Provided by: The Financial Post, Oct 15, 2012
Vancouver video game indies look to revitalize the industry
Danny Bradbury, Special to Financial Post | Oct 15, 2012 9:11 AM ET
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Danny Bradbury for National PostBrenda Bailey Gershkovitch, left, and Kristin Forbes peruse a graphic from their upcoming romance game.
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Video game tax break makes Quebec an industry hub
When Eidos Montreal won console game of the year honours at this year’s Canadian Videogame Awards for Deus Ex: Human Revolution, the prequel to the famed cyberpunk action thriller, designer Jean-François Dugas stood at the podium and thanked the 140 or so production staff who laboured on the title.
“Without those people this game would have never happened,” Mr. Dugas said. Without Quebec’s publicly funded tax credit program that pays a third of their salaries, it wouldn’t have happened either.
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VANCOUVER — Much like the fall weather, the city’s video games sector is looking increasingly gloomy after bleeding jobs this year, leaving some wondering if the once-great local industry can get its groove back.
In January, video game giant Ubisoft closed its Vancouver development studio. In June, Activision eviscerated its Vancouver subsidiary Radical Entertainment, which had been active here for 20 years, taking away 89 jobs. Then, famed games studio Rockstar pulled out, moving its development to Ontario. Capcom Vancouver cut 20 jobs, and Microsoft then shed about 35 when it shut down two development projects. Last year, Disney closed its Propaganda Games studio, founded in 2005, and EA, Vancouver’s largest gaming company, has been steadily downsizing for the past few years. Many of these jobs are moving east to Quebec and Ontario, where tax incentives are better.
“I have counted at least 5,000 jobs we have lost in Vancouver because we are not competitive,” laments Howard Donaldson, president of the Digital Media and Wireless Association of British Columbia. “I am not really a big fan of tax policies, but when they work so effectively against your community then they’re important,” he says.
Vancouver’s gaming industry stalled in 2008, after a period of extensive growth, due to the global economic meltdown. British Columbia implemented its Interactive Digital Media Tax Credit in 2010, offering a 17.5% break to digital media companies setting up there. However, Ontario and Quebec have since topped that with tax credits of 40% and 30 to 37.5%, respectively, for video game companies. PwC notes incentives in Ontario and Quebec cover contract labour, which is a huge factor in the console games development business; B.C.’s does not.
The consultancy firm says Vancouver employed 52% of Canada’s video game professionals in 2007, while Quebec had 26%. Last year, B.C.’s count had dropped to 28%, and Quebec’s had risen to 53%.
Matt Toner, founder of gaming studio Zeros to Heroes, wants to see more government involvement to help revitalize the industry in Vancouver. He calls the current tax program the worst of both worlds. “It’s high enough to be expensive, but not high enough to do something productive,” he warns. “If they matched Ontario and Quebec’s rate, they’d be competitive, and revenue-neutral.”
Mr. Toner — whose campaign, Can We Do It, has a website — has his eye on a provincial government seat in his riding of False Creek, so that he can execute a campaign mandate to revitalize the digital media sector.
His vision is of a multi-tiered video game industry, with a mixture of large and small firms. Larger companies throw off talent that in turn encourages the development of smaller players who can innovate in new areas. Tax breaks may not be as relevant for smaller companies, he says, citing other incentives. If elected, he says he would promote small government investments in many smaller video game companies to help them grow.
“A lot of the pedigree here is in studios that develop games destined for consoles,” says Susannah Skerl, a 17-year veteran of the industry, who has worked at large and small firms alike. Now working at Eastside Games, one of Vancouver’s up-and-coming startups, she thinks the industry is set for a fundamental shift.
“The publishing model is broken and these large studios are unsustainable — and not just in Vancouver,” she warns. “These companies are shareholder-driven, and shareholders are risk-averse, and we’re in a recession.” Games for the major computer consoles take years to develop, which makes the gaming studios and large publishers less agile. Instead, Ms. Skerl encourages a nascent industry that focuses on small games designed for mobile devices that cost less to develop.
Developers in this market stand to benefit in several ways. Agility and lower entry costs are two big factors, but it is also possible to partner with different people, rather than just dealing with a major publishing studio. East Side Games is one of several studios targeting the market for mobile games in Vancouver.
Brenda Bailey Gershkovitch, chief executive of Silicon Sisters, the first female-owned and operated video game company in Vancouver, is helping break another taboo. The video game sector is male-dominated, but along with business partner Kirsten Forbes, she is tackling new markets, going after a younger female market with their School 26 games series.
“We’re seeing the indie scene here really light up. People that are leaving companies are staying here and starting up on their own,” she says. “I am an optimist. I think it’s possible that the vibrant startup community could bring some innovative studios, many of which will do well.”
Silicon Sisters is focused on smart phones, tablets, PCs and Macs, and adapts its revenue model to fit whichever platform it is targeting. “There are 28 monetization models in the App Store,” Ms. Gershkovitch says. “What’s fun about being in the smartphone market is that you can take feedback from the consumers.” The company can monitor players’ usage patterns directly in the game, which can inform future game development, and even alter the way a company charges for the games.
The company is preparing a romance game aimed at its core young female market. “We want to be the Harlequin Romance of video games,” Ms Gershkovitch says. “That is a market that hasn’t been filled yet.” Perhaps, as traditional video gaming jobs flee town, breaking the rules of the game is the best way to survive.