Blame Canada
Why do some video game developers set up across the water? Canadian tax credits make it more viable for companies to develop their games there.
While Tiga, the companies it represents and various politicians continually backed the introduction of tax breaks for UK video games developers, one country that crops up all the time in their discussions is Canada. For some years now Canada has been seen as a haven for developers due to the tax credits system it has running in some of its provinces.
In April this year the Entertainment Software Association of Canada proposed further methods of ensuring that Canada became the market leader in video games development. ESAC Executive Director Danielle LaBossière Parr said: “The Canadian video game industry creates some of the best -selling video games in the world, however we must work together with government to ensure that we maintain the high paying and highly skilled jobs that have been created here, and that could still be created as this industry continues to grow.”
The two main havens within Canada itself are Ontario and Quebec and later this year British Columbia will also be joining them.
Ontario has a number of programs targeted at helping digital games producers cut costs, including the Ontario Interactive Digital Media Tax Credit, the Ontario Computer Animation and Special Effects Tax Credit and the Ontario Sound Recording Tax Credit. In fact, Ontario's R&D tax credits and digital media incentives can cut R&D costs by more than 60%.
Then in 2008 the Ontario Media Development Corporation, an agency of the Ontario Ministry of Culture that facilitates economic development opportunities for Ontario’s cultural media industries including book publishing, film and television, interactive digital media, magazine publishing, and music industries, invested $1 million in two development studios there: Digital Extremes and Silicon Knights.
President and founder of Silicon Knights, Denis Dyack said: “We believe that Ontario, and Niagara in particular, is an excellent place for a company to thrive, and, with the OMDC’s funding through the Video Game Prototype Initiative, it clearly shows that the Ontario government is on the same page.”
He added: “Most of Silicon Knights’ team are graduates of Ontario colleges and universities, and our team members are the best and brightest in their fields. This grant will encourage this great talent to stay within Ontario.”
In this way the investment helps graduates of the provinces universities, provides employment and the money made from Digital Extremes’ involvement in the highly successful Bisoshock games and Silicon Knights long awaited Too Human action adventure game gets funnelled back into the province. 
It’s a similar story in Quebec with developers such as Artificial Mind And Movement, THQ, Ubisoft and Eidos Montreal have all set up home there. Each of these studios has created games such as Wet, UFC Undisputed, Assassin’s Creed and Thief IV respectfully, that have been incredibly successful both in sales and for the province they are created in.
One of the reasons that companies like to settle in Quebec is because, as CEO of Tiga, Dr Richard Wilson, puts it: “Quebec offers 5 year income tax holidays for foreign specialists and pays 37.5 per cent of the salary costs of games companies’ development staff. Additionally, R&D tax credits cover 20-35 per cent of qualifying expenditure.” Which makes it more competitive and financially stable to develop video games there. In fact out of the provinces in Canada it is Quebec that has the highest tax relief for developers.
Another Canadian city that will benefit from the government’s greater interest in video games is Vancouver. In September this year the British Columbia's Interactive Digital Media Tax Credit program legislation that was announced in February will be put into action and this will make the city of Vancouver and the Province of British Columbia even more attractive to video games developers.
Vancouver has a long history of video game development, some might even suggest that it is a little incestuous, given how various studios have birthed smaller, more independent studios – which no one really minds because their metaphorical six toes gives them the ability to stand out of the crowd of the larger developers. But if you look at a family tree of how the six big developers: Barking Dog, Relic Entertainment, Black Box Games, Radical Entertainment, DSI and Electronic Arts Canada have sired their offspring, then you can see that the apple doesn’t fall far from the tree.
I spent some time in Vancouver when I was on a trip to see how the latest Super Mario spin off was coming along. The company entrusted with Nintendo’s most popular character and tasked with making him into a football star was Next Level Games.
Next Level was set up when several key members left Black Box Games to set up their on independent studio. Black Box had a bit of success with arcade football games having scored goals with Sega Soccer Slam and with these credentials Next Level began a strong relationship with Nintendo and has mostly recently remade Super Punch Out for Nintendo’s Wii console.
While visiting the studios at Next Level was interesting enough – it is always amazing to see how developers work especially as their studios are always of an incredibly opulent standard and Next Level was no exception with its high-tech offices, easily enviable huge televisions and the magnificently relaxed atmosphere and attitude of everyone working there (quite a few of them were from the UK as well) – it was also interesting just to see how many developers were almost on the same block. Within a few miles of each other you can find EA, Blue Castle Games, Piranha Games, Radical Entertainment, a lot of smaller studios and of course Next Level.
But besides Vancouver’s heritage in video game development it is only this year that development studios will benefit from tax breaks. Head of business development at Next Level Games , Sean Murch said: “They just announced the new tax credit for game development last month. It doesn't start until this fall, so it hasn't affected us yet. It is a 17.5% labour credit, based on salaries of people working directly on the games.”
Previously there was a tax credit that was more centred around research but this does mark a new era for the city and the province. Sean added: “It replaces an old provincial research credit, but should give us a net lift of 5 to 10% overall on the credits. They are not as good as the ones in Ontario and Quebec, but we hope to improve them in the future.”
With so many video game developers already in Canada and each one benefitting from the province-specific tax credit system it does make sense that some developers from the UK are willing to emigrate and work for companies that have a bit more financial security, from the effects of the tax credits, rather than stay in the UK where so far not much has been done to help the British developers and won't be for the foreseeable future. Perhaps this will change if the UK government can go ahead with the proposed plan that was outlined in the Budget in March and we’ll see an influx of Canadians looking for work here, eh?