Innovation and economic diversification are receiving ongoing attention and media coverage in Canada and in the world beyond. What are the elements that lead to success? What are the actions that stall progress or lead to outright failure?

The Canadian federal government is planning clean tech investments and offering venture capital funds in support of innovation in its budget that was tabled in March 2017. In view of the long history of government stumbles when investing in businesses or providing subsidies for targeted types of investment, how might this latest effort in support of innovation turn out? David Crane assessed Budget 2017 as a big miss on innovation opportunity.

Canadian video game development is a well-regarded, world-leading industry. This industry offers an insightful case study for how innovation and economic diversification are best supported and encouraged by a comprehensive ecosystem.

To describe how innovation and economic diversification efforts have contributed to the development of the video game industry in Canada, I recently interviewed Cédric Orvoine, the vice-president, human resources & communications at Ubisoft Montréal.

We discussed the elements of the ecosystem that Ubisoft relies on and benefits from to foster innovation in its video game development. Here are the highlights of our discussion, edited for length and clarity.

Yogi Schulz: Summarize the Ubisoft company for our readers, please

Cédric Orvoine: Ubisoft is headquartered in France where the company was founded in 1986. We are located on every major continent in about 29 development studios and 23 business offices. Our developers rely heavily on the 3DS Max 3D modeling, animation, and rendering software now owned by AutoDesk.

We now employ approximately 11,000 staff worldwide with 4,000 in Canada. Of these 3,000 are at our biggest studio in Montreal. As you likely know, the language of work in Quebec is French. Most of our staff is bilingual. Almost 60 nationalities are represented among our staff.

Ubisoft started in Montreal in 1997. The initial 10-year goal was to reach 500 staff. We’re proud to have reached 1,500 within those 10 years. Ubisoft has grown organically and through a series of acquisitions.

Ubisoft is particularly proud of its Tom Clancy’s Splinter Cell video game that became an international hit in 2002. This hit was an important milestone and huge success for Ubisoft that also advanced the industry in general. That initial hit was followed by several sequels. Splinter Cell Blacklist was launched in 2013 as the most recent game in the series.

Ubisoft is also known for Assassin’s Creed, Just Dance, Far Cry, Rainbow Six, Rayman, Ghost Recon, and many other video games.

YS: What is the size and economic impact of Canadian video game development?

CO: In 2017 2.2 billion gamers across the globe are expected to generate $108.9 billion in game revenues. This revenue is an increase of $7.8 billion, or 7.8 per cent, from 2016. The market is expected to grow by six per cent annually at least until 2020.

The Entertainment Software Association of Canada (ESAC) counts 472 active studios of varying size and focus in Canada in 2016. ESAC estimates the industry adds about $3 billion to Canada’s GDP each year. ESAC estimates the industry directly employs about 20,000 people.

YS: How important are government tax credits to the ecosystem?

CO: Provincial tax credits are pivotal to the financial viability of Ubisoft and our competitors. For example, Ontario offers an Interactive Digital Media Tax Credit of 35 per cent – 40 per cent for eligible labor expenditures. The Production of Multimedia Titles tax credit in Quebec allows companies to claim 30 – 37.5 per cent of labor expenditures for the entire lifecycle of the product.

The availability of provincial tax credits significantly influences where Ubisoft locates its development studios.

YS: How important is post-secondary education to the ecosystem?

CO: Post-secondary education is hugely important to Ubisoft and our competitors. The greater Montreal area is home to 11 universities. Most of them offer relevant training in media and software development.

Ubisoft supports post-secondary education. Our staff regularly interact with educators and collaborates on curriculum development. Some Ubisoft staff teach courses and others act as mentors to students.

Ubisoft develops talent by sponsoring the annual Ubisoft Game Lab competition with significant prize money and scholarships. In 2017 19 teams, comprised of 149 students from 13 universities in Quebec, created playable 3D-prototypes.

The annual ESAC Student Video Game Competition is designed to encourage game development skills that are crucial to the future of the Canadian video game industry.

The presence of universities and the size of the local talent pool influences the location of our development studios. I’m not sure if we should be proud of this talent development achievement but many competitor studios in Montreal are headed by ex-Ubisoft employees.

YS: Is a favorable municipal environment for the video game business required?

CO: It’s helpful but not essential. Montreal was already an animation hub before Ubisoft arrived in Montreal in 1997. Nonetheless, starting in Montreal was a risky move for Ubisoft because no prospective employees with relevant experience were available to hire.

However, that’s all changed in the intervening years. Video game development in Montreal has grown to 15,000 positions. Montreal is now one of the top five cities on the planet for video game development.

Ubisoft first arrived in Montreal in 1997.

One of Montreal’s benefits is its excellent air access to the many countries where Ubisoft is located.

Initially, Montreal offered dramatically lower rent than other major Canadian cities. More recently rent has been increasing and the gap with other cities is narrowing. Rent is an important cost component in video game development because we have so many employees. Ubisoft now rents about 500,000 sq. ft. of office space in Montreal.