ReportESAC – Entertainment Software Association of Canada
Canada's Video Game Industry in 2013: Final Report
1 Jul 201360 pages~98 min full read
Canadian video-game firms rate tax credits as highly effective, awarding them an average satisfaction score of 4.4/5.
The tax-credit regime is a primary driver of industry expansion, with 40% of firms projecting revenue growth exceeding 25% in the coming year.
Tax incentives are most effective at creating project opportunities, which received an impact score of 4.0/5, followed by strong benefits for employee retention and industry visibility.
The administrative burden of accessing tax credits is considered low relative to the financial value received, maintaining a favorable cost-benefit ratio for firms.
Economic impact analysis confirms that the industry generates significant ancillary activity through supply-chain spillovers and household re-spending, calculated using a methodology that accounts for import leakages.
Direct economic impact calculations for the sector utilize an operating-surplus-to-labour-income ratio of 15.17% to quantify profits and value-added contributions.
**Canada’s Video Game Industry in 2013 – Final Report (Summary)**
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### 1. Industry Perception of Tax Credits
- **Overall valuation:** Canadian video‑game tax credits received an **average rating of 4.4 / 5**, indicating that firms consider them a highly valuable policy tool. - **Key benefits identified:** - **Project opportunities:** Highest impact score (**4.0 / 5**). - **Employee retention, revenue growth, and industry visibility** also scored strongly, reflecting that tax incentives help companies keep talent, expand sales, and raise the sector’s profile. - **Cost‑effectiveness:** Respondents reported that the **administrative burden is low relative to the financial value** they obtain from the credits. - **Growth outlook:** The survey revealed a **very optimistic near‑term outlook**: **40 % of firms expect revenue growth of more than 25 %** in the coming year, underscoring confidence that the tax environment is a catalyst for expansion.
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### 2. Economic‑Impact Analysis
| **Component** | **Methodology** | **Key Findings** | |---------------|----------------|------------------| | **Direct impacts** | • Calculated from reported industry revenues and wages.<br>• Applied an **operating‑surplus‑to‑labour‑income ratio of 15.17 %** (derived from the broader software‑publishing sector) to estimate profits and value‑added. | • Direct employment, labour income, and GDP contributions were quantified based on actual firm‑level data. | | **Indirect impacts** | • Integrated the survey data with **Statistics Canada Input‑Output (I‑O) tables**.<br>• Modeled supply‑chain spillovers, capturing purchases from other Canadian industries and adjusting for **import leakages** (goods/services sourced abroad). | • Showed how video‑game firms stimulate activity in supporting sectors (e.g., hardware, professional services, marketing). | | **Induced impacts** | • Used a **custom multiplier** built on Canada’s **marginal propensity to consume (MPC)** and **marginal propensity to import (MPI)**.<br>• Estimated household re‑spending of earnings generated in the direct and indirect stages. | • Quantified the additional employment, income, and GDP generated when workers and suppliers spend their wages locally. |
**Overall economic contribution (direct + indirect + induced):** - The combined effect demonstrates that the video‑game sector’s footprint extends well beyond the firms themselves, creating **significant ancillary jobs and income** throughout the Canadian economy. - The methodology ensures that **import leakages are subtracted**, providing a realistic picture of net domestic impact.
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### 3. Implications
1. **Policy Validation** – The high satisfaction scores and strong growth expectations confirm that the tax‑credit regime is achieving its intended objectives: fostering project development, retaining talent, and boosting sector visibility. 2. **Economic Multiplier Effect** – The I‑O‑based analysis shows that every dollar of direct video‑game revenue generates additional economic activity across multiple industries, reinforcing the argument for continued or expanded fiscal support. 3. **Strategic Recommendations** (derived from the findings): - **Maintain or enhance tax‑credit levels** to sustain the momentum in project creation and revenue growth. - **Streamline administrative processes** further to keep the cost‑benefit ratio favorable.
