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Attractive tax breaks offered by Canada, France and many US states are drawing global publishers to build studios and recruit talent based on tax incentives, rather than broader commercial logic.
Britain, which does not offer tax breaks, is falling down the global rankings of games-producing companies from third to either fifth or sixth, depending on who you believe. TIGA, the games development trade body, has been a vociferous supporter of tax breaks for the games industry to “level the playing field”.
But is Canada actually benefiting so much? In the latest Develop 100 2010 survey of the world’s most successful game studios, one statistic leaped out at me:
“Within Canadian-made games, 82 per cent of product sold is by a publisher-owned studio, no surprise given the many studio investments in the region.”
Hold on. Are the tax breaks really doing what Canada wants? Are they creating a strong, domestic business with global exports and long-term potential? Or are they just creating a legion of indentured wage slaves who are only attractive to foreign investors because of the generous tax breaks?
What’s the long-term future of Canadian development?
I’m guessing that the purpose of the Canadian tax breaks are to build long-term value in the economy (not just keep people in jobs, which to my mind is the role of the market, not of government).
The question, then, is whether Canada’s economy will benefit from the repatriation of profits generated by its local development talent to the coffers of US, French and Japanese companies.
After all, a knowledge economy rests on Intellectual Property. And that IP is not being created for the benefit of Canadian companies but for their overseas paymasters.
Does this matter?
I think it does.
Ask any businessman whether he would be happy to compete on price alone, and he would look at you as if you were mad. Price is a poor differentiator, and a beggar-thy-neighbour one. As soon as high-quality development talent comes on stream in other countries that have lower costs-of-living or better tax breaks, Canada is in trouble. Unless it offers even bigger incentives.
For the long term, Canada needs to foster a spirit of entrepreneurialism and IP-generation that will stay in Canada. It needs to encourage its best and brightest to start new businesses, not to take attractive (and subsidised) jobs with global behemoths.
A quick test for you: can you name two global Canadian success stories in games in the last ten year? For these purposes, they need to be well-known to gamers, still independent, and have created intellectual property with a long-term future.
I’m struggling. Maybe I don’t know enough about Canada.
Or maybe tax breaks have a hidden, and dangerous, cost.
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Yes, the big 'press release' announcements that you read about typically involve the larger publisher shops - because they are the ones that tend to spur the initial growth in a region. Every creative hub that exists in the industry has started as a direct result of an 'anchor' studio - which is in most cases a large publisher-owned studio.
Vancouver started with EA Canada - which in turn has spawned literally dozens (if not hundreds) of smaller studios, the vast majority of which are independent, 'entrepreneurialism and IP-generation' based studios.
What you don't read about in the global press is that the creative grants and the tax credits are exactly the reason that smaller studios have the chance to create their own IP instead of simply jumping from service contract to service contract.
The hidden, dangerous cost is that the tax credits & grants are often very political - when budget cutting & elections come around, the creative / arts world is the first on the chopping block. Luckily, we live in a country where a large percentage of the population actually believe in supporting the Arts, and the government has followed through (in a mostly successful fashion).
It's far from perfect, but it's definitely a great start.
That has already happened in some ways. I've been working in a QA in Montreal Canada for nearly 3 years. Over the last 3 years Quebec has raised min wage every year. When I started in QA (at an american owned outsourcing company.) min wage was 8 bucks an hour and there was lots of work. More work then what we could handle at the time. A year later min wage went up to 8.50, then 9 the fallowing year. By the time it hit 9 the company I worked for had already set up a center in India. They sent 80% of the work there and laid off over 80% of their staff by the end of 2009. I believe they used to have about 400+ employees in the summer months. That is alot of lost jobs.
After I got my advance warning about the mass layoffs I jumped ship to a (France owned) Dev company. Thinking it would be a little more secure doing QA in house. It seems more and more work is being sent to China. Due to the cost in wages. We are to expensive. I checked in on wages in China for QA. What they make in one year I make in a month. I see why QA is slowly being sent out of Canada even when more and more gaming companies are opening up studios here.
In a few more years more and more aspects of game developement will be sent over seas to cheap areas like india and china. Then Canada will have a whole lot of experinced developers out of work.
And to answer your question. The only Canadian owned company I know of in Montreal is A2M. And they make shit games. Look at the reviews for Naughty Bear.
Nicholas, It's difficult to meet your criteria because the most successful Canadian developers have been bought out by publishers - companies like Radical, Relic and BioWare - after having created IP prior to the purchase. Forget Canada: can you name any companies in the enire world that meets these criteria? Basically, because publishers buy out developers who create long-term IP, asking for a "still independant company that creates long-term IP" is akin to asking for an apple that's still an orange.
Here's wiki's list of still-independant developers:
http://en.wikipedia.org/wiki/List_of_indie_game_developers
There's only TWO that I would consider to be well-known and have viable (AAA) long-term IP: Insomniac and Level-5. One American, one Japanese.
I suspect you have two related yet different arguments: tax breaks don't help local business grow and Publishers own all the IP. Even if there weren't tax breaks, even if a different funding program helped grow local Canadian indie companies, publishers would probably still scoop up all the good companies with good IP and you'd be right off in the same boat with US companies owning Canadian subsidiaries. The advantage to tax breaks is that it encourages the local companies to stay in Canada, rather than be relocated to another place after the buy-out is completed.
So it's dangerous to be too optimistic or uncritical about things.
reaks_Hold.php) is a type of Darwinism-by-bureaucracy - the animals that survive are the ones good at making government applications; the ones that don't, aren't. But being good at writing an application / understanding tax credits / etc, and being good at making a game/film, are two separate things.
But hey... We'll gladly take the tax credits if we can get them... ;-)
There *are* a handful of gigantic foreign-owned studios here, but there are also many dozen or hundreds of smaller domestic indies.
Just in the Toronto area, OTOH, there are: Capy, Queasy, Metanet, RSBLSB, Spooky Squid, Drinkbox, Bedlam, Cerebral Vortex. I'm sure there are just as many in Vancouver, though the only ones I remember meeting are Slick and Klei; AFAICR Infinite Ammo is somewhere in the prairies.
In closing: Canada rules, Toronto rules, and there are plenty of small Canadian teams who own their own IP. Suck it, rest of the world! Woo!!
But like Tim, I worry that government incentives cause people to chase what goverment wants, not what customer want (leaving aside the whole "artistic" debate.) And in the end, I'd rather deliver what a customer wants, not what a government wants.
And tax breaks cloud that picture.
Also, Raigan missed Little Guy Games, Streaming Color (well, guelph), Untold Entertainment...
Our corporate tax rate is something like 20%, which AFAIK is on par with the US; I'm pretty sure our personal income tax is also comparable to that of the US -- there's definitely not a huge disparity. I guess you can just provide a lot more for your citizens when you aren't throwing away trillions of dollars on the military :p
(BTW, you already HAVE the same "vast social programs" -- they're just administered by private corporations. But this is OT enough already without getting into cultural corporate Stockholm syndrome...)
Anyway, the whole argument about "what the government wants" is confused -- their terms are purely financial/corporate (i.e they require that the business be owned/controlled by residents, that the majority of the budget be spent in Canada, etc.) and have nothing to do with the content that you're making -- what the government wants is for us to employ people and contribute to the economy via a healthy business.
It *is* true that learning how to write a good grant application is a somewhat annoying and tedious task, but it's no worse than figuring out e.g payroll and taxes; it's just part of the administrative overhead of running a company. Also -- as with taxes and payroll -- there are companies who specialize in tax credit/grant application who can take care of it for you if your time is better spent elsewhere.
http://www.cra-arc.gc.ca/sred/
[apologies for the plaintext, my links keep getting eaten for some reason]
For the latter you need to be involved in developing tech where there is significant R&D, i.e not casual games on iPhone, etc..