The term interactive digital media (IDM) accounts for a range of digital content and experiences available through a variety of digital platforms such as PCs, mobile devices and game consoles. 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 games, cross-platform entertainment, virtual and augmented reality content, web series, e-learning and training products.
Industry Size and Economic Impact2
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.3
- A 2017 study conducted by Interactive Ontario, Measuring Success, found that there are 877 IDM companies in Ontario, and that the IDM industry in Ontario employs approximately 10,900 full-time equivalents (FTEs) employees, with 70% of employment attributable to the largest 12% of IDM firms, those employing 20 FTEs or more. Ontario’s IDM industry generated an estimated $1.27 billion in revenues and contributed an estimated $1.4 billion to provincial GDP in 2015.4
Source: Interactive Ontario, Measuring Success: The Impact of the Interactive Digital Sector in Ontario, February 2017, p. 4.
- Convergent digital media products are related to traditional television productions but provide an experience on additional platforms. Project types include rich interactive media, video, games, eBooks and social media. The Canadian Media Producers Association (CMPA)’s Profile 2016 estimates the Canadian convergent digital media industry’s production volume in 2015/16 at $65.6 million, a 6% decrease from 2014/15. This production volume represents 326 projects and an average project budget of just over $200,000. In 2015/16, convergent digital media generated 1,500 full-time equivalent jobs (FTEs).5
- Virtual reality (VR) includes a range of immersive experiences from 360 degree “spherical” video on a laptop, desktop or mobile device, to mobile VR via a head mounted display, to a PC based headset experience. Pulse on VR, a recent study on the VR landscape in Canada, found that most companies engaged in VR product and service development had this as one of several lines of business. The over 200 companies that responded to the study’s survey reported over 1,300 VR-focused employees (out of a total of over 14,000 employees). Ontario had the largest net number of VR employees, while Québec had the largest share of employees focused on VR at 30%.6
- With a videogame market valued at US$1.85 billion in 2016, Canada is currently in 8th position among countries worldwide for video games revenue. The United States, China and Japan have substantial leads compared to other jurisdictions, with the U.S. market alone worth in excess of US$20 billion in 2016. Global video game revenue was estimated at US$92.8 billion in 2016, up 14.3% from 2015.7
- Canada’s videogame industry consisted of 596 studios in 2017.8 Canada is home to several top international videogame developers, including Ubisoft with locations in Montreal, Quebec City, Halifax, and Toronto, Electronic Arts in Burnaby, Montreal, Kitchener, Charlottetown and Edmonton and Gameloft in Montreal and Toronto. Social game publisher Zynga has offices in Toronto and Victoria, B.C. and Rockstar Games has set up a digital gaming studio in Toronto.
Entertainment Software Association of Canada, Canada's Video Game Industry In 2017, September 2017, p. 7
- A 2017 report by the Entertainment Software Association of Canada (ESAC) estimates that Canada’s videogame industry employs 21,700 FTEs directly, as well as generating an additional 19,000 FTEs in the wider economy. The national videogame industry spent $2.6 billion in 2017, an increase of 8% from 2015. As of 2017, the average annual salary of a Canadian videogame worker was $77,300, up 8% from 2015. As measured by number of employees, Ontario’s videogame industry is the third largest in the country after Quebec and British Columbia, with 171 firms directly employing 3,800 people.9
- The Hand Eye Society recently launched the Toronto Videogame Database, a resource which lists over 1,000 games made in Toronto and the surrounding area over the last 20 years. A total of 236 creators (including developers, publishers and others) were identified, each of which had created an average of 3.43 games. Almost two-thirds of games were for PC, 29% for mobile devices and 11% for consoles.10
- Globally, the number of gamers continues to increase rapidly. Today there are an estimated 2.6 billion gamers, compared to 100 million in 1995.11 According to the Entertainment Software Association of Canada (ESAC)’s Essential Facts 2017, 37% of Canadians consider themselves gamers, yet a higher proportion, 52% of Canadians, have actually played games in the past month—51% of them male and 49% female, with an average age of 36.12 Gaming is a highly engaging activity, with active users playing console games an average of 51 daily minutes, and mobile games an average of 35 daily minutes. The length of mobile daily gaming sessions also increased 33% between July 2015 and March 2017.13
- Broadly there has been an evolution occurring from individual play to global collaborative play. There is a growing trend toward observing others playing games, both via online streaming (using platforms such as Twitch) and in person, in terms of esports spectatorship.14 Esports are growing in importance and are especially popular with younger generations. Millennials are just as likely to express a “significant preference” for esports compared to traditional sports, whereas older generations are more than three times as likely to significantly prefer traditional sports as they are to significantly prefer esports.15 According to Solutions Research Group, the top 5 eSport titles in Canada are League of Legends, Overwatch, Counter Strike, Call of Duty, and Starcraft. While China is the global esports leader, 16% of Canadians online 12 years and older engage in esports activities, making Canadians enthusiastic players.16
- The notion of what a digital magazine is or should be is currently in flux. There are digital replica versions of print magazines but increasingly the term includes magazine websites, apps, social media and messaging. Digital magazine readership in Canada has grown to reach a Monthly Digital Audience of 8.5 million as of Q1 2017.17 Digital magazine consumers tend to navigate across different devices. Recent data from Vividata suggests that 33% of digital magazine readers use laptop/desktop only, while 45% use both mobile and desktop, and 22% use mobile only.18
Trends and Issues
Growth Rate and Industry Trends
- Video games are expected to see a strong compound annual growth rate (CAGR) of 8.2% globally from US$92.8 billion in 2016, to US$137.9 billion by 2021, led by the app-based social/casual games segment and by console-based online/microtransaction revenue where growth rates will exceed 10% CAGR over this five-year period. Social/casual gaming revenue is forecast to exceed traditional gaming revenue for the first time in 2017 but the latter will continue to see steady growth, buoyed by ongoing strength in the consoles market and a revitalized PC market. Sales of physical games and revenue from browser-based social/casual games are the only category of video gaming expected to see small declines over the next 5 years.19
- The Canadian video game market was valued at US$1.9 billion in 2016, which made it the 8th largest video game market globally. The video game segment is expected to be second only to internet video as the fastest growing entertainment and media segment in Canada from 2016-2021, with a compound annual growth rate (CAGR) of 4.5%, and at $US 2.3 billion, second highest in value, behind traditional TV and home video.20 The rate of growth of the video game market in Canada will be about half the global rate and behind the U.S. growth rate of 6.3% CAGR. With quicker rates of growth in competing jurisdictions, Italy, Russia and India are expected to edge Canada, Australia and Taiwan out of the Top 10 video game markets by 2021.21
- Canadian game companies’ revenues are highly dependent on export. In 2017, 75% of all revenue generated by video game companies in Canada was attributable to other markets, primarily the USA (46% of export revenue) and Europe (42% of export revenue).22
- Most digital game company revenue comes from sales of game units, intercompany/transfer pricing, and in-app or in-game sales.23 The proportion of revenue attributable to physical retail has declined significantly in recent years, from 62% in 2013 to just 13% in 2015, while direct to consumer digital sales rose in relative importance to 38% of revenue from 5% over the same period.24
- PwC issued 5-year projections for the virtual reality market for the first time in 2017, focusing on ten markets: the U.S., Japan, China, South Korea, Germany, France, Italy, Spain, the UK, and Russia. While deeming the market still immature with underdeveloped business models, PwC predicts very strong growth in the number of headset units sold, from 17 million in 2016 (the first year the technology is considered to have truly reached consumers) to 257 million by 2021. Most are expected to be portable units designed to work with smartphones, but high end headsets for use in the home (such as Oculus, HTC and Valve and Playstation’s PSVR) will be the ones to drive content revenues. VR content revenue (split primarily between video games and apps, with a small percentage attributable to apps and utilities) will be $15.1 billion within five years. By 2021, PwC expects an ad market to emerge centered around virtual reality.25
- In China, which accounts for 25% of the global video game market, demand for VR experiences to ‘activate’ commercial spaces is increasing, and by the end of 2016, there were more than three thousand VR arcades across the country.26 According to the International Data Corporation (IDC)’s Augmented and Virtual Reality Spending Guide, Canada is predicted to spend about $723 million on augmented reality and virtual reality in 2017.27
- Twenty-nine per cent (29%) of respondents to a recent survey of interactive digital media companies were developing for VR platforms. Some of the Ontario companies working in this space include Secret Location, CFC Media Lab, and Occupied VR. A small number of companies are exclusively focused on creating VR products and services, however the majority of firms are adding this capacity to their range of digital media offerings. Many companies’ most advanced VR products are still in a prototype stage.28
- Several companies, such as Ontario magazine media firms, are using off-the-shelf augmented reality (AR) products such as Layar and Blippar in both editorial and advertising capacities (e.g. Brainspace Magazine, Cottage Life, House & Home). Game and audiovisual production companies have created AR products with a site specific component in a museum/gallery setting (e.g. Xenophile Media, Sinking Ship) or standalone applications (Alex Mayhew, Big Blue Bubble).
- Web series are defined as episodic entertainment delivered via online distribution platforms. A study by the Independent Web 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.29
- 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.30
|Consumer-Paid Models||Funded Models||Hybrid Models|
Source: Adapted from CIAIC, Monetizing Digital Media: Trends, Key Insights and Strategies that Work, November 2014, pp. 5-6.
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. Through the Culture Satellite Account, Statistics Canada and its partners are now 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 Measuring Success study, which surveyed Ontario IDM companies in 2016.31
- In June 2017, the federal government announced a new Global Talent Stream of the Temporary Foreign Worker Program as part of the Global Skills Strategy, aimed at attracting highly-skilled high-tech workers from abroad. The news was welcomed by industry groups such as the Entertainment Software Association of Canada, as the changes should allow member video game studios to attract global talent in a more efficient and timely fashion than was previously possible. In 2015, 13% of the video game work force in Canada was hired through the Temporary Foreign Worker Program.32
- In August 2017, the federal government announced new Economic Strategy Tables, one of which will focus on digital industries. Made up of industry representatives, the Tables will assist in setting growth targets and road maps for their sectors, and will report back by summer 2018. The Digital Industries Table will be chaired by Tobi Lütke, CEO of Shopify, with additional industry representatives to be announced shortly.33
- Approximately 25% of the workforce within IDM in Ontario is female. Interactive Ontario has launched several initiatives aimed at addressing the diversity gap in the IDM industry, including the ipprenticeship program which provided placements at leading digital media companies to diverse candidates and a recently launched Diversity & Inclusion Toolkit.34
- The growth potential of AR/VR technology has major implications for Canadian and Ontarian digital media producers. The Canada Media Fund (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.35 Canadian VR companies surveyed in the 2017 Pulse on VR study identified maturity of the market as the most significant challenge, followed by access to private finance and public funding.36
- The Bell Fund has made changes to its convergent production and development programs, as well as its performance accelerator and TV development online programs, further to the 2016 release of a new CRTC policy framework for Certified Independent Production Funds. The Fund’s four new pilot programs cater to a variety of formats and platforms, namely: Short-Form Digital Series Programs (Non-Fiction and Fiction programs) and Development Programs (Slate Development, Webdocs development).37
- In 2017-18, 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, Concept Definition, Global Market Development, Marketing Support and Industry Development, which provides support to trade organizations for events and activities that stimulate the growth of the industry. In 2017, as part of the Industry Development program, the IDM Fund supported emerging digital companies with training activities through the IDM Fund Futures initiative.
- In launching the Creative Canada federal policy framework, the Government of Canada announced additional support for the Canada Media Fund including investing a minimum of$40 million per year in the Experimental Stream. A new Creative Export Strategy will have $125 million over 5 years allocated to expanded export opportunities for creative entrepreneurs.38
Ontario is home to a thriving IDM industry that includes many independent firms creating award-winning products:
- Ontario studios won two of eight Best in Play Awards at the 2017 Game Developers Conference in San Francisco: Phantom Compass for Auto Age: Standoff and Cococucumber for River Bond.
- Toronto developer Drinkbox Studios’ narrative adventure game Severed won a 2017 Apple Design Award. The Apple Design Awards recognize best in class apps design, innovation and technology on Apple platforms.
- Ontario VR/AR productions Multi-Sensory Virtual Reality Historical Vignettes (SimWave Consulting), and Welcome to Wacken (Secret Location/Banger Films), were featured at the Marché International des Programmes de Télévision (MIPTV) in Cannes in April 2017.
- At the 2017 Canadian Screen Awards, Toronto’s Digital Howard won Best Cross Platform-Fiction for their Wynonna Earp Interactive project.
Profile current as of November 10, 2017
2 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.
4 Interactive Ontario, Measuring Success, February 2017, pp. 3-4, 33. An earlier study conducted by the Canadian Interactive Alliance indicated that Ontario’s interactive digital media industry had $1.1 billion in revenues and employed 17,000 individuals in 2011. (Canadian Interactive Alliance (CIAIC), 2012 Canadian Interactive Industry Profile, October 2013, p. 10.)
8 Entertainment Software Association of Canada (ESAC), Canada’s Videogame Industry in 2017, September 2017, p. 2.
9 ibid., p.11.
12 ESAC, Essential Facts 2017, 2017, p. 10.
13 cited in Meeker, pp. 114-115.
14 Meeker, pp. 82, 99.
15 L.E.K. Sports Survey data cited in Meeker, p. 140.
17 Vividata, 2017 Q1 Magazine Topline Data. Unduplicated audience of all measured English and French language magazines in Canada. Digital audience is defined as audience who accessed any digital content of the magazine in the past 30 days.
18 Vividata, “2015 Q4 Readership and Product Database (January-December 2015 Fieldwork),” April 14, 2016.
19 PwC, “Video games”.
20 PwC, Global Entertainment and Media Outlook 2017-2021, June 2017.
21 PwC, “Video games”.
22 ESAC, Canada’s Video Game Industry in 2017, p. 28.
23 ibid., p. 25.
25 PwC, “Video games.”
30 CIAIC, Monetizing Digital Media: Trends, Key Insights and Strategies That Work, November 2014.
31 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; Interactive Ontario, Measuring Success.
32 Jayson Hilchie, “Attracting Foreign-born Talent Can Take Canada’s Tech Sector Global,” Huffington Post, October 25, 2016; Press Release, “Video game industry welcomes new Global Talent Immigration Stream,” ESAC, June 12, 2017.
33 Press Release, “Creating the conditions for Canada’s job creators to succeed globally,” Innovation, Science and Economic Development Canada (ISED), August 16, 2017; ISED, “Economic Strategy Tables,” Canada.ca.
34 Interactive Ontario, Measuring Success, pp.18, 21; Press Release, “Interactive Ontario announces diversity and inclusion initiatives,” Interactive Ontario, March 8, 2017; Interactive Ontario, A Diversity & Inclusion Toolkit for the Interactive Digital Media Industry, October 17, 2017.
36 CFC Media Lab, Pulse on VR, p. 38.
38 Department of Canadian Heritage, Creative Canada Policy Framework, September 2017.