With the video game industry seeing a sharp increase in sales over the past two years due to the stay-at-home orders as a result of the COVID-19 pandemic, the Canadian government wants to help support the development of innovative video game development studios.
Canada is home to some larger-than-life video game studios, such as the Edmonton-based BioWare, which has created game franchises ranging from Mass Effect to Star Wars: Knights of the Old Republic and Dragon Age to Ubisoft which has locations in Montreal, Quebec, and Toronto, which has created games such as the Assassins Creed series, Tom Clancy’s Rainbow Six games, and the Far Cry games. Smaller or “indie” game development studios such as Matt Makes Games developed breakout games like Celeste, as well as developers Finji who developed Night in the Woods and Red Barrels who developed the Outlast games.
According to WePC the video game market was worth $159.3 billion in 2020 with that number expected to be dwarfed this year because of additional pandemic lockdowns.
The barrier to entry in the video game development industry has also been lowered, with independent game studios, known as indie games, being widely supported, and popularized on storefronts such as the Nintendo eShop, Steam, the PlayStation Store, and the Microsoft Store, the Apple App Store, and the Google Play Store.
With that being said, the coronavirus has taken its toll on the gaming industry. Sony, Microsoft, Nintendo, and other gaming hardware manufacturers that have had consoles or graphics cards release in the past year that have been in extremely high demand with low supply due to the ongoing microchip shortage. Many video game development studios have also reported delays for their game releases into next year, citing the challenges brought on by the pandemic as a reason for their delay.
In this article, we look at the funding programs provided by federal and provincial governments to support studios with the conceptualization, development, and promotion of a Canadian-made video games. If you believe your business is eligible for any of these programs, we can match funding with your gaming projects and discuss next steps.
Canadian Federal Funding Programs for Video Game Development
Most video game developers will have one or multiple games being worked on at any given time and can cost anywhere from $500 to $300,000,000 to develop. With the cost of developing video games varying so greatly, it’s no wonder why government funding incentives exist help with the creation process and increase the scope and polish of games of all sizes. Canadian federal government funding programs exist and the following section focuses on the top incentives.
Funding for Video Game Development: Canada Media Fund’s Experimental Stream
The Canada Media Fund’s Experimental Stream helps to support Canadian-made interactive software through its conceptualization, prototyping, production, and marketing funding phases that support these various stages of the product development lifecycle. The funding provided through this is a loan and will need to be paid back to the Canada Media Fund through a portion of revenue, which is determined by the stream of funding being utilized.
Amount: This program funds up to 50-75% of eligible project costs to a maximum of $15,000-$1.5 million. Each phase of a project has a different maximum amount of funding associated with it:
- Conceptualization Phase: 75% of eligible expenses up to $15,000.
- Prototyping Phase: 75% of eligible expenses up to $250,000.
- Innovation Phase: 75% of eligible expenses up to $1.5 million.
The overall maximum amount a single project can access across all funding streams is $1.5 million.
Video Game Research & Development: The Scientific Research & Experimental Development (SR&ED) Tax Credit
The Scientific Research & Experimental Development (SR&ED) tax incentive program provides a retroactive tax credit four to 12 months after a project’s approval. This program is a retroactive tax credit that only applies to completed projects and costs that have already been incurred. Expenditure coverage differs between each program.
Amount: Tax credit of up to 35-45% of wages, overhead, materials, and various other expenses.
Eligible Businesses: Organizations must be conducting experimental development or basic/applied research in Canada and be capable of tracking and reporting resource allocation to eligible research activities.
Eligible Projects: The SR&ED program can include labour costs, external contractors’ costs, materials, and overhead costs that directly relate to the eligible project. Projects have to have a level of uncertainty and be focused on exploratory research.
Those businesses eligible for funding can apply up to 18 months from the end of the tax year that the expenses were incurred.
Funding for Innovative Video Games and Game Engines: NRC IRAP
The National Research Council (NRC)’s Industrial Research Assistance Program (IRAP) is a business research grant offered through the Canadian federal government designed to support the research and development process of innovative made-in-Canada technologies with a level of technical risk and uncertainty. This program would be relevant to those developing an innovative new game or software that is seeking to have its research and development supported through government incentives. The intellectual property (IP) created as a result of the project would stay with the applicant.
Amount: Grants of up to 60-80% of internal labour costs and subcontractor expenses.
Ontario Government Funding for Video Game Development
Ontario is home to many video game development studios such as Rockstar Toronto, Capybara Games, and Ubisoft Toronto that have created massive hit games that have achieved global popularity. The video game industry accounts for a significant portion of the province’s economic activity and the Ontario provincial government has taken notice. As a result, the province offers multiple long-standing funding programs to help kickstart and expand the development of new video games, as well as the promotion and reach of Canadian-made games in new markets.
Funding to Accelerate Video Game Development: Ontario Interactive Digital Media Fund (IDM)
Ontario’s Interactive Digital Media Fund (IDM) is a provincial government grant program that supports digital media developers in conceptualizing new digital media products, as well as the development and commercialization of those products.
Amount: Provides up to 50% of costs to a maximum of $50,000 for concept definition projects, or up to 50% of costs to a maximum of $300,000 for digital media projects in the production phase.
Tax Credits for Ontario Video Game Developers: Ontario Interactive Digital Media Tax Credit (OIDMTC)
The Ontario Interactive Digital Media Tax Credit (OIDMTC) is a refundable tax credit that can be put towards eligible labour, marketing, and distribution expenses. This program is open to established Ontario-based corporations that develop interactive digital media. The OIDMTC is administered by Ontario Creates and the Canada Revenue Agency (CRA).
Amount: Up to 40% of eligible labour, marketing, and distribution expenses towards internal activities, with up to 35% for fee-for-service arrangements.
There is no overall funding cap for this program, however funding towards marketing and distribution expenses are capped at $10,000 per product.
Canadian Federal Funding Programs for Published Video Games
Once a video game has been developed, it must compete with the other games listed on multiple storefronts. This includes both retail shelves, as well as virtual storefronts such as Steam, Epic Games, PlayStation Store, Nintendo eShop, Microsoft Store, and more. Therefore the Canadian government is introducing funding programs to help with the promotion of games that have been released.
Promoting Your Game in Foreign Markets: CanExport SME
The CanExport SME program can help your video game studio conduct marketing activities in foreign markets outside of Canada by accessing CanExport grants for related projects.
Amount: Up to 50% of project expenses to a maximum of $50,000 in grants.
Eligible Businesses: For-profit businesses must be incorporated for more than three years, less than 500 employees, and have between $100,000-$100M in Canadian annual revenue.
Eligible Projects: Market research, IP/product certifications, marketing tools, and website SEO. Trade show and travel related costs for new markets, however these costs are ineligible if there is a travel advisory in those markets.
This program will open in January 2022 and will fund projects starting after April 1, 2022. All eligible costs must be incurred after approval. It can take up to 60 days to receive a verdict on submitted applications.
Apply for Government Funding Grants, Loans, and Tax Credits
Whether your video game development studio is conceptualizing a new game, developing a game, or planning the promotion of a game launch, there are Canadian government grants, loans, wage subsidies, and tax credits that might be relevant.
If you believe your business may be eligible for funding through one or more of these programs, contact a member of the Mentor Works team for application assistance. Our team of government funding writers provide an estimated 95%-time savings compared to organizations that apply for funding in-house.
Video game development studios looking into creating VR experiences can download our free white paper on virtual reality trends to learn about new trends and funding programs to capitalize on this innovative new technology.