De­spite growth, On­tario gam­ing sec­tor faces bar­ri­ers

The Peterborough Examiner - - BUSINESS - CHAD SAPIEHA FI­NAN­CIAL POST

TORONTO — De­spite On­tario’s rep­u­ta­tion for of­fer­ing lu­cra­tive tax in­cen­tives to at­tract tech com­pa­nies — the prov­ince lured ma­jor video game devel­oper Ubisoft to open a large stu­dio in Toronto in 2009 — some qual­i­fy­ing busi­nesses are find­ing it dif­fi­cult to gain ac­cess to funds, a new re­port says.

This find­ing comes from a re­port re­leased Wed­nes­day and com­mis­sioned by the non-profit trade as­so­ci­a­tion In­ter­ac­tive On­tario, a group aimed at grow­ing the in­ter­ac­tive dig­i­tal me­dia (IDM) in­dus­try in Canada’s most pop­u­lous prov­ince.

IDM com­pa­nies aren’t just game com­pa­nies. They also in­clude app de­vel­op­ers, dig­i­tal ad firms, and e-learn­ing creators, among oth­ers. But, ac­cord­ing to the re­port, game mak­ers con­sti­tute the big­gest chunk: Two-thirds of IDM com­pa­nies re­ported that they pro­duced video games.

The sheer size of the in­dus­try in On­tario might sur­prise some. Ac­cord­ing to the re­port, there are 877 IDM com­pa­nies lo­cated in On­tario di­rectly em­ploy­ing nearly 11,000 highly ed­u­cated, full-time equiv­a­lent work­ers, with sig­nif­i­cant hubs of ac­tiv­ity in Toronto, Ot­tawa, and Lon­don. These com­pa­nies — vir­tu­ally all of which are pri­vately held and Cana­di­anowned — gen­er­ated a com­bined to­tal of $1.3 bil­lion in rev­enue in 2015, 25 per cent of which was tal­lied as profit. What’s more, the 100-plus com­pa­nies sur­veyed for In­ter­ac­tive On­tario’s study re­ported an ex­pected com­bined rev­enue in­crease of more than 60 per cent over the next year.

But de­spite the sec­tor’s rapid ex­pan­sion, some IDM com­pa­nies are still butting up against ob­sta­cles.

Asked to rank po­ten­tial bar­ri­ers to their growth, IDM com­pa­nies re­ported that the great­est hur­dle is get­ting ac­cess to pub­lic fund­ing, such as grants and tax cred­its. Re­spon­dents noted a va­ri­ety of rea­sons, in­clud­ing that gov­ern­ment pro­grams are of­ten com­plex and that they have dif­fi­culty meet­ing the re­port­ing re­quire­ments, that more so­phis­ti­cated projects aren’t nec­es­sar­ily el­i­gi­ble for some pro­grams, and that in­de­pen­dent stu­dios some­times don’t meet min­i­mum rev­enue thresh­olds.

That said, In­ter­ac­tive On­tario ex­ec­u­tive di­rec­tor Christa Dick­en­son be­lieves that plenty of other IDM com­pa­nies do ben­e­fit from gov­ern­ment pro­grams.

“Many com­pa­nies we sur­veyed were able to ac­cess rel­e­vant pub­lic grants and tax cred­its, but of­ten found bar­ri­ers to re­ceiv­ing fi­nanc­ing from ven­ture cap­i­tal­ists and other pri­vate in­vestors, who are of­ten un­will­ing to in­vest in dig­i­tal con­tent. We work to bring the two sides to­gether in the hope of nur­tur­ing fu­ture part­ner­ships.”

She did ad­mit, how­ever, that some smaller stu­dios strug­gle to get into gov­ern­ment pro­grams.

“We do rec­og­nize that pub­lic fund­ing ap­pli­ca­tions can be in­tim­i­dat­ing for startup stu­dios, which is why we fre­quently host ses­sions de­signed to help com­pa­nies un­der­stand the process and meet fund­ing rep­re­sen­ta­tives.”

Some com­pa­nies are also hav­ing a hard time find­ing ex­pe­ri­enced tal­ent within the prov­ince. How­ever, it sounds like these busi­nesses could po­ten­tially find the peo­ple they need by look­ing be­yond On­tario: The re­port found that nearly 90 per cent of IDM em­ploy­ees in On­tario are hired from within Canada.

Other sig­nif­i­cant chal­lenges noted by the com­pa­nies sur­veyed seem to go hand-in-hand with work­ing in a high-tech space. For ex­am­ple, some com­pa­nies ref­er­enced the in­dus­try’s ten­dency to ex­pe­ri­ence sig­nif­i­cant dis­rup­tion via the in­tro­duc­tion of new and ex­pen­sive tech­nolo­gies, which have po­ten­tial to play havoc with strate­gic plan­ning and bud­gets.

And game stu­dios re­ported that their of­ten long devel­op­ment cy­cles can re­sult in prod­ucts that are less rel­e­vant when re­leased than they might have been when the project was ini­ti­ated. In other words, if you start mak­ing a game you’re rel­a­tively sure ev­ery­one will want to play to­day, changes in tech­nol­ogy, trends, and tastes means there’s no guar­an­tee it will re­main as at­trac­tive when it launches two or three years later.

The re­port also re­veals in­ter­est­ing in­for­ma­tion about the IDM work­force.

Nearly 90 per cent of work­ers are un­der 40. Only 11 per cent are in their 40s, and less than 1 per cent are in their 50s or older. Re­tain­ing older work­ers likely isn’t a re­mu­ner­a­tion prob­lem; salaried IDM em­ploy­ees with more than six years of ex­pe­ri­ence make a healthy $89,000 per year, on av­er­age. In­stead, the re­sults may lend cre­dence to re­ports in re­cent years that sug­gest ageism in tech­fo­cused pro­fes­sions such as game de­sign.


A shot of the Ubisoft of­fices in Toronto. The gam­ing com­pany was lured to On­tario in 2009 but other tech com­pa­nies are find­ing it hard to set-up shop in On­tario.

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