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Suffering Vancouver video game industry highlights bigger problem

Ontario tax credits aren't the only reason studios are moving. In general, Vancouver is just too expensive.

CB_Vancouver

(Photo: Jon Eben Field/Wikimedia)

Another day, another dead video game studio in British Columbia. Or so it seems, with studio after studio being closed or dramatically reduced by its owners. Early this year, it was Ubisoft Vancouver that was shuttered. A few weeks ago, it was mainstay Radical Entertainment that was severely downsized by parent Activision. Last week, Take Two Interactive announced it was closing Rockstar Vancouver. The question on everyone’s minds now is, who’s next to go?

As the saying goes, one person’s pain is another’s gain, and this is certainly true in the case of Ubisoft and Rockstar. Both companies closed their B.C. operations in favour of consolidating their workers at expanding studios in and around Toronto. It’s no secret the retrenchments are happening because Ontario is giving video game companies significantly better tax credits on their workers than British Columbia.

This has been a long-standing point of contention not just between provincial governments, but countries too. Politicians in various provinces, as well as the United Kingdom and several U.S. states, have questioned the wisdom of granting tax rebates to video game makers.

Critics have said it’s a case of giving certain industries special treatment and that it’s a race to the bottom. The companies might be lured to set up shop, but will they then stay if someone else comes along and offers a better deal? The counter-argument has always been that credits and subsidies help create a big ecosystem that becomes dependent on itself and therefore hard to uproot, regardless of better offers popping up.

The B.C. situation looks like it could add fuel to critics’ arguments, and that already appears to be happening. As the Canadian Federation of Independent Business puts it, “It’s a high-risk, high-reward gain. They can be attractive, but it’s also dangerous…. If one province is trying undercut, it’s only Canadian business that ends up getting hurt.”

That may be true, but the Vancouver problem isn’t endemic just to the video game industry. The soaring cost of living in the city, especially in real estate, is making it more expensive for everyone to do business there. One developer told me the other day that it costs about 40 per cent more to create a game in Vancouver than it does in Quebec, simply because companies have to pay people more. Other companies and entrepreneurs are also finding that to be the case, so shutting down and moving to cheaper locations seems to be a no-brainer.

If anything, the province has to do something to fix these overall spiraling costs. Who is or isn’t getting tax credits seems to be the least of its problems.

Whatever the case may be, there doesn’t seem to be any sense of panic in the B.C. games community. People I’ve spoken to, including local games journalist Blaine Kyllo, say the industry is in the midst of transition. While it looks like the days of big blockbuster games being created in Vancouver may be coming to an end, there is lots of activity going on with independent studios and various new game initiatives. Microsoft, for one, opened a new studio last year that is devoted to creating Kinect games, while other, smaller game companies quickly moved to try and snap up employees laid off by Radical.

That’s perhaps the biggest bright side and counterpoint to all the tax credit criticism: if you work in game development in Canada right now, there is no shortage of jobs waiting for you.