Good afternoon. I will be making my presentation in French.
I am Carole Deniger, from SECOR-KPMG. It feels a bit odd to say that name because SECOR and KPMG merged very recently. My colleague Rob DePetris will speak to you afterwards. I will be making a somewhat more general presentation, whereas Rob will address specific questions and tax issues.
KPMG-SECOR's expertise in this sector is in both the tax and economic areas and in more strategic studies, particularly those that SECOR conducted at the time for Quebec, Ontario and Prince Edward Island and many industry clients.
At the risk of seeming to repeat what was said by our friends from the Entertainment Software Association of Canada who preceded us, I believe it is important to note all the profound changes that have been affecting the industry in the past few years.
We know that the recession hurt the market, but there have also been major paradigm shifts as a result of digital distribution, new platforms, the construction of mobile and online platforms, networked games, particularly social games, and all the new business models that have followed, with subscription and microtransaction models. So there have been some major changes to which Canadian and foreign businesses must adapt.
Incidentally, when we talk about Canadian businesses, I believe we are still really talking about businesses that are provincial or are based around major cities such as Montreal, Toronto, Vancouver and various hubs where solid expertise and real maturity have been developed. I believe those hubs have managed to position Canadian businesses on the global stage. That is also the case of foreign businesses because we know that most of the gaming industry's workforce is at large firms owned by major publishers such as Ubisoft and Eidos, but also by many national businesses and smaller but very dynamic players.
As for the growth issue, as a result of tax credits in particular, I believe we have achieved such a degree of maturity that this is not a priority at the present time. We have managed to build critical mass, expertise that is recognized and no longer challenged. Now we have to develop recognition related more to our content and success, and that is perhaps where we must focus our efforts, particularly at the federal level and across Canada. For the general public, what is made in Canada does not really exist. It exists for the professional industry because people know each other. Initiatives such as Game Nation are also starting to make our businesses better known here, but we are talking about an entertainment-related sector. So it is important to position ourselves as Canadians on the world stage.
What does that mean? There is obviously a marketing issue, but we have to make sure that there is support for intellectual property created here. We have to be able to maximize the success of that property, that is to say original content, to support it and to generate maximum profits. In fact, in certain respects, we are talking about a service industry that creates a lot of jobs. Now we have to think about creating value. That does not mean that we have to control everything here. I think it is important, particularly for games intended for very large audiences, to have publishers outside Canada. However, if we can retain more of our intellectual property, we will negotiate better conditions, earn larger royalties and generate more profits that will stay here.
That can be done through existing measures, in particular the Canada Media Fund, which is quite a large fund, particularly its experimental component. However, perhaps it should be adjusted to provide more support for the creation of original content. That is what we also call prototyping in the gaming industry. We have to get to at least the prototype stage. We obviously already have the research and development tax credit. However, tax credits are mainly granted at the provincial level, and we are well served in that respect.
Incidentally, I took another look at the KPMG study. As you probably know, it states that Canada is a mature region where digital entertainment costs as a whole are the lowest in the world. We are well served in that respect.
I do not want to go back over immigration, but the issue of work permits, like that of marketing and commercialization support, is becoming an increasingly important issue. The same is true for venture capital in general. I know you have funded studies on that topic, including this one, which is a very good study. It shows that there are obvious deficiencies in funding to assist business start-ups, particularly in the digital entertainment industry.