Introduction
The video gaming industry has emerged as a powerhouse within Canada’s economy, driving innovation, generating revenue, and offering substantial employment opportunities. A comprehensive overview of this sector reveals its significant contributions, underpinned by government support through initiatives like the Scientific Research and Experimental Development (SRED) program. This article delves into the dynamics of Canada’s video gaming industry, highlighting its economic impact and the crucial role of SRED grants in propelling innovation and growth.
Economic Impact of Canada’s Video Gaming Industry
The video gaming industry holds a pivotal position in Canada’s economic landscape. A 2019 study by the Entertainment Software Association of Canada revealed that this sector injects a staggering $4.5 billion annually into the Gross Domestic Product (GDP). This marks a remarkable 20% increase from its performance in 2017, reflecting its exponential growth.
Of this GDP contribution, $2.6 billion stems directly from the industry itself, while an additional $1.9 billion is indirectly induced or earned. The industry’s impact reverberates across regions, supporting both local and national economic development.
Canada boasts around 700 active game development studios, reflecting a notable 16% increase from 2017. This surge in growth is particularly pronounced in provinces like Ontario, the Prairies, and Atlantic Canada, which collectively witnessed the emergence of 129 new gaming companies. Quebec, Ontario, and British Columbia stand as epicenters of activity, housing a remarkable 82% of all game studios in the country.
Government Support
Canada’s global prominence in the gaming industry can be attributed in part to robust government support in the form of provincial and federal grants. Notable programs include:
- Scientific Research and Experimental Development (SR&ED) program
- Canada Media Fund: Experimental Stream
- Industrial Research Assistance Program (IRAP) Funding
- CanExport Grant
- British Columbia Interactive Digital Media Tax Credit (BCIDMTC)
- Ontario Interactive Digital Media Tax Credit (OIDMTC)
- Quebec Production of Multimedia Titles Tax Credit
These initiatives provide a multifaceted framework that aids game developers across various stages – from conceptualization to production to export marketing.
Government grants have played a pivotal role in bolstering employment opportunities within the gaming industry. As of 2019, the industry supports a workforce of 48,000 full-time employees (FTEs), with over 27,000 employed directly – a significant 28% increase from 2017. Ontario, in particular, witnessed a 32% surge in full-time jobs since 2017, a testament to the industry’s growth trajectory.
Interestingly, while Canada houses prominent global game developers, over 50% of gaming companies are micro-enterprises with fewer than five employees. A significant proportion constitutes small businesses with up to 25 employees. The sector’s resilience and diversity reflect in the fairly consistent average salary, hovering around $70,000 across companies of varying sizes.
Contribution to the Economy
In 2019, Canada’s video gaming industry raked in $3.6 billion in revenue, marking a commendable 15% growth from 2017. The industry’s export-driven nature is evident, with 75% of its earnings originating from overseas markets. This holds true for businesses of all scales, from micro-enterprises to corporations with over 100 employees.
The revenue sources are diverse, with transfer pricing leading at 41% of total revenue, followed by in-game sales (13%), game unit sales (11%), and industry tax credits (11%). This revenue distribution underscores the industry’s emphasis on strategic product development, as companies release a selective number of titles each year.
SRED Refunds: Nurturing Innovation and Growth
The SRED program stands as a beacon of support for Canada’s video gaming industry. Designed as a federal tax incentive program, it levels the playing field for smaller enterprises across the nation. By offering income tax deductions or investment tax credits (ITC) to qualified projects addressing scientific and technological uncertainties, the SRED program fosters innovation.
Eligibility focuses primarily on the project’s merits rather than the applying entity, opening doors for businesses across diverse industries, including gaming. Access to SR&ED refunds empowers small businesses to undertake research and experimental development, unlocking the potential of novel ideas for new or improved products and services.
Innovating with SRED Tax Credits
Canada’s gaming industry is at the forefront of innovation, incorporating technologies like virtual reality, augmented reality, cloud gaming, and blockchains. This innovation has become even more pertinent during the pandemic, as these advancements cater to evolving consumer needs for immersive experiences.
The SRED program’s coverage of salaries, wages, material costs, overhead expenses, and contractor services bolsters the gaming sector, which heavily relies on labor-intensive activities. With this support, studios can develop prototypes for mobile and online platforms, integrate advanced features, and fortify their competitive edge.
Harnessing the Power of SRED: Benefits for Game Developers
Game studios embarking on eligible SR&ED projects can secure up to 35% ITC for the first $3 million in qualifying expenditures, along with a 15% non-refundable ITC for exceeding costs. The Canada Revenue Agency further rewards qualifying corporations with 15% ITC for eligible costs surpassing $3 million, 40% of which can be refunded.
These incentives, whether through tax deductions, credits, or refunds, empower game developers to optimize their research and development budgets. It ensures that even smaller entities can remain competitive in an industry characterized by fierce competition and innovation.
Conclusion
Canada’s video gaming industry’s ascent to prominence reflects its vibrant ecosystem, economic impact, and pioneering role in embracing cutting-edge technologies. The government’s strategic grants, particularly the SR&ED program, have been instrumental in propelling the industry’s growth trajectory. As the sector continues to innovate, these grants stand as beacons of support, ensuring that game developers – irrespective of their size – can leverage innovation for sustained growth, economic contribution, and lasting success.
