Industry Profile - Interactive
Interim Update to July 2020 Profile
- A CMF-funded study from June 2020 showed that micro and small IDM businesses in Canada had lost an average of 40% of their monthly income as a result of COVID-19, and 33% had lost all their monthly revenue.
- A new report from the Canadian Film Centre provides a snapshot of the impact of COVID-19 on women-led digital media businesses in Ontario. Having conducted a number of surveys and workshops, the study identifies main priority themes being business adaptation, social distress, and exhaustion, change, and collaboration.
- According to Statistics Canada, in 2018, the Canadian interactive media industry generated $6.3 billion in GDP, $3.3 billion of which was generated in Ontario. Ontario also accounted for over 21,000 of the almost 45,000 jobs created by the industry.
- The Ontario government has added an extension for the Ontario Interactive Digital Media Tax Credit, granting applicants an additional 24 months for eligible labour expenditures incurred on products not completed before March 15, assuming the expenditures were incurred in the 2020 taxation year.
- As of Q3, extended reality (XR, encompassing VR, augmented reality and mixed reality) is expected to generate $6.7 billion in worldwide revenue in 2020. This is projected to climb by almost 70% to $11.3 billion by 2023. VR is expected to make up almost half of this revenue consistently over time.
- Location-based entertainment (LBE) is predicted to be a significant driver in the virtual reality (VR) industry, with estimates placing it at 11% of the VR industry by 2023 (although COVID-related restrictions and post-COVID consumer caution could have a significant impact on this trend). LBEs combine VR technology with real-world sets, giving users the opportunity to interact with real environments and objects.
- Video games and esports generated $2.3 billion in Canada in 2019, and are expected to grow to $2.9 by 2024, for a combined annual growth rate (CAGR) of 4.71%. Canada was ninth in global video games and esports revenue, with Mainland China, the United States and Japan as the top three markets.
- Livestreaming of video games on platforms such as Twitch and YouTube has increased dramatically during COVID-19, and is increasingly becoming a viable career path. However, livestreaming requires a strong ability to build an audience and a personal brand, as well as to seek out external sponsorships, rather than just a talent for playing games.
- With 12% of Canadians having viewed live video game content and 5% having viewed an esports tournament, Canada is not currently a significant global market for live video games and esports (ranked 26th of 41 countries polled on esports viewing). However, this form of entertainment is growing in popularity, particularly among teenagers and young adults. As above, it is thus far unclear how post-COVID changes may affect the ongoing popularity of live video game and esports events.
- Multiplatform cloud gaming (a system by which users can stream a game across multiple devices, rather than purchasing it for a particular device) is expected to be a rising force in the video game landscape, with Zion Market Research predicting a 27% annual growth for the sector over the next six years, rising to sales of $6.9 billion by 2026.
- IDM companies have faced a number of obstacles as a result of COVID-19, such as the cancellation of conventions, conferences and esports events; difficulty making connections and securing deals due to inability to travel or meet face to face; loss of productivity due to work from home measures; and a decline in ad revenue. Recovery efforts are also expected to face obstacles due to lessening of consumer spending as a result of financial instability.
- Lockdown measures have increased interest in digital video games, with revenue increasing dramatically on a global level and reaching a record-breaking $10 billion in March. Part of this may be linked to an increased perception that online gaming creates an avenue for people to connect and interact socially while in physical isolation.[i]
- According to a recent survey by Interactive Ontario, Ontario IDM companies have seen an average revenue decrease of 38% for IDM companies, and an average anticipated loss per company of $168,400 in 2020.[ii]
- There will be an estimated layoff of 1,606 full-time and part-time employees by Ontario IDM companies if social distancing continues through June. Freelance employees are disproportionately affected by this, with approximately 2.5 times as many freelance staff having been laid off compared to salaried staff. That number is expected to climb to over 3 times as many by the end of June.[iii]
- Ontario IDM companies have a identified a number of key issues impacting their work, with almost half saying that they have seen a loss of business development opportunities due to partners and stakeholders facing their own COVID-19 related difficulties. Thirty-four per cent also flagged major markets being cancelled, and 30% identified a decrease in sales due to loss of advertising budgets and decreased purchasing power of consumers.[iv]
- Only 6% of IDM companies and self-employed individuals indicate they their fiscal health is “business as usual,” with 43% reporting that they will be in fiscal trouble if social distancing is longer than 3 months, and 18% stating that they are in current danger of bankruptcy.[v]
- Please visit Ontario Creates’ website for more information on our COVID-19 response plan.
i Matt Perez, “Report: Digital Video Game Revenue Hit $10 Billion in March, Its Best Month ever,” Forbes, April 22, 2020; Michael Macdonald, “’There has been a boom’: Surge in video games linked to need for connection,” CTV News, April 16, 2020.
iii ibid, pp. 6-7.
iv ibid, p. 10.
v ibid, p. 11.
JULY 2020 PROFILE
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. IDM content includes but is not limited to video games, cross-platform entertainment, virtual and augmented reality content, web series, and e-learning and training products.
Industry Size and Economic Impact
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.
Note: Statistics Canada tracks the production of “interactive media” goods and services by establishments in both culture and non-culture industries, whereas Interactive Ontario’s Measuring Success reports look at a smaller pool of companies whose primary activities are the creation of “interactive digital media” products. There are therefore some differences in statistics from these two sources.
Revenues, Production Volume, and Employment
- In 2017, Ontario IDM companies generated $1.17 billion in direct GDP, $317.7 million in indirect GDP, and $285.8 million in induced GDP, for a total GDP contribution of $1.77 billion. This was 24% higher than the industry’s 2015 GDP impact of $1.43 billion.1
- Ontario-based IDM companies generated $1.66 billion in revenue in 2017, with a profit margin of 15.7%. A report by Interactive Ontario projects an overall revenue growth of 12% for Ontario’s IDM companies in the 2018 fiscal year.2
- $1.14 billion (69%) of this was from IDM-related products and services. Forty-seven percent of this revenue (or $771 million) was from game development, with another 22% ($370 million) from other IDM activities.3
- A study conducted by Interactive Ontario (IO) found that the IDM industry in Ontario consists of 929 companies, almost half of which employ five or fewer people. In total, the sector employs a total of 18,070 full time equivalents (FTEs), 12,300 of which are direct employment. This demonstrates significant growth since IO’s previous study, which found that there were 10,900 FTEs employed by Ontario IDM companies in 2017.4
- IDM companies surveyed in Interactive Ontario’s Measuring Success report indicated that some of their greatest concerns were the value of the Canadian dollar, difficulty with finding skilled labour in-province, and further difficulty in trying to hire foreign labour to fill gaps. Smaller companies were more likely to see skilled labour as a significant challenge rather than immigration issues, because they are more likely to hire directly from post-secondary institutions, whereas larger companies are more likely to attempt to bring employees into the country.5
- Ontario houses the highest number of video game companies in Canada, having surpassed Quebec as the national leader in 2019. Ontario makes up 34% of Canadian video game companies, compared to 27.2% in 2017, and 22.9% in 2015.6
- The Canadian video game industry had a 2019 expenditure of approximately $3.2 billion, marking an increase of 24% over 2017, with Ontario accounting for 18%. Almost two thirds of this expenditure (63%) was spent on employee wages, compensation and benefits.7
- As of a 2019 survey, Canadian video game companies employ 27,700 full-time equivalents (FTEs), an increase of 28% over 2017. This is attributable to both a significant growth in number of companies, and the fact that almost half (45%) of individual companies indicate having more employees than in 2017. Of these 27,700 FTEs, 83% are full time employees, 17% are contract or freelance employees, and less than 1% are part-time employees.8
- The Canadian video game industry had a direct GDP contribution of $2.6 billion in 2019, as well as an indirect and induced impact of $1.9 billion, for a total of $4.5 billion, a 20% increase over 2017. Given that the Canadian economy grew by only 5% between the two years, this points to a dramatic growth of the Canadian video game industry.9
- In 2019, the number of Canadian video game companies had increased by 16% from 2017. Over half of these companies are defined as “micro,” being staffed by fewer than 4 employees. This area has seen by far the greatest rate of growth at +65%. The only other firm size category to grow between 2017 and 2019 was “very large” companies (with over 100 employees), which increased by 42%. All other company sizes decreased, which may suggest a polarizing trend in the video game production industry.10
- In Canada, video game and esports revenue is expected to grow at a 5.5% compound annual growth rate (CAGR), reaching US $2.8 billion in 2023, up from US $2.2 billion in 2018. Console gaming revenue greatly surpassed PC gaming revenue, with US $669 million for the former and US $252 million for the latter. Social/casual gaming is growing the quickest in the Canadian video games market, accumulating revenue of US $1.1 billion in 2018 and expected to grow at a 6.0% CAGR to US $1.5 billion in 2023.11
- Canadian esports revenue is growing rapidly and is expected to reach US $37 million in 2023 at a 14.54% compound annual growth rate (CAGR) from US $19 million in 2018.12
- Mobile gaming revenue continues to grow worldwide at a significant rate. Spending in games increased by 12.8%, from US $54.7 billion in 2018 to US $61.7 billion in 2019. 13
- On a global scale, the video game industry generated over US $152 billion in revenue in 2019, marking an increase of 27% compared to 2017. While the Canadian market has not matched this rate of growth, it reached US $2.7 billion in 2019 (CAD $3.6 billion at the time this report by the Entertainment Software Association of Canada was written), up 15% from 2017.14
- In 2019, the average employee in the Canadian video game industry was 31 years old, with a slightly higher average of 34 years in Ontario. Nineteen percent of Canadian video game employees are women, with Ontario having the highest percentage at 26%.15
- As of 2018, 61% (up 24% from 2016) of Canadians define themselves as a “gamer”, and 64% (up 12%) have played a video game in the four weeks prior to the survey. The average Canadian gamer is 39 years old, and spends ten hours a week playing video games. The gamer population is evenly split along gender lines, with 50% identifying as men and 50% as women.16
- Mobile gaming is the most popular form of video game consumption among Gen Z, Millennials and Gen X, followed by console gaming, and then PC gaming. Substantially more Gen Xers play mobile games (81%) than console or PC (29% and 31% respectively). In contrast, Gen Z play mobile games only 2% more than console games (73% vs 71%), but play PC games less than either of the other two demographics (25%).17
- Millennials spend more money on gaming than Gen Z or Gen X and older, across all forms of video game purchasing (full physical game purchases, full digital game purchases, gaming subscription services, and additional in-game content).18
- Sixty-four percent of Gen Z play video games on a weekly basis, more than watching films, reading books, listening to podcasts or reading magazines. Twenty-nine percent identify that they play video games frequently, as opposed to 15% of Millennials.19
- In 2019, there were an estimated 214.1 million active mobile gaming players in Canada and the United States, with a +2% year over year growth rate. Eighteen percent of mobile gamers are children ages two to twelve, 24% are ages 13-24, 30% are ages 25-44, and the remaining 28% are 45 years of age and older.20
- Forty-four percent of US VR users are between the ages of 18-34. This would suggest that VR has a wider-reaching appeal than might be assumed, with over half of users being ages 35 and older. The wide range of applications for VR may be the cause for this, as audiences for video games tend to skew lower.21
Trends and Issues
Growth Rate and Industry Trends
- The global esports industry experienced a 26.7% year on year growth rate between 2018 and 2019. The largest growing segment was media rights, with 41.8% growth, though over a third of the US $1.1 billion in revenue generated by this industry is attributable to sponsorship, suggesting that esports are coming to be seen more and more as a viable mainstream source of entertainment. This is reinforced by the fact that broadcasters such as The Sports Network (TSN) have begun streaming major esports matches on their websites.22
- As the IDM industry expands, other creative industries look for new ways to integrate with digital media, particularly video games. Netflix has begun developing video games based on popular franchises, such as a Stranger Things game which was released the same day the third season of the show came out. The music industry is also looking for ways to integrate with video games, such as the large scale virtual concerts held in massive multiplayer online games like Fortnite.23
- Some companies are expanding their audience from the standard Gen Z and Millennial market to seek out benefits of gaming for seniors. A London, ON VR company called VRcadia hosted a pop-up event specifically for senior; the general manager of VRcadia hopes to use the technology to assist with physical or cognitive difficulties caused by aging. Research at the University of Chicago reinforces the potential benefits of seniors engaging with video game technology, such as improved balance or vision improvement regarding cataracts.24
- Ontario Creates-funded game studio Falling Squirrel released its first game, The Vale, in August 2019. The game is developed and designed for players with visual disabilities, and features a blind protagonist. The game will use both auditory and haptic feedback to fully flesh out its world without relying on images.25
- Ontario IDM companies are more likely to develop products for mobile platforms than any other, at 59%. However, it should be noted that in 2015, approximately 90% of studios worked on mobile products, indicating a substantial shift in the market that may be in part due to marketplace saturation. Mobile gaming is followed by PC/Mac at 55%, then by Web browser at 48%. Game consoles are far behind these other platforms, with only 19% of studios developing for them.26
- Not only are IDM companies developing for a wide variety of platforms, the majority are developing for more than one platform at a time. Only 25% of IDM companies are only developing for one platform, and 23% are developing for more than three.27
- While IDM companies develop a wide range of products, games still make up a significant percentage. Seventy percent of Ontario IDM companies develop games, with 38% producing games exclusively.28
- Location-based entertainment (LBE) is a rising force in bringing VR to wider public consumption, with projections suggesting that it will make up 11% of the VR industry by 2023. LBE experiences involve consumers navigating a physical environment while wearing a VR headset, allowing for a more immersive experience than that offered by VR use at home. LBE experiences also hook new consumers into VR by providing a high quality experience without the up-front price tag of purchasing a VR console for personal use.29
- As the interactive digital media industry expands, many developers are trying to build their audiences by creating more educational programs, to try to capitalize on the extent to which children and teenagers play games. In 2017, the international education technology market generated US $17.7 billion in revenue and is expected to reach US $40 billion by 2022, for a compound annual growth rate (CAGR) of 18.2%.30
Global and Domestic Issues
- Video game and console companies are beginning to look at streaming models instead of requiring players to buy new consoles to play new games. New and up-and-coming services such as Microsoft’s Xbox Game Pass and xCloud; Google’s Stadia and Play Pass; Apple Arcade; Sony’s PlayStation Now or Ubisoft’s Uplay+ allow users to stream games for a monthly fee, much like television streaming services. It is hoped that the ability to stream games to a number of different platforms will expand the gaming market to people otherwise unwilling to buy a number of different systems.31
- 83% of gamers interviewed in a survey by Broadband Genie indicated that they would potentially be interested in videogame streaming services, though only 38% indicated that they were “absolutely” or “probably” interested, with the remainder dependent on a number of factors, including concerns about performance or visual quality, lack of tangible product, or potential broadband issues.32
- Some are hailing the advent of subscription gaming as the lead-in to a “golden age of gaming” much like that of television following the rise of TV streaming services. However, there is also fear that the desire to produce a steady stream of new titles to keep subscription services appealing will result in more run-of-the-mill content being generated as a safe alternative to risk taking.33
- Canada will be getting its first global esports exchange-traded fund in the near future. The Evolve E-Gaming Index ETF will track the Solactive Electronic Gaming Index, which looks at hardware, software and services related to the esports industry.34
- Canada’s projected esports growth will be bolstered significantly by Cineplex’s purchase of esports platform WorldGaming Network for US $15 million to host national esports leagues at Cineplex venues. This will ensure the sustainability of esports revenue from consumer ticket sales, which grew significantly at 288.8% year-on-year in 2018 through similar international esports circuits. Bell has also become involved in esports as an exclusive partner to OverActive Media, who own 15 esports teams internationally.35
- The extended reality (XR, encompassing VR and AR) market is extremely new, and as such, a great deal of work is being done on better understanding issues such as financing and distribution. An article from CMF Trends recommends multiple funding sources, combining private and public funding, as well as co-production partners. The comparatively small size of the VR market encourages creators to make the most of their content, leading to cross-platform distribution such as television shows, films, or video games on other platforms. Finally, producers need to be proactive in pursuing opportunities for distribution, as traditional distributor roles are less common in the realm of XR.36
- The World Health Organization (WHO) has included “Gaming Disorder” in the 11th edition of the International Classification of Diseases, characterized by individuals allowing gaming to take over their lives to the detriment of other activities and relationships. The Global Video Game Industry Associations have released a statement expressing concern that the designation did not consult the academic community, and that it may have far-reaching impacts on the video game industry.37
- Increasing awareness is being brought to issues regarding the mental health of tech workers, particularly those in the video game development field. A white paper by mental health organization Take This highlights key challenges faced by game developers, such as job instability and “crunch,” a term used to refer to prolonged periods of overtime leading up to the release of a game.38
- Over half of game developers (53%) say that crunch is an expected part of the job, and can involve up to sixteen hour days, seven days a week. Less than 18% of developers receive overtime pay for working during these periods.39
- In light of issues such as crunch and precarious employment, there has been increasing discussion among the video game developer community of unionizing. The 2019 Game Developers Conference (GDC) was host to a number of roundtable sessions about the issue, organized by Game Workers Unite. However, support for the issue is still divided. A survey of GDC attendees found that only 47% were definitively in favour of unionization, with 26% saying maybe, 16% saying no, and 11% undecided.40
- Interactive Ontario released a new report on discoverability challenges and tips for Ontario IDM companies. Interactive Ontario Discoverability Report draws from interviews with a number of IDM leaders representing a wide variety of studios to learn what obstacles they face and what key methods they have used to overcome them.
- Game Arts International Network (GAIN) have created a new resource called Gameplanner, which is designed to assist indie video game development studios decide which industry events to attend and to maximize the value gained from the events they choose.
- Ontario interactive digital media producers have access to public funding through the Ontario Interactive Digital Media Tax Credit (OIDMTC) and the Ontario Creates Interactive Digital Media (IDM) Fund. Support from Ontario Creates 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. As part of the Industry Development program, the IDM Fund also supports emerging digital companies with training activities through the IDM Fund: Futures initiative.
- In their 2019 budget, the Ontario provincial government proposed lowering the annual labour expenditure threshold from $1 million to $500,000 in order to allow more video game development companies to apply for tax credit certification.41
- The provincial government is contributing $1.4 million for a “virtual career exploration module” project called “CareerLabsVR.”. The Leeds-Grenville Employment and Education Centre is partnering with tech firm UP360 Inc. to develop a virtual reality project which will give prospective employees virtual experience for working in the steel industry. If successful, it is hoped that this project will expand to more locations and other industries.42
- Sticky Brain Studios received a Youth Media Alliance award for “Best Interactive Content – Preschool” for their game Cutie Pugs in 2019.
- The aforementioned Falling Squirrel game The Vale received a number of awards and nominations, including winning Special Selection at Reboot Develop Red 2019, and Industry Choice Award at Game Slice 2019.
- Ontario studio GLOAM won the 2019 Ubisoft Indie Series Grand Prize for their game Bravery Network Online.
- Mighty Fight Federation by Komi Games Inc won the award for best multiplayer game at DreamHack Atlanta 2019.
- A Short Hike by Adam Robinson-Yu won both the Seumas McNally Grand Prize for best Independent Game and the Audience Award at the 22nd annual Independent Games Festival.
Profile current as of March 31, 2020
4 Interactive Ontario, Measuring Success: The Impact of the Interactive Digital Media Sector in Ontario -2nd Edition, May 2019, p.3; Interactive Ontario, Measuring Success: The Impact of the Interactive Digital Media Sector in Ontario, February 2017, p.18.
20 The NPD Group, Inc, Deconstructing Mobile and Tablet Gaming 2020, pp. 4-5.
23 AdAge, “Netflix takes step toward multimedia empire with new video games,” AdAge, June 12, 2019; Cherie Hu, “Why the music industry needs the video gaming industry’s help to scale virtual concerts,” Music Business Worldwide, April 8, 2019.
24 CBC News, “This guy let seniors play with virtual reality… and they liked it,” CBC, July 5, 2019; Tracy Arabian, “Senior Lookout: Games are a great way to challenge your brain,” Gloucester Times, May 30, 2019.
29 Sol Rogers, “The VR Companies Shaking Up Location-Based Entertainment,” Forbes, November 8, 2019; Anshel Sag, “Location-Based VR: The Next Phase of Immersive Entertainment,” Forbes, January 4, 2019.
31 Keza MacDonald, “E3 2019: the future of video games is complicated,” The Guardian, June 13, 2019; Todd Martens, “Can streaming and subscription models do for games what they’ve done for TV?,” Toronto Star, June 24, 2019; Francis Gosselin, “Google Stadia Going After the Recreational Multiverse,” CMF Trends, April 15, 2019.
37 World Health Organization, “Gaming Disorder,” World Health Organization, September 2018; Entertainment Software Association of Canada, “Global Video Game Industry calls Upon World Health Organization to Reverse Video Game Classification,” Entertainment Software Association of Canada, no date.
39 Dean Takahashi, “Take This: Game developers face serious mental health challenges,” VentureBeat, July 9, 2019; Eli Glasner, “’I just broke down crying’: Canadian video game creators face grueling ‘crunch’ hours,” CBC, April 26, 2019.
40 Sam Dean, “As video games make billions, the workers behind them say it’s time to unionize,” Toronto Star, April 15, 2019; Nick Kolakowski, “Developers Split on Tech Unionization Question,” Dice, July 10, 2019.