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Canada has shown rare foresight with game subsidies

15 Sep

Oh that Jesse Brown. He’s at it again. Regular readers probably remember our spirited back and forth recently about Apple’s relative level of importance to technology over the past decade. Now, with his latest post on Macleans, Jesse has me frothing over another topic: video games.

In his post, he takes issue with the big tax breaks and other financial incentives that video game companies have received in many countries to set up shop there, especially Canada. As Jesse puts it, it’s a highly profitable industry that’s also one of the most subsidized:

The health of the industry is inarguable—sales of video games reached $15 billion in the U.S. alone last year, eclipsing the music industry, if that still means anything—and it would likely do just fine without the charity. So why the corporate welfare?

He goes on to argue that the hundreds of millions in tax breaks that provinces have been “seduced” into giving the likes of Ubisoft and Electronics Arts are just being used to pay coder grunts. When developing countries have enough people to do the same jobs, the multinationals will eventually outsource that work to them and get it done at a fraction of the cost:

When developing workforces in, say, Bangalore train enough skilled code-monkeys to undercut local coders, the jobs will quickly migrate to India, leaving little of the creative economy behind.

I have the same concerns over the current subsidy battle going on not just between countries, but also between provinces. Ultimately, it’s a race to the bottom where whoever provides the biggest carrot wins – but, as is at the heart of Jesse’s concern, do they win in the long run?

The answer for Canada, both empirically and anecdotally, is yes. According to a recent study compiled by SECOR for the Entertainment Software Association of Canada – to which I contributed some input – the games industry here employs 16,000 people and will generate $1.7 billion in economic activity this year. That’s not revenue, it’s the amount of dough it contributes to the national economy. At that rate of return, the hundreds of millions the provinces have doled out in subsidies will be repaid in short order, if they haven’t been already.

Moreover, the Canadian industry is growing quickly and is expected to expand 17% over the next two years. That means even more employees and more contribution back to the economy.

The economic impact was at the core of the Pushing Buttons series we did back at the CBC almost exactly a year ago. In one of the series’ stories, I discovered the more ground-level impact of the video game industry – that the production companies often revitalize the neighbourhoods they’re based in. With the average age and salaries of game employees being 32 and $68,000, respectively, that means there’s a whole lot of well-paid young people running around town. Such workers tend to want to be close to the action so they live downtown rather than in suburbs, so they buy condos. They’re also conspicuous consumers who eat at restaurants a lot, go to movies and concerts and buy the newest plasma screens and other expensive gadgets.

In Montreal, this has meant the revitalization of Mile End, a part of town that was quite sketchy prior to Ubisoft’s arrival in 1997. The same happened to Yaletown in Vancouver. It’s already happening in Toronto; one of the first things I noticed when I attended Ubisoft’s studio opening in the Junction area last year were the high-end condos going up right across the street. I went to high school near the Junction, so I’m particularly looking forward to that area getting cleaned up.

Jesse’s characterization of the types of people who work in video game design is off quite a bit. While the “coder monkeys” are indeed the people needed to ultimately make a game go, they’re only a small piece of the overall puzzle. And indeed, much of the simple coding work is already being outsourced to the likes of Singapore and Romania.

One of the more fun things I did for Pushing Buttons was put together a video on the making of a game, in which I talked to the many creative types – those highly paid young people – involved in design. Here’s the video:

Anyone who thinks games are made by interchangeable coder monkeys really should watch this because it underlines the fact that you can’t just plop a studio into any geography. The locale needs to have a smart and creative ecosystem in the first place, with the proper schools and skills around to feed the likes of Ubisoft and EA.

While the race to the bottom in subsidies is concerning, the good news is that Canada has a big head start. The ball is now rolling quite well and it’s going to take a lot for other countries to catch up, if they ever can. Video games are created through the confluence of creative and technological ability, which is something Canadians have proven to have in spades. Our governments shouldn’t be criticized for supporting the development of this industry, they should instead be praised for showing rare and uncharacteristic foresight.

Unfortunately, much of the media still lacks that same foresight. As I’ve written before, video games are still woefully misunderstood at best and discriminated against at worst. Alas, it’s a generational thing and eventually, gamers won’t just rule the world, they’ll rule the media too.

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4 Comments

Posted by on September 15, 2011 in video games

 

4 responses to “Canada has shown rare foresight with game subsidies

  1. Marc Venot

    September 15, 2011 at 4:22 am

    The video game industry is able to create useful jobs, pushing the boundaries of knowledge and usage (what is said in French “faire avancer le schmilblick”).
    So even if its footprint on the economy is not that large and don’t provide the huge margin of lawyers for example it’s a support for maybe a better future.
    An example when Canadians have bring something http://www.internetactu.net/2010/02/02/soyons-serieux-jouons-25-les-nouvelles-formes-de-jeu/

     
  2. Steve

    September 15, 2011 at 2:38 pm

    “the games industry here employs 16,000 people and will generate $1.7 billion in economic activity this year. That’s not revenue, it’s the amount of dough it contributes to the national economy. At that rate of return, the hundreds of millions the provinces have doled out in subsidies will be repaid in short order, if they haven’t been already.”

    This paragraph implies that without government subsidy, the games industry would not exist and would generate $0 in economic activity. I think that’s kind of a silly assumption. The question is how much would be generated without the subsidy, and does the economy come out on top as a result? The report doesn’t present a convincing case that it does.

     
  3. Russell McOrmond

    September 15, 2011 at 3:18 pm

    I guess my major complaint with the gaming industry is how some representatives are being abusive in the Copyright revision process. It’s not so much about protecting copyright, but how the ESA wants legal protection (under copyright) for the non-owner locks being applied to game consoles.

    http://flora.ca/own

    If this industry was not lobbing to revoke my hardware property rights and greatly harm my interests as a software author (owners much have right to make their own software choices in order to choose my software), then I wouldn’t be so upset about yet another example of corporate welfare.

     
  4. Craig Bamford

    September 16, 2011 at 4:41 pm

    It the industry is elsewhere, Steve, and has developed roots elsewhere, then it most definitely is generating zero income here.

    Comparative advantage doesn’t always happen by accident. Sometimes it can be built. We saw that in Japan, in Scandinavia, and over and over again in the United States; public investment in developing industries can pay off tremendously over time. Why shouldn’t Canada do the same thing? Are people that attached to the idea of hewing wood and drawing water until both are all used up?

     
 
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