Overview of the Canadian Video Game Industry:
Canada is the site of a thriving interactive game industry. It is home to some world-renowned game development companies; several multinational game makers operate Canadian studios; Montreal and Vancouver are internationally recognized as hubs of game industry; and Canadians are avid consumers of new media, including video and computer games. Below is an overview of the Canadian digital play industry—some select factoids, a few highlights, and some brief analysis. More detailed reports and extended analysis will be made available on this site on an ongoing basis.
The global market for interactive games software and hardware is about $30 billion. Canada accounts for approximately 3%, or $1 billion, of these sales.
Canada possesses one of the world’s strongest technical infrastructures for gaming: 40% of all households own a video game console; 60% own a personal computer and broadband penetration, so crucial to the enjoyment of on-line gaming, is second only to Korea
Canadian $1 billion purchases of games software and hardware is only slightly behind the sales of recorded music in Canada, estimated at $1.2 billion for 2000.
Canadian games are published and sold internationally, and games sold in Canada are produced internationally.
Canadian game developers reckon no more than 5% of their sales are domestic. Most games bought in Canada are made in the US, Europe or Japan; and most games made in Canada are sold in the US or Europe.
The best selling games and genres in Canada over the past five years tend to be same titles and genres that topped the US and European charts. But, yes, hockey games are more popular here..
Development and Publishing
The top game-producing nations are the US, Japan, Britain, Germany, and France--followed by Canada.
Canada is home to some world- renowned gamed developers and studios. For example:
· Edmonton’s BioWare is one the most famous developers of role playing fantasy games, with best selling titles such as Baldur’s Gate, Neverwinter Nights, and Star Wars: Knights of the Old Republic.
· Vancouver’s Relic Entertainment created Homeworld an original PC title viewed as a benchmark in game aesthetics.
· Digital Extremes, located in London, Ontario, co-developed Unreal, a celebrated shooter.
· The Montreal studio of French publisher UbiSoft. produces the highly succesful SplinterCell games, based on Tom Clancy novels.
· Electronic Arts Canada, the Vancouver branch of US computer game giant, is one of the largest game development studios in the world, and focuses on the production of EA’s famous sports games.
In total, there are about 100 Canadian-based companies primarily devoted to interactive game development, publishing or distribution.
Of these there are some 25 in Quebec, 35 in Ontario, 30 in British Columbia, 4 in Alberta, 1 in Saskatchewan, 1 in Manitoba, 1 in Nova Scotia and 2 in New Brunswick.
In addition, there another 50 or so companies that include game development as a subsidiary activity—e.g. alongside web design or other multimedia business services. Their distribution follows a similar pattern to the companies listed above.
The major centres of the gaming industry are Montreal and Vancouver. They owe their position largely to the presence of large development studios of multinational publishers (UbiSoft, EA), providing a hub that other, smaller companies revolve around or spin off from. Although there are many developers in Ontario, the province lacks a “hub” of comparable stature.
Some game industry success stories occur in unlikely places e.g. Bioware in Edmonton. Geographically, the industry is characterized by a tension between “regional innovation milieux” and “death of distance” dynamics
This core group connects and with other high tech sectors: postproduction services, computer software and peripherals, animation and special effects, “advergaming,” web design, etc. Some standouts are --Mad Catz (game accessories, annual revenues $83 m.), ATI Technologies ((video cards, annual revenue $1 b.) and various “middleware” and authoring tool producers, such as Alias Wavefront, Discreet, Softimage..
Canadian based companies dedicated primarily to developing and publishing video and computer games account for between 3,500 and 4,000 jobs. This employment is heavily concentrated in BC and Québec, which each account for at least 1,500 jobs.
The majority of development companies are small. Most employ less than 10 people, many fewer than 5 there is high degree of “churn”; many are start- ups that fail.
The largest development studios are: Electronic Arts Canada (Vancouver, 8-900), UbiSoft (Montréal, 450), Radical Entertainment (Vancouver, 200), Bioware (Edmonton, 135), A2M (Montréal, 140), Microids Canada (Montréal, 90).
Other large employers are the publishers Strategy First (Montréal 100), Hip Interactive (170) Smaller but important developers, employing between 120 and 50 people are Microids (Montreal), A2M (Montreal), Artech (Ottawa), Strategy First (Montreal), Relic (Vancouver), Black Box(Vancouver, recently acquired by EA), Barking Dog (Vancouver, recently acquired by Take Two), Digital Extremes (London),Digital Illusions (London), Silicon Knights (St. Catherines).
Many of these large companies are foreign owned, by multinational developers and/or publishers based in the US (EA, Take Two/Rockstar, THQ), France (UbiSoft, Microids) or Sweden. (Dice)
Mid-size Canadian companies are increasingly being bought up by multinationals: e.g. Black Box by EA, Barking Dog, by Take Two, Relic by THQ.
There are three notable Canadian-owned publishers: Toronto’s DreamCatcher Interactive, Montreal’s Strategy First , and Hip Interactive of Toronto i--a major national distributor of game software and hardware that recently branched into publishing.
These three publishers, although correctly regarded as Canadian breakthroughs in the global games business, are not remotely in the league of internationally organized publishers based in the US, Japan, or France. The Canadian games industry is centered primarily on game development rather than publishing.
There are no reliable statistics on the Canadian based video and computer game industry. It is not listed as a distinct sector by government agencies such as Industry Canada or Statistics Canada, which rolls it into broader categories such as “multimedia.” We have arrived at figures based on a combination of published figures, interviews, and informed estimates. These figures should be treated with caution, because the estimates are just that—estimates, and also because of the complex structure of the industry, the high component of foreign ownership and also the very volatile nature of the industry, which can produce large annual alterations in sale.
The annual revenues for Canadian-based developers and publishers are currently around between $1.5 and $2 billion. This is compares to a 2001 total operating revenues for the Canadian software publishing industry estimated at $5.9 billion in 2001 by Industry Canada, and of a multimedia sector valued by the same source at $2-3 billion.
At least half of this amount is accounted for by a single company, the Vancouver-based Electronic Arts Canada, a subsidiary of the US owned Electronic Arts (EA). EA is the largest game developer in the world, and EA Canada its largest development studio, EA regularly has annual revenues over $1.5 (US) billion, and a number of reports ascribe 40% or more of this to the productions of the Vancouver studio.
A cluster of 12 or so publishers and developers account for most of the remaining revenues (Hip Interactive Radical Entertainment, Bioware, Strategy First, Digital Extremes, Relic Entertainment, New KidCo, Silicon Knights, Microids UbiSoft, Digital Illusions, Rockstar/Take two).
About $100m or less revenues is split amongst some 50 companies. There are many small developers making low or no revenue.
Strengths and Weaknesses of the Canadian Industry
The Canadian video and computer games industry has a number of notable strengths:
1. Canada is wealthy, wired and well-educated. There is a good skilled labour pool (particularly in the field of graphic design and animation), and widespread familiarity with digital technology and game-play.
2. Proximity to the US. Canada attracts investment by US publishers looking for low-cost production site, and from European game companies looking for base to break into N. American market (this has been important in attracting French game corporations to Quebec).
3. A supportive policy environment. In some provinces (Quebec), government policies are strongly supportive of the gane business, thru tax breaks, etc.. More generally, the Canadian policy and legal environment presents few major problems—from the point of view of game publisher sand developers-- around issues such as IP legislation and enforcement.
4. Although many people in the game business complain about high tax rates, the industry benefits from aspects of the Canadian welfare state such as a good education system and relatively pleasant, safe cities.
Despite its success, however, the Canadian games industry does have some problem areas:
1. Proximity to US. Canadian developers face a constant “brain-drain” threat arising from the higher wages, lower taxes and intense reputation of the US game business. This is clearly the flip-side to point 2) above.
2. Lack of control. As we’ve noted, there are few Canadian publishers The decision-making heights of the business--the site of the largest market base, of the largest game enterprises--are in markets and in companies outside of Canada. Many Canadian companies do not own IP rights to games they develop. Much of the revenue accrues overseas. Independent Canadian developers are being bought up. There is a risk of Canadian game development tending towards a “service industry” for overseas publishers.
3. Global mobility. Following from 2) above, publishers who see Canada as low cost development site may eventually globally relocate this work. Therefore, the Canadian government might consider policy level supports for independent, original domestic development by Canadian companies, similar to programs initiated in other countries, such as France or Korea.