-one-animation-school-in-the-world

[13] Heritage, C. (2017, October 19). Government of Canada. Retrieved December 16, 2020, from https://www.canada.ca/en/canadian-heritage/campaigns/creative-canada/framework.html

[14] Execution Labs. (2020). Retrieved December 17, 2020, from https://www.bdc.ca/en/bdc-capital/venture-capital/portfolio/execution-labs

[15] Canada, G. (2020, November 23). Canada’s Digital Charter: Trust in a digital world. Retrieved December 17, 2020, from https://www.ic.gc.ca/eic/site/062.nsf/eng/h_00108.html

[16] Nordicity. (2019, November). The Canadian Video Game Industry. Retrieved December 16, 2020, from https://theesa.ca/wp-content/uploads/2019/11/CanadianVideoGameSector2019_EN.pdf

[17] Willhelm, K. (2020, October 20). CMF Strategy [Interview by A. Sidhu]. Phone Call.

[18] Ubisoft. (2020, November 13). BIPOC of Ubisoft — Nikhil Ramburrun. Retrieved December 17, 2020, from https://news.ubisoft.com/en-us/article/20h6m7jIjrAe8se388SDSB/bipoc-of-ubisoft-nikhil-ramburrun

[19] CBCTheNational. (2019, April 26). Canadian video game creators face gruelling ‘crunch’ hours. Retrieved December 17, 2020, from https://www.youtube.com/watch?v=C-pQUocvE4Y

[20] Practical Law Canada Commercial Transactions. (2017, March 20). Federal Court Awards Nintendo $12.7 Million in First Technological Protection Measures Case Under the Copyright Act. Retrieved December 17, 2020, from https://ca.practicallaw.thomsonreuters.com/w-006-8435?transitionType=Default

[21] Abramovitch, S. (2018, August 28). Rules Of The Game (Part 1): Copyright Protection Of Video Games In Canada — Intellectual Property — Canada. Retrieved December 17, 2020, from https://www.mondaq.com/canada/copyright/730946/rules-of-the-game-part-1-copyright-protection-of-video-games-in-canada