Canadian-made games and the question of outsourcing

Hidden away in a non-descript office building south of downtown Edmonton, BioWares offices arent exactly easy to find. Theres no sign on the building to indicate the company, considered by many to be the crown jewel of Canadas video game industry, is housed inside. In fact, you might end up driving by a few times, as I did, trying to find it.

'There are no guarantees in this world; thats the harsh reality. But we intend to stay here.' Aaryn Flynn, general manager of Edmonton-based game developer BioWare

Theres something very Canadian about such modesty. BioWare, however, should be anything but. The studio has designed critically acclaimed and best-selling game series like Mass Effect and Knights of the Old Republic. It should be broadcasting its success if not with bright neon, then at least with a clear sign out front.

Over the past 15 years, Canada has developed into a world power in video game design we employ more people in the trade than anyone, save for the United States and Japan. Much of that is attributable to the hundreds of millions of dollars in subsidies and tax cuts offered by provincial governments in Quebec, British Columbia and Ontario. The incentives have attracted multinational game companies such as Ubisoft, Eidos and Electronic Arts, which in 2007 bought BioWare.

But as is the case with such subsidies, there is the inevitable fear: What would happen if all that government help suddenly came to an end? Could those big multinationals suddenly uproot and move to cheaper locales?

BioWare general manager Aaryn Flynn, who moved to Edmonton from B.C. as a teenager, doesnt think so. He says the idea behind such subsidies is to build an ecosystem that can then propagate itself without outside assistance, something Canada is well on its way to establishing.

BioWares parent, EA, for example, benefits from tax credits in both Quebec and British Columbia, where it has operations. Quebec provides game companies with ongoing tax credits of 37.5 per cent of labour costs, while B.C.s rate is 17.5 per cent.

"I like to think BioWare is a pretty good tentpole for both the tech and entertainment industries here in Edmonton. I think were valuable in that respect and hopefully were important," Flynn says. "There are no guarantees in this world; thats the harsh reality. But we intend to stay here."

The British government, however, doesnt believe in subsidizing the industry. Last year, it scrapped a plan to offer the sort of tax breaks found in Canada, saying such incentives were "poorly targeted." (The United Kingdom, incidentally, ranks fourth in the world in terms of total video game employees, having been surpassed by Canada in 2007.)

The Brits may have a different perspective, however, having seen the rise and fall of Ireland.

In the mid-1990s, the Irish government began enticing multinational corporations with offers of big tax cuts. Major tech companies including IBM, Google and HP took up the offer, which led to rapid economic growth and Irelands transformation into a "Celtic Tiger." Over the course of a decade, the country went from one of Western Europes poorest economies to one of its wealthiest.

But critics warned that the incentives were creating a false competitiveness that Irelands high-tech economy couldnt really hack it if things got tough. To some extent, they were right. Through the boom, low-paid workers became high-paid workers. When the global financial crisis began in 2008, corporations around the world cut back on their IT spending and Irelands high-tech firms suffered, with layoffs following. A number of other factors, including a housing crisis, contributed to the countrys woes, which ultimately led the European Union to step in last year with more than $113 billion in bailout money. Irelands fall came almost as quickly as its rise.

Could Canadas video game industry be operating under the same sort of false competitiveness, and could it experience a similar downfall?

The games sector has for decades been riding a steady wave of upward momentum, but the financial crisis proved that no industry is infallible. Games are a pure entertainment product, which people often cut back on when money gets tight.

Electronic Arts alone axed more than 2,500 jobs over the course of the crisis, with some of those hitting Canadian operations such as Vancouvers Black Box studio particularly hard. And the pain isnt over yet. Two weeks ago, Disney announced the closure of Vancouvers Propaganda Games, designer of the recent Tron: Evolution game. About 70 employees lost their jobs.

Despite the job losses, video game studios point to one major difference between themselves and high-tech industries like the ones built in Ireland that video games are not really a high-tech industry. Sure, the tools needed to create the titles are largely technological, but the core of the business is artistic, which cant necessarily be outsourced or uprooted.

The hard-core coding can be outsourced to cheaper countries, and some of it already is. Electronic Arts, for one, has operations in Romania and Singapore while Ubisoft, which has its major base in Montreal, also outsources some of its work to Singapore.

The creative process, though, takes place in Canada and, as people who work in the industry like to say, that will likely always be the case because of our unique cultural makeup. Creating video games with producers, directors, writers, actors, musicians and artists involved is a cultural endeavour not unlike making movies, which is why the two media are often compared. Indeed, Hollywood has been outsourcing some of its work for decades ironically to Canada yet the bulk of the industry remains in California.

In both industries, theres an imperative to be culturally sensitive, get the pop culture references right and generally be in tune with the zeitgeist.

Games such as the Assassins Creed series, created by Ubisoft Montreal, put the punctuation mark on this point. The games, which centre on a group of assassins in medieval Europe, start with a disclaimer that reads:

"Inspired by historical events and characters, this work of fiction was designed, developed and produced by a multicultural team of various religious faiths and beliefs."

This preamble is meant to head off religious or cultural objections, but it might as well read: "Made in Canada, where were dialed in to this sort of thing."

The disclaimer is not unlike the one Apple puts on its products: "Assembled in China, designed in California."

Unlike Apple, though, our companies tend to be much more subtle in their messaging another uniquely Canadian trait. Its obvious in their game disclaimers, as well as their office signage.