Interim Update

December 2016

OMDC Industry Profiles receive a full update once per year. The interim update summarizes key changes approximately six months after the profile’s release.

a Entertainment Software Association of Canada (ESAC), Essential Facts 2016, 2016.

b Jayson Hilchie, “Attracting Foreign-born Talent Can Take Canada’s Tech Sector Global,” Huffington Post October 25, 2016.

c Entertainment Software Association of Canada (ESAC), Essential Facts 2016, 2016.

d Shane Dingman, “Game maker Big Viking announces $21-million financing for 2016,” The Globe and Mail, November 2, 2016

Introduction

The term interactive digital media (IDM) accounts for a range of digital content and experiences available through a variety of digital platforms such as mobile devices, tablets, game consoles, and Web applications. IDM in Canada is a growth industry that is quickly changing, driven by shifts in consumer behaviour and technology. The broader IDM sector includes companies that produce interactive content as well as firms that provide various types of products and services to enable the production of interactive content. These are sometimes called “core” and “peripheral” IDM.1 Core IDM content includes, but is not limited to, video and mobile games, cross-platform entertainment, virtual and augmented reality content, web series, e-learning, and training products.

Ontario is home to a thriving IDM industry that includes many independent firms creating award-winning products:

  • Toronto’s Secret Location won two Webby Awards at the 2016 event. Highrise: Universe Within, made in conjunction with the National Film Board, won the Online Film & Video/ Best Use of Interactive Video award, while their project Orchestra VR picked up the Online Film & Video/ VR: Cinematic or Pre-Rendered award. Secret Location has also recently won the inaugural Peabody-Facebook Futures of Media award for its project Ebola Outbreak: A 360 Virtual Journey. The project was made in partnership with PBS’ investigative journalism series Frontline.
  • At the 2016 Canadian Screen Awards, Secret Location picked up several digital media awards, including Best Cross Platform Project, Children’s and Youth and Fiction, and Best Interactive Production for Gaming Show Interactiv and Book of Negroes Interactive. Smokebomb Entertainment picked up the award for Best Original Program or Series for Carmilla.
  • Hamilton’s casual games developer SHG Studios has been experiencing incredible success since their debut in 2008. The company’s first mobile game, Zombie Moon, still counts over 100,000 players since its launch in 2013. The studio’s most recent game, Wasteland Heroes: Boss Wars is a hero-centric role playing game. SHG was honoured as Hamilton’s 2015 Small Business of the Year.

Industry Size and Economic Impact

It should be noted that some data on the Canadian digital media industry in this document is not comparable to data from earlier years due to changes to industry definitions and methodology in key source materials such as the Canadian Interactive Industry Profile. The following information on industry size, activity, revenue, and employment should be considered a snapshot of activity in the industry based on the best available information.

Revenues, Production Volume, and Employment

  • Statistics Canada’s Culture Satellite Account measures the economic contribution of culture industries and products to Canada’s economy. In 2010, Canadian interactive digital media products were responsible for $3.3 billion in Gross Domestic Product (GDP). When looked at from an industry perspective, the Canadian interactive digital media industry generated $2.2 billion in GDP. Data from the Canadian Interactive Industry Profile (CIIP) indicates that Ontario’s interactive digital media industry had $1.1 billion in revenues and employed 17,000 individuals in 2011.2
  • Ontario’s interactive digital media industry is concentrated in Toronto and the surrounding area, with additional clusters of activity in Ottawa, Kitchener-Waterloo, London, Hamilton, and St. Catharines/Niagara Falls. A mapping of companies commissioned by Interactive Ontario in 2014 showed that 72% of Ontario IDM companies were located in Toronto, with Ottawa home to the next-largest geographic cluster with 6% of companies.3
  • Convergent digital media products are related to traditional television productions but provide an experience on additional platforms. The Canadian Media Production Association’s (CMPA) Profile 2015 estimates the Canadian convergent digital media industry’s production volume in 2014/15 at $70.1 million, less than a one percent increase from 2013/14 and a 61.5% increase from 2012/13. This production volume represents 340 projects and an average project budget of $206,000. In 2014/15, convergent digital media generated 1,620 full-time equivalent jobs (FTEs).4

Videogame Industry in Canada and Ontario

Videogame industry

  • The digital game industry is a central component of the interactive digital media sector. Canada’s videogame industry is the third largest in the world, consisting of 472 studios in 2015. Canada is home to several top videogame developers, including Ubisoft with locations in Montreal, Quebec City, and Toronto; Electronic Arts in Vancouver, Montreal and Edmonton; and GameLoft in Montreal and Toronto. Social game publisher Zynga and Rockstar Games have also set up digital gaming studios in Toronto. Investments from the provincial government assist these companies to grow and contribute jobs and economic impact to Ontario.5
  • The national videogame industry spent $2.4 billion in 2015, an increase of almost 50% since 2013. A 2015 report by the Entertainment Software Association of Canada (ESAC) estimates that Canadian videogame firms employ 20,400 FTEs directly, as well as generating an additional 16,100 FTEs in the wider economy. In 2015, Ontario’s videogame industry was the third largest in the country, with 108 firms directly employing 2,500 people with the provincial industry spending an estimated $265 million. Fifty-nine percent of Ontario firms are standard-sized, while 38% are classified as micro-sized. Ontario has a few large companies (3%), although the provincial distribution of companies by size is similar to the national average. A higher proportion (91%) of Ontario videogame companies are Canadian-owned, as opposed to the national average of 85%.6
  • As of 2015, the average age of Canadian videogame workers was 30.8 years, and the average annual salary was $71,300. The average salary in Ontario was slightly lower than the national average, at $70,100.7

Consumer market

  • The latest data from PwC states that the global videogame market is estimated to be worth US $74.9 billion (USD) in 2016, up 5.2% from 2015’s projection. The online/microtransaction segment of the console game market is expected to see the highest rate of compound annual growth rate (CAGR) through 2020, followed by the digital console segment, advertising, and app-based social and casual games. The PC game segment is now projected to be the most lucrative single segment of the videogame market through this period; by 2020, it is estimated to generate 37% of all videogame revenues, while the more traditionally lucrative physical console game segment will decline an estimated -2.5% CAGR. PC games revenue is projected to overtake console game revenue in 2017, in most part due to the growing digital distribution of games through platforms such as Steam. Social and casual game revenue will also continue to see healthy growth, with a 5.7% projected CAGR to 2020.8
  • The North American market is projected to be worth $18.8 billion (USD) in 2016. This resumes a growth pattern after several years of declining revenue in the console games segment. Mirroring global trends, the console segment is expected to continue to slow (by -3.8% CAGR to 2020) while the PC games segment sees expected growth of 6.2%, spurred by online and microtransactions. Canada’s videogame market is estimated at $1.1 billion in 2016, which is lower than its peak market in 2010 but is anticipated to be back into a growth position for a projected CAGR of 4% by 2020.9

Trends and Issues

Growth rate and industry trends

  • The release of high-end consumer-ready VR headsets such as Oculus Rift will initially be limited to early adopters and serious gamers due to the high cost. However, PwC sees 2017 as a watershed year for global VR as a sales drive is projected, due in part to new lower priced smartphone VR technology such as Google Cardboard and Samsung’s Gear VR, which work with the user’s smartphone. DigiCapital estimates that the augmented/virtual reality market globally will reach $150 billion by 2020.10

Global video game market growth 2014-2018

  • Web series are defined as episodic entertainment delivered via online distribution platforms. A study by the Independent Web Series Creators of Canada (IWCC) focused on creators who are not affiliated with a broadcaster, commissioning company, or agency. The study found that in 2013, Ontario-based independent web series creators collectively generated $3.14 million in web series revenue, and the total volume of production budgets the same year was $7.45 million. About 24% of creators report working exclusively in web series, while the majority have a background in traditional film and television production and continue to work in these other platforms in addition to web series. Comedy was the most popular genre for web series, followed by drama.11
  • New monetization models have been emerging for interactive digital media in tandem with growth of new technologies and platforms. There is a proliferation of approaches to monetization of interactive digital media, from consumer-paid subscription models to content funded by brands. The videogame industry in particular has early adopters experimenting with models. The key categories can be described as: consumer-paid, funded, and hybrid models, as further outlined in the chart below.

Monetization Models Table

Global and domestic issues

  • In spite of its economic importance, recognition of interactive digital media as a distinct sector has lagged behind some of the other creative industries. Interactive digital media had not been part of the standard series of North American Industry Classifications and Codes (NAICS, NAPCS) tracked by Statistics Canada until the creation of NAICS codes for some digital media activity in 2012. Industry figures to date for interactive digital media have been captured by a combination of existing categories such as Software Publishing, Internet Publishing and Broadcasting as well as Computer Systems Design and Related Services. Most recently, through the Culture Satellite Account, Statistics Canada and its partners are measuring and reporting on the cultural output, GDP, and employment of ‘interactive media’ products and industries.However, the most recent data currently available is from 2010. The industry is attempting to address data gaps through the periodic publication of the Canadian Interactive Industry Profile, which surveyed the industry in 2006, 2008, and 2011 in an attempt to acquire baseline data about the industry on which to build. Additional efforts on a provincial level have included Interactive Ontario’s Mapping Ontario’s Digital Economy (MODE) project, which is a database of companies creating IDM content in Ontario.12
  • The growth potential of the new AR/VR (Augmented Reality/Virtual Reality) technology has major implications for Canadian and Ontarian digital media producers. CMF’s mid-year update to their 2016 Trends Report suggests that “growing pains” in the AR/VR market, including the ongoing changes in technology and lack of a common industry “grammar” will pose challenges to the industry. The success of AR/VR will depend on the availability and quality of content, and the industry’s ability to identify workflows that attract and develop talent to produce the next generation of AR/VR content.13

Government support

  • Funding is available for interactive digital media projects from the Canada Media Fund (CMF). The CMF has two streams: a convergent stream, which requires that projects are available across a minimum of two distribution platforms (one of which is television), and an experimental stream, which is geared toward projects where the main component of the project is not a television or film component. Figures from CMF’s 2014-15 funding year show that $38.6 million was invested in 108 interactive projects in the experimental stream.14
  • In 2016-17, Ontario interactive digital media producers have access to public funding through the Ontario Interactive Digital Media Tax Credit (OIDMTC) and the OMDC Interactive Digital Media (IDM) Fund. OMDC support provides opportunities for producers of interactive content to create new products, access existing and new markets, and grow their business through the IDM Fund. IDM Fund programs include: Production and Concept Definition, Global Market Development, and Marketing Support. OMDC also provides funding to trade and event organizations in interactive digital media through the Industry Development Program for events and activities that stimulate the growth of the industry.
  • The Ontario government announced in its 2014 Fall Economic Statement that it would be reviewing the scope and parameters of the OIDMTC as part of a broader review of tax credit commitments, and in its Spring 2015 budget proposed measures to focus the OIDMTC to entertainment products and educational products aimed at children under 12. Further changes were announced and are summarised in an OMDC bulletin. 15

Profile current as of August 15, 2016.

Endnotes

1 Canadian Interactive Alliance (CIAIC), 2012 Canadian Interactive Industry Profile, October 2013, p. 10.

2 Statistics Canada, Canadian Culture Satellite Account, 2010, tables A.1 and A.2. Provincial and Territorial Culture Satellite Account, 2010, tables A.1 and A.7; Canadian Interactive Industry Profile.

3 CIAIC, p. 11.

4 Canadian Media Production Association (CMPA), Profile 2015, pp. 13-15.

5 Statistics Canada, “Canadian Culture Satellite Account, 2010,” Catalogue no. 13-604-M no. 75, Tables A.1 and A.2, September 2014.

6 Entertainment Software Association of Canada, Canada’s Videogame Industry in 2015, p. 36, 57.

7 ibid, p. 3, 37.

8 PwC Global Entertainment and Media Outlook: 2016-2020, “Videogames”.

9 ibid.

10 PwC; Tech Republic, “Virtual Reality in 2016: The 10 biggest trends to watch”, December 11, 2015; DigiCapital, “Augmented/Virtual Reality to hit $150 billion disrupting mobile by 2020”, April, 2015.

11 Independent Web Series Creators of Canada, Industry Profile of the Independent Web Series Creators of Ontario, June 23, 2014.

12 Statistics Canada, “Revision of the North American Industry Classification System.” The Culture Satellite Account (CSA) is a joint initiative of the Department of Canadian Heritage, provincial/territorial and municipal governments and agencies, delivered by Statistics Canada. The CSA measures cultural output, GDP and employment. Currently only figures for 2010 are available. http://idm.interactiveontario.com/

13 CMF, Trends Report: Mid-Year 2016 Update

The information included in this section is an overview of some of the government support to the interactive digital media sector. This is not intended to be a comprehensive list of government support available.

14 CMF, 2014-15 Annual Report; CMF.

15 Ontario Media Development Corporation (OMDC), “Renewal of the OMDC Interactive Digital Media Fund and Changes to the OIDMTC Announced in the Provincial Budget April 23, 2015,” omdc.on.ca; Ontario Ministry of Finance, “Ontario Interactive Digital Media Tax Credit Bulletin,” May 6, 2015.