if the innovations today are the pipelines of jobs tomorrow then ontario’s interactive digital...

If the innovations today are the pipelines of jobs tomorrow then Ontario’s Interactive Digital Media Creative Cluster is well placed to answer the province’s call “to create jobs and grow the economy by investing in people…” as laid out in the Ontario Budget 2014.

Interactive Digital Media (IDM) is constantly evolving

From console gaming to Internet-based to mobile

1980sB.C. and Quebec early adopters of console game development.

Companies: Distinctive Gaming, Radical, EA Canada

Mid - 2000Number of web games & casual games join the console gaming industry, compete for eyeballs.

Companies: Zynga, Uken Games

Today

Mobile Apps, interactive choose-your adventure documentaries, e-learning, transgaming, and digital content studios producing for online broadcasters, take greater market share.

Companies: Phantom Compass, XMG, Game Pill, Smokebomb, Blue Ant

TomorrowInteractive content will leverage wearable technologies to make augmented reality, real-time gamified content and more.

Companies: Digital Howard, Secret Location

The evolution of digital platform has favored SMEs with the explosive growth of mobile apps & games

• Some large console game companies, and a high # of SMEs in mobile App, casual, web gaming, digital content, e-learning sub-sectors.

• IDM revenue in Ontario.

• Much of Ontario’s IDM sector has grown as offshoot of strong film and TV studios.

• Ontario has start-up culture:

• Two-thirds BC of companies 7 +years old; no self-described start-ups.

• In Ontario 25% of IDM companies are under 3 years &10% self-described start-ups.

• Ontario has fewer foreign-owned companies:12% compared to 41% in BC.

multi-platforms + entrepreneurs

= great innovation potential

Ontario’s IDM companies are growing and diversified: start-up nation

SOURCE : CIAIC REPORT 2013 AND ESAC SURVEY 2013 AND INTERACTIVE ONTARIO 2012 REPORT

British Co-

lumbia33%

Ontario26%

Prairie Prov-inces16%

Quebec13%

Nova Scotia10%

Outside of Canada

2%

Number of IDM companies across Canada as a % of total

Snapshot of Ontario’s IDM Sector

Ontario’s IDM sector has all the ingredients for sustainable growth –

the talent, the diversity, the entrepreneurship, the innovation (technical + creative), the cost structure and the global opportunity

• Employs 16,000 Ontarians.• Generates $1 billion in predominantly export direct revenue; $2.1

billion when enabling and supporting revenues are included.• Contributes $1 billion annually to Ontario's GDP.• Expected to grow on the order of 15% in next 2-3 years.

BUT

• Ontario is still catching up.• Still only represents 28% of total Canadian IDM revenues.

• Approximately 100 companies.

• Directly employ 1,821 Ontarians.

• Generates $134 million in direct spending;.

• 65% of Ontario-based companies have been in business for more than seven years.

BUT

• Relatively small compared to BC & Quebec with their larger, mature, video game core.

• BC employs 5,140 in video games and Quebec 8,749.

• Ontario lagging in video game expenditures (proxy for industry size).

Ontario is the tortoiseto the BC hare

Snapshot of Ontario’s video game industry

SOURCE : ESAC ESSENTIAL FACTS 2014, ESAC SURVEY 2013

Ontario8%

BC46%

Quebec34%

other 12%

Percentage of video game

expenditures by province

IDM is one of only a handful of sectors that can help drive Ontario’s future

• Anchoring talent

• Average age of creative/ technical employees is 32

• Employs adaptable labour

• Combines technical and creative

• 66% of IDM employees have university degrees; 97% had at some

university or college education

• Training ground for higher education and co-op student placements

• 72% of IDM companies facilitate training

• IDM average salary 36% higher than average Ontario worker

• Six distinct clusters in province; largest in GTA but pockets in Sudbury,

Kitchener-Waterloo, Hamilton London & Ottawa;

• industry tied to broadband not geography

• IDM industry is made up of “gazelles” – fast and nimble SMEs who

according to OECD are best generators of IPSource: CIAIC Report 2013 and ESAC Survey 2013

IDM entrepreneurs have source code for economic growth

The Map of Growth

Interactive Ontario’s member companies have grown substantially between 2007-2014

From Interactive Ontario survey December 2014

The Map of Growth

Interactive Ontario’s member companies employees under 30 years old


International Markets

Interactive Ontario’s member companies impact global markets


Ontario’s IDM Industry is DiverseInteractive Ontario’s members have a diverse range of business activities – more than B.C. and Quebec.

They also work across multi-platforms and do traditional film and television work.

0%

10%

20%

30%

40%

50%

60%

70%

3%

29%

59%

31%

% of business activities included inIDM business models

web series

mobile apps

web and console gaming

online video, online publishing, tv


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

25%

81%75%

44%

50%

% of IDM companies that innovatein the following areas:

Innovation by IDM

Interactive Ontario’s members weigh in on how their companies innovate…

organizational method

new content for market

use new technologies to create new forms of content

new marketing method

create proprietary / technical IP vs content


0%

10%

20%

30%

40%

50%

60%

70%

80%75%

25%

50%

25%

6%

50%

31%

50%

63%

% of IDM companies that use the following forms of financing:

FinancialStreams

IDM companies use diverse forms of financing but OIDMTC is critical piece of the puzzle here.

While many IDM firms use OIDMTC, the majority say it makes up less than 10% of overall financing plan

OIDMTC

company investment

sales

services

market financing

IDM fund

CMF convergent

CMF experimental

other tax credits


Total Revenue

SME’s dominate in the IDM Sector and 13# are in the micro start-up phase.

SME’s are the biggest generator of IP according to the OECD.

13%

20%

33%

27%

7%

Company Size by Total Revenue

under $500,000

$500,000 - $1million

$1million - $5million




Global Perspective:The Trend is on our side

• The global gaming market: $79 billion in 2012, 93 million in 2013 … is expected to reach $111 billion in 2015.

• Ontario owns a sliver of this market.

• 56 % of IDM companies in Canada are projecting revenue growth of 25% over next 12-24 months.

• Opportunity to grow into new markets is tremendous:

• 57% of Canadian IDM revenues from exports.

• Over 90 % of Canadian Gaming revenues from exports.

• 94% of companies are expanding sales to new markets over the next 12–24 months.

• Ontario is best positioned to supply talent: Ontario has 38 colleges and universities vs BC and Quebec with 15 apiece.

Source: Gartner Report 2013, Source: CIAIC Report 2013 and ESAC Survey 2013

• A labour-based tax credit to foster production of original interactive digital media content

• Modeled on pre-existing film and TV tax credits but “technologically neutral”

• Single most important support mechanism to grow sector

• Allows SMEs to hire top talent and create proprietary IP

• Ontario company, but can be Canadian or foreign owned

• Support entertaining, educational, or informative

• Presented using text, video and or images (2 of the 3)

• Used by individuals • Not all user-generated content

• No branded content

What is the OIDMTC? Key Criteria

OIDMTC is tool that supports Martin Prosperity Institute’s thesis that growing

“creativity-based occupations ” will drive Ontario’s economy

• Growth of OIDMTC reflects growth of sector BUT apparent problem with outliers;

• IO supports narrowing the credit to bona fide IDM content and companies (incl. other creative industries)

• Want to ensure bona fide IDM companies continue to leverage this credit to grow original product with proprietary IP

Need clarification of the intent and scope of this review

Making the OIDMTC more Efficient and Effective

SOURCE: OMDC ANNUAL REPORTS :

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

$400,000,000

$450,000,000

Value of Tax Credit

Project Value

2008 2009 2010 2011 2012 2013

2014 Ontario Economic Outlook and Fiscal Review

A profile of the video game subsector

• Rise of the “casual gamer” and business models organized around mobile game development (i.e., free to play model and in-app purchases).

• Industry structure becoming more dramatically split between large and small firms.

• Increasing interest in crowdfunding for small independent firms to access financing.

• Console game production has the highest budget and largest teams (average $8.7 million) compared to mobile games (average $300,000).

• Large studios (500+ employees) comprise 4% of the video games companies in Canada, but employ 68% of the industry’s workforce.

• While casual games account for the largest portion of projects completed in Canada, consoles games continue to generate the most revenues (66.5% of total industry revenues).

Source: Nordicity, Canada’s Video Game Industry in 2013

A profile of the eLearning subsector

Another key IDM segment is Ontario’s e-learning industry, which is made up of more than 120 specialized e-learning development firms, dozens of government sanctioned educational e-learning entities, and thousands of corporate practitioners.

These organizations supply educational products in three main categories: 1. academic

2. non-curriculum learning

3. corporate training

While there is no economic data available for Ontario, the global e-learning industry is projected to grow 400%, from $27.1 billion (US) in 2009 to an estimated $107.3 billion (US) by 2015.

The province’s e-learning industry is poised for growth, and reports stable revenue models and high profitability. (d)

Source: (d) Interactive Ontario’s eLearning committee, ONelearning, eLearning Industry Snapshot 2010-2011

A profile of the mobile sub-sector

One of the province’s emerging IDM segments is mobile, which is experiencing explosive global growth.

In 2012, 46 billion apps were downloaded worldwide, which generated $12 billion in sales, advertising and in-app purchases.

In 2013, the number of app downloads is expected to double, and generate $20 billion in revenues.

As highlighted in the recent Taking Ontario Mobile study by OCAD University, Ontario is well positioned to take advantage of mobile’s growth, and has been identified as an emerging global centre of mobile-app development. (e)

Currently, there is an estimated 750 companies in the GTA working on mobile content development. (f)

Source: (e) Wall Street Journal: “Toronto becoming a Hub for Mobile Apps Companies; 2010 (f) Ontario’s Business report: “T-APP” Toronto’s ever growing app market”

Rock Stars of the Independent IDM Sector

Blue Ant: Toronto (Founded 2011)

• Creates digital media content and distributes internationally across its television, mobile, web and magazine properties

• Revenue $50 million

• 75% of content licensed; 25% original

• Staff grew from 2 to 200 full-time + 30 part-time; 35 staff in U.S.

• Produce 800 hours original content; 100 million global viewers

• Offices in L.A. and New York

• Expected growth: triple in staff in 18 months

• OIDMTC and other government funding: 5% capitalization

• Awaiting OIDMTC payments from 2012

Case Study: 1

Blue Ant


Game Pill: Toronto (Founded 2008)

• Predominately made PC/Flash games until 2010

• Today 75% mobile gaming company

• Revenue: $500,000-1 million; export revenues 80%

• Staff grew from 1 to 10 full-time and contract

• Service work vs proprietary: 95:05 (U.S. clients Nickelodeon)

• Expected growth: $2 million in revenues and 18-20 staff in 2015

• Government founding represents <2% of capitalization

• Never applied for OIDMTC but will apply for original projects

Case Study: 2

Game Pill


Digital Howard: Toronto (Founded 2013)

• Make App-based and web-based interactive content

• Work with emerging technology e.g. iBeacon enabled-devices

• Revenue: $500,000-1 million; export revenues 60%

• Staff grew from 2 to 6 full-time and contract

• Service work vs proprietary: 20:80 (U.S. clients Nickelodeon)

• Expected growth: $2 million in revenues and 18-20 staff in 2015

• Government founding represents 20 % of capitalization

• Applied OIDMTC in 2013; still in queue

Case Study: 3

Digital Howard


Secret Location: Toronto (Founded 2007)

• Digital Agency creates entertaining experiences such as virtual reality, augmented reality, interactive documentaries and websites, mobile content and games, web series

• Won over 200 international awards including International Emmy and Cannes Golden Lion --Oscar equivalent in the advertising

• Works with emerging technology e.g. Oculus Rift for Frontline PBS

• Revenue: $5-10 million; export revenues 60%

• Staff grew from 1 to 55 full-time and 20 contract

• Co-owns 20% of the content it produces; as for underlying technology it licenses 30-40% or builds it and owns 70-80%

• Government founding represents 25% of capitalization which includes OIDMTC and CMF experimental & convergent

Case Study: 4

Secret Location

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