If the innovations today are the pipelines of jobs tomorrow
then Ontario’s Interactive Digital Media Creative Cluster is well
placed to answer the province’s call “to create jobs and grow
the economy by investing in people…” as laid out in the Ontario
Budget 2014.
Interactive Digital
Media
(IDM) is constantly
evolving
From console gaming
to Internet-based to
mobile
1980s
Mid - 2000
B.C. and Quebec early adopters of console game development.
Companies: Distinctive Gaming, Radical, EA Canada
Number of web games & casual games join the console gaming
industry, compete for eyeballs.
Companies: Zynga, Uken Games
Today
Mobile Apps, interactive choose-your adventure
documentaries, e-learning, transgaming, and digital content
studios producing for online broadcasters, take greater market
share.
Companies: Phantom Compass, XMG, Game Pill, Smokebomb,
Blue Ant
Tomorrow
Interactive content will leverage wearable technologies to make
augmented reality, real-time gamified content and more.
Companies: Digital Howard, Secret Location
The evolution of digital platform has favored SMEs with the
explosive growth of mobile apps & games
Ontario’s IDM companies are growing and diversified: start-up nation
Nova
Scotia
10%
Outside of
Canada
2%
• Some large console game companies, and a high # of SMEs in
mobile App, casual, web gaming, digital content, e-learning
sub-sectors.
• IDM revenue in Ontario.
• Much of Ontario’s IDM sector has grown as offshoot of strong
film and TV studios.
Quebec
13%
• Ontario has start-up culture:
Number of
IDM companies
across Canada
as a % of total
British
Columbia
33%
• Two-thirds BC of companies 7 +years old; no selfdescribed start-ups.
• In Ontario 25% of IDM companies are under 3 years
&10% self-described start-ups.
• Ontario has fewer foreign-owned companies:12% compared
to 41% in BC.
Prairie
Provinces
16%
Ontario
26%
SOURCE : CIAIC REPORT 2013 AND ESAC SURVEY 2013 AND INTERACTIVE ONTARIO 2012 REPORT
multi-platforms + entrepreneurs
= great innovation potential
Snapshot of
Ontario’s
IDM Sector
Ontario’s IDM sector has all
the ingredients for
sustainable growth –
the talent, the diversity, the
entrepreneurship, the
innovation (technical +
creative), the cost structure
and the global opportunity
• Employs 16,000 Ontarians.
• Generates $1 billion in predominantly export direct revenue;
$2.1 billion when enabling and supporting revenues are included.
• Contributes $1 billion annually to Ontario's GDP.
• Expected to grow on the order of 15% in next 2-3 years.
BUT
• Ontario is still catching up.
• Still only represents 28% of total Canadian IDM revenues.
Snapshot of Ontario’s video game industry
other
12%
• Approximately 100 companies.
Ontario
8%
• Directly employ 1,821 Ontarians.
• Generates $134 million in direct spending;.
• 65% of Ontario-based companies have been in business for more
than seven years.
BUT
Quebec
34%
Percentage of
video game
expenditures by
province
• Relatively small compared to BC & Quebec with their larger, mature,
video game core.
• BC employs 5,140 in video games and Quebec 8,749.
BC
46%
• Ontario lagging in video game expenditures (proxy for industry size).
Ontario is the tortoise
to the BC hare
SOURCE : ESAC ESSENTIAL FACTS 2014, ESAC SURVEY 2013
IDM is one of only
a handful of
sectors that can
help drive
Ontario’s future
• Anchoring talent
• Average age of creative/ technical employees is 32
• Employs adaptable labour
• Combines technical and creative
• 66% of IDM employees have university degrees; 97% had at some
university or college education
• Training ground for higher education and co-op student placements
IDM entrepreneurs
have source code for
economic growth
• 72% of IDM companies facilitate training
• IDM average salary 36% higher than average Ontario worker
• Six distinct clusters in province; largest in GTA but pockets in Sudbury,
Kitchener-Waterloo, Hamilton London & Ottawa;
• industry tied to broadband not geography
• IDM industry is made up of “gazelles” – fast and nimble SMEs who according
to OECD are best generators of IP
Source: CIAIC Report 2013 and ESAC Survey 2013
The Map of
Growth
Interactive Ontario’s
member companies have
grown substantially between
2007-2014
From Interactive Ontario survey December 2014
The Map of
Growth
Interactive Ontario’s
member companies
employees under 30 years
old
From Interactive Ontario survey December 2014
International
Markets
Interactive Ontario’s
member companies impact
global markets
From Interactive Ontario survey December 2014
Ontario’s IDM
Industry is
Diverse
Interactive Ontario’s
members have a diverse
range of business activities –
more than B.C. and Quebec.
They also work across multiplatforms and do traditional
film and television work.
% of business activities included in
IDM business models
70%
 web series
59%
60%
 mobile apps
 web and console gaming
50%
 online video, online
publishing, tv
40%
29%
30%
20%
10%
3%
0%
From Interactive Ontario survey December 2014
31%
% of IDM companies that innovate
in the following areas:
Innovation by
IDM
90%
 organizational method
81%
80%
 new content for market
75%
 use new technologies to
70%
Interactive Ontario’s
members weigh in on how
their companies innovate…
create new forms of content
 new marketing method
60%
50%
50%
44%
40%
30%
25%
20%
10%
0%
From Interactive Ontario survey December 2014
 create proprietary /
technical IP vs content
% of IDM companies that use the following
forms of financing:
Financial
Streams
80%
75%
 OIDMTC
 company investment
70%
63%
60%
IDM companies use diverse
forms of financing but
OIDMTC is critical piece of
the puzzle here.
While many IDM firms use
OIDMTC, the majority say it
makes up less than 10% of
overall financing plan
 services
50%
50%
50%
50%
 CMF convergent
31%
25%
25%
20%
10%
 market financing
 IDM fund
40%
30%
 sales
6%
0%
From Interactive Ontario survey December 2014
 CMF experimental
 other tax credits
Company Size by Total Revenue
 under $500,000
Total Revenue
7%
 $500,000 - $1million
13%
 $1million - $5million
SME’s dominate in the IDM
Sector and 13# are in the
micro start-up phase.
 $5million - $10million
 $10million - $50million
27%
20%
SME’s are the biggest
generator of IP according to
the OECD.
33%
From Interactive Ontario survey December 2014
Global
Perspective:
The Trend is on
our side
• The global gaming market: $79 billion in 2012, 93 million in 2013 … is
expected to reach $111 billion in 2015.
• Ontario owns a sliver of this market.
• 56 % of IDM companies in Canada are projecting revenue growth of 25%
over next 12-24 months.
• Opportunity to grow into new markets is tremendous:
• 57% of Canadian IDM revenues from exports.
• Over 90 % of Canadian Gaming revenues from exports.
• 94% of companies are expanding sales to new markets over the next 12–24
months.
• Ontario is best positioned to supply talent: Ontario has 38 colleges and
universities vs BC and Quebec with 15 apiece.
Source: Gartner Report 2013, Source: CIAIC Report 2013 and ESAC Survey 2013
What is the OIDMTC?
Key Criteria
•
A labour-based tax credit to foster production of
original interactive digital media content
•
Ontario company, but can be Canadian or
foreign owned
•
Modeled on pre-existing film and TV tax credits
but “technologically neutral”
•
Support entertaining, educational, or
informative
•
Single most important support mechanism to grow
sector
•
Presented using text, video and or images (2 of
the 3)
•
Used by individuals
•
Not all user-generated content
•
No branded content
•
Allows SMEs to hire top talent and create
proprietary IP
OIDMTC is tool that supports Martin Prosperity Institute’s thesis that growing
“creativity-based occupations ” will drive Ontario’s economy
Making the OIDMTC more Efficient and Effective
$450,000,000
$400,000,000
• Growth of OIDMTC reflects growth of sector BUT apparent
problem with outliers;
$350,000,000
• IO supports narrowing the credit to bona fide IDM content
and companies (incl. other creative industries)
$300,000,000
$250,000,000
• Want to ensure bona fide IDM companies continue to
leverage this credit to grow original product with
proprietary IP
$200,000,000
$150,000,000
$100,000,000
Need clarification of the intent and
scope of this review
$50,000,000
$0
2008
2009
2010
Value of Tax Credit
SOURCE: OMDC ANNUAL REPORTS :
2011
2012
Project Value
2013
2014 Ontario Economic Outlook and Fiscal Review
A profile of the
video game
subsector
• Rise of the “casual gamer” and business models organized around mobile
game development (i.e., free to play model and in-app purchases).
• Industry structure becoming more dramatically split between large and
small firms.
• Increasing interest in crowdfunding for small independent firms to access
financing.
• Console game production has the highest budget and largest teams (average
$8.7 million) compared to mobile games (average $300,000).
• Large studios (500+ employees) comprise 4% of the video games companies
in Canada, but employ 68% of the industry’s workforce.
• While casual games account for the largest portion of projects completed in
Canada, consoles games continue to generate the most revenues (66.5% of
total industry revenues).
Source: Nordicity, Canada’s Video Game Industry in 2013
A profile of the
eLearning
subsector
Another key IDM segment is Ontario’s e-learning industry, which is made
up of more than 120 specialized e-learning development firms, dozens of
government sanctioned educational e-learning entities, and thousands of
corporate practitioners.
These organizations supply educational products in three main categories:
1.
academic
2.
non-curriculum learning
3.
corporate training
While there is no economic data available for Ontario, the global e-learning
industry is projected to grow 400%, from $27.1 billion (US) in 2009 to an
estimated $107.3 billion (US) by 2015.
The province’s e-learning industry is poised for growth, and reports stable
revenue models and high profitability. (d)
Source: (d) Interactive Ontario’s eLearning committee, ONelearning, eLearning Industry Snapshot
2010-2011
A profile of the
mobile subsector
One of the province’s emerging IDM segments is mobile, which is
experiencing explosive global growth.
In 2012, 46 billion apps were downloaded worldwide, which generated $12
billion in sales, advertising and in-app purchases.
In 2013, the number of app downloads is expected to double, and generate
$20 billion in revenues.
As highlighted in the recent Taking Ontario Mobile study by OCAD
University, Ontario is well positioned to take advantage of mobile’s growth,
and has been identified as an emerging global centre of mobile-app
development. (e)
Currently, there is an estimated 750 companies in the GTA working on
mobile content development. (f)
Source:
(e) Wall Street Journal: “Toronto becoming a Hub for Mobile Apps Companies; 2010
(f) Ontario’s Business report: “T-APP” Toronto’s ever growing app market”
Blue Ant: Toronto (Founded 2011)
Rock Stars of the
Independent
IDM Sector
• Creates digital media content and distributes internationally
across its television, mobile, web and magazine properties
• Revenue $50 million
• 75% of content licensed; 25% original
• Staff grew from 2 to 200 full-time + 30 part-time; 35 staff in U.S.
Case Study: 1
Blue Ant
• Produce 800 hours original content; 100 million global viewers
• Offices in L.A. and New York
• Expected growth: triple in staff in 18 months
• OIDMTC and other government funding: 5% capitalization
• Awaiting OIDMTC payments from 2012
Game Pill: Toronto (Founded 2008)
Rock Stars of the
Independent
IDM Sector
• Predominately made PC/Flash games until 2010
• Today 75% mobile gaming company
• Revenue: $500,000-1 million; export revenues 80%
• Staff grew from 1 to 10 full-time and contract
• Service work vs proprietary: 95:05 (U.S. clients Nickelodeon)
Case Study: 2
Game Pill
• Expected growth: $2 million in revenues and 18-20 staff in 2015
• Government founding represents <2% of capitalization
• Never applied for OIDMTC but will apply for original projects
Digital Howard: Toronto (Founded 2013)
Rock Stars of the
Independent
IDM Sector
• Make App-based and web-based interactive content
• Work with emerging technology e.g. iBeacon enabled-devices
• Revenue: $500,000-1 million; export revenues 60%
• Staff grew from 2 to 6 full-time and contract
• Service work vs proprietary: 20:80 (U.S. clients Nickelodeon)
Case Study: 3
Digital Howard
• Expected growth: $2 million in revenues and 18-20 staff in 2015
• Government founding represents 20 % of capitalization
• Applied OIDMTC in 2013; still in queue
Secret Location: Toronto (Founded 2007)
Rock Stars of the
Independent
IDM Sector
• Digital Agency creates entertaining experiences such as virtual
reality, augmented reality, interactive documentaries and
websites, mobile content and games, web series
• Won over 200 international awards including International Emmy
and Cannes Golden Lion --Oscar equivalent in the advertising
• Works with emerging technology e.g. Oculus Rift for Frontline PBS
Case Study: 4
• Revenue: $5-10 million; export revenues 60%
Secret Location
• Staff grew from 1 to 55 full-time and 20 contract
• Co-owns 20% of the content it produces; as for underlying
technology it licenses 30-40% or builds it and owns 70-80%
• Government founding represents 25% of capitalization which
includes OIDMTC and CMF experimental & convergent