Subsidy Cut & The Montreal/Quebec Games Industry
polycounter
The recently elected Liberal Party of Quebec announced their Budgets last week:
(Google Translated)
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(Google Translated)
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The cuts will reach nearly $ 500 million per year when fully in force in 2016 CGI, IBM, Ubisoft, the Fonds de solidarit
Replies
http://www.gamasutra.com/view/feature/176110/whats_really_going_down_in_.php
Do you think this means jobs will just be spread out more?
I kinda think there will just be less jobs.
subsidy doesnt go forever, eventually it going to b cut, especially if it not in the essential department ( food , gas , education, health)...
well apparently it happen sooner than we expected.
What some people say is that subsidies don't actually create new jobs they just move jobs. Which means that all those old studios who are not able to make competitive bids with the new studios that are subsidized are closed down because they can no longer make money.
I think it's not even economical. Atleast not long term. If this keeps happening they will drive the workforce away.
But, if they don't go to where cost of doing business is cheaper than in their home turf they'll lose to the competition and industry relevance since they'll be forced to pay local salary rates which are higher and can negatively affect their bid to secure funding from investors/ financers.
Tax subsidies...you don't get free money from a local government, you basically pay less to no tax for running a business.
Major studios who can outsource must do it (bid competitively) so they can secure maximum amount of funding spread out over number of years via multiple projects.
Sure there are term limits but even if your project fails or have to close shop you can still bank investor money (don't feel sad for investors, they usually have insurance for biz losses).
For example:
Ubisoft Montreal set-up shop in an area of town called the 'Mile End'
http://en.wikipedia.org/wiki/Mile_End,_Montreal
The Mile End was a very rundown area of town, that was primarily populated by painters, writers, musicians, and poets.
Enter Ubisoft in 1997, instilling thousands of professionals, with decent salaries, and a majority of them not knowing or caring how to cook for themselves.
The area seemingly gentrified very rapidly, with restaurants, coffee shops, bars/microbreweries, and is now considered to be a very 'hip' area of town. This resulted in rising property values, and increased investments into the schools, thus resulting in higher Municipal/Property taxes. Also, there are MANY 3D/Programming Colleges that have opened up around Montreal, further employing and funding an entirely different industry.
Ubisoft's presence there is very similar to what a college or university would bring. I understand that this sort of thing doesn't necessarily happen everywhere.
But a tax cut to the games industry will very likely result in a staff reduction at Ubisoft, resulting in less money spent in the local restaurants/bars resulting in lower property values, resulting in lower municipal taxes.
Is the subsidy cut really worth doing for something that obviously pays itself off in other ways?
Well,
One thing I can say that pretty much everyone in this province will agree on:
The video games industry having a large presence here has been one of the very very few visibly positive things the government has done.
We are taxed higher than anywhere else in North America (we are taxed similarly to Scandinavian Countries), while having some of the worst access to healthcare, worst school system, worst roads, and worst infrastructural development, worst social security, and oldest/unsafe buildings of any city in Canada.
A very large portion of of our tax money has been laundered to the Italian Mafia:
http://en.wikipedia.org/wiki/Charbonneau_Commission
I don't think VFX Soldier ever spoke about the games industry, but his information would be wrong in this regard:
http://www.theesa.ca/wp-content/uploads/2011/08/SECOR_ESAC_report_eng_2011.pdf
According to a recent study compiled by SECOR for the Entertainment Software Association of Canada the games industry here employs 16,000 people and will generate $1.7 billion in economic activity this year. Thats not revenue, its the amount of dough it contributes to the national economy. At that rate of return, the hundreds of millions the provinces have doled out in subsidies will be repaid in short order, if they havent been already.
Moreover, the Canadian industry is growing quickly and is expected to expand 17% over the next two years. That means even more employees and more contribution back to the economy.
http://www.theglobeandmail.com/report-on-business/ubisoft-to-expand-montreal-operations-add-jobs/article14600598/
Bit of a shame though, I have been looking at moving to Montreal for awhile. I was gonna try next year but it might pay to see how this plays out.
Layoffs are possible but I hope it's not going to be like Vancouver.
Every time there was economical turmoil in Montreal - Toronto kept absorbing all the businesses that moved for more favorable conditions so a lot of jobs might just go there. Which is a more innocent outcome I can envision.
On the other hand some of the people laid off might go Indie, which is exciting and I think you can get some government grants and support for that.
But in general, as always in the industry - it's worth having an up-to-date portfolio just in case.
doing some research into sustainability would really help us as an industry. And I think developers too would welcome more stability.
Hopefully it all works out in the end, but that is pretty big news... does this make Toronto a more attractive move for future studios to open shop? Still costs an arm and a leg just to get things going here though...
Medium term you would think so, but there is always the variable of what happens with a new government here? The election tomorrow could have the province go as far as Blue + Orange which would be a different than if it stays Red + Orange.
I'd think (with the all out focus on quarterly numbers these days) corporations will probably always go where the latest and greatest tax break will give a good two year profit projection. The volume of industry infrastructure in Montreal would probably affect those projections though.
Confirmed... slashed to 24/30% (if a french version is made). Oh well
Do you think this means studios will give up on Montreal and head to Toronto or something?
I'm looking forward to discussing it with fellow polycounters at the meetup tomorrow. You going to be there?
You know that arguement above is completely blind to the fact of the fate of those creatives who lived there. Being taxed out of their places for some hipster to move in? Nevermind the fact they were adding to your cities culture and creativity, to be replaced with.. Starbucks? Is that truly good?This type of gentrification is working going great for San Francisco.
If your going to use this sort of thing to show why your subsidies are so great, at least make the original tenents villians.
I guess the thing is, Why wouldn't subsidies be permanent, if they result in continual growth?
Canada has a much different political and economic model than the US, in that we are a lot more socialized. We don't have a purely capitalistic model, and we have MANY ongoing subsidies.
Our schools don't lead to crippling debt, we have free healthcare. We don't have a migrant farmworker Visa issue, because our farmers are fairly subsidized. Our airlines are subsidized, so are our Oil and Mining Industries. Of course it's unfair for you guys. It's meant to be. It's why socialism rules.
:P
This interesting bit of spending that came the day after the budget was released:
http://www.cbc.ca/news/canada/montreal/formula-1-inks-187m-10-year-deal-to-keep-grand-prix-in-montreal-1.2668266
Sorry for painting the wrong picture.
The only Starbucks in Mile End is the one INSIDE of the top floor of Ubisoft behind locked bars. Starbucks simply wouldn't stand a chance against the long-standing Independant Coffee shops. Cafe Olympico, Cafe Myriade, and Cafe Social, are commonly known as 3 of the best coffeeshops in the city, with long lineups year round, and frequented by gourmand Anthony Bourdain.
The gentrification that took place was one where the locals (independent Coffee Shops, Independent Bookstores, indie Restaurants/Bakeries/Galleries/concert venues) REALLY took off, and brought the locals with them.
Montrealers do NOT like chains, particularly American Chains.
Infact, the entire area, has a largely local flavour, right down to the microbreweries, the clothing manufacturers, and the art galleries.
The property values may have risen, and I can't speak for all of the locals (many who had signed to long-term leases), but the independant comic/book store Drawn and Quarterly, along with the resurgence of the numerous concert venues, art galleries in the area have given them a loud voice in the community, and more regular venues to showcase their art.
Montreal is more closely aligned to Europe than any American City, and being politically and economically more socialist, makes the SF comparison irrelevant.
Article that outlines a bit of the type of gentrification that took place:
http://www.ottawacitizen.com/Trip+Mile+Canada+hipster+capital/9669130/story.html
this probably indicate some reason for subsidies cut. ( just my speculation of course )
I live in that area and it's pretty much that. The word gentrification brings a lot of bad stuff to my mind based on previous experiences but the mile end case doesn't offend me. It's a pretty cool place and still affordable to live, and very active. You have fancier caf
They don't create permanent growth and are a net drain on tax revenue. Government is eventually forced to reduce it to a break-even level and the companies move on to the next government.
There are other reasons for subsidies, such as preservation of Quebecois culture, but videogames are way too low-brow for that.
though UBI montreal is where all the huge hits come from... so i don't know if corporate could afford to fiddle around with this studio that much..
But that is becuase of the people there, not the location of the studio, so they might just pickup and move to Vancouver if tax is better there, Or possibly just leave Canada and go to Austin or a other big US gamedev city.
Over a few years cheaper tax will cost them less than it would to relocate the people in the studio.
Though expected if you know the politics between Quebec and the rest of Canada, since if you make a game with its primary language being French they are still offering the 30%.
I beg to differ with you. What you said is totally empty and based on your personal perception.
September 30, 2013 : 500 new jobs at Ubisoft Montreal.
http://affaires.lapresse.ca/economie/technologie/201309/29/01-4694553-ubisoft-500-nouveaux-emplois-a-montreal.php
June 19 2014 : Ubisoft Montreal CEO Yannis Mallat is unsure of his studio's future.
http://gamasutra.com/view/news/219485/Ubisoft_analyzing_Canadian_tax_breaks_situation.php#.U6MCTPUGKS1.facebook
So, they do create permanent growth since 1997. almost 20years now.
Ya that is french Canada for you the politics between Quebec and the rest of Canada is pretty fucked up.
Can't find any English article yet, but it's reassuring at the very least.
Sucks for the smaller studios, though.
http://plus.lapresse.ca/screens/4139dc58-53a4-5937-bf82-53e2ac1c606d%7C_0.html