Despite growth, Ontario gaming sector faces barriers
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.