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A Site Selection Web Exclusive, April 2010
WEB Exclusive story

Playing for Keeps

France-based Ubisoft, whose Montréal studio (the company's largest) was once led by current Warner Bros. Interactive Entertainment President and native Québecer Martin Tremblay, has steadily increased employment in both Montréal and Québec City since coming to the province in 1997.
Photos courtesy of Ubisoft

A new video game studio marks  the return of a native son to Montréal.

Site Selection Managing Editor

Montréal is mecca when it comes to virtual play. It's luring more companies to the playground with some very real enticements, the likes of which only Québec can summon. And it's now celebrating the homecoming of an industry champion

Warner Bros. Interactive Entertainment (WBIE), part of the home entertainment group within the Burbank, Calif.-based entertainment giant owned by Time Warner, is the latest entry in a veritable glut of Québecois video game industrial development. The division has announced its intent to establish a development studio in Montréal that will employ more than 300 people by the end of 2015.

That's not Road Runner pace, but then again, it's designed to allow recruiting of new graduates while also maintaining "the labor balance in the Québec video game industry," said the government's press release.

Besides, as any gamer knows, it always takes time to get to the next level.

Helping the outfit get there will be a 37.5-percent employment tax credit, a 50-percent refund of certain training costs and a direct, non-refundable contribution of C$7.5 million from Invest Québec for the studio's creation. (The exchange rate with the U.S. dollar was virtually even at press time.) Financial partners for the project include Emploi-Québec and Société de développement des entreprises culturelles (SODEC), which makes further fiscal incentives available to audio-visual producers. Over the past decade, the province has invested more than $100 million in financial sweeteners to video game companies.

"The Government of Québec's tax credits and other incentives made Montréal the right location for our studio at this time," Martin Tremblay, president of Warner Bros. Interactive Entertainment, said at the project announcement on March 22. "Montréal, with its wealth of talent and highly affordable operating costs, is a wonderful place to continue to expand our growth in gaming."

Tremblay knows a bit about growth in gaming. A native Québecer and industry pioneer, he previously served as president and COO of Ubisoft Montréal during its dramatic growth in the province over the past decade, and helped Montréal become the digital media capital it is today. But as with any tight industry cluster (see "golf clubs, Carlsbad, Calif.," "houseboats, Somerset, Ky.," or "biotech, Boston and San Diego"), talent poaching and intellectual property issues can be the most serious game of all.

Such was the case in Montréal about four years ago, when Ubisoft obtained an injunction against Tremblay, who had gone to work for Vivendi in L.A., in order to enforce a non-compete clause. The legal action carried its share of irony, as Tremblay himself had used such clauses to potent effect in talent battles with Electronic Arts a few years earlier.

Treading the fine line between a healthy industry cluster and an unhealthy cluster of talent poachers is always a challenge for a community targeting a niche. And it only promises to become more so as success follows success in Montréal, where video game operations from Norway's Funcom (100 jobs) and from California's THQ (400 jobs) have also established beachheads within the past year. But economic developers, as they are wont to do, prefer to look on the sunny side. And higher education is making the outlook sunnier all the time.

"By constantly bringing in new talent and expanding the competition base, we successfully continue to make better and better games," says Élie Farah, vice president, Investment Greater Montréal, Montréal International. "As a location, we compete on quality and performance and by creating and continuing to build local competencies. The relationship between the industry and academic institutions is a tremendous lubricant in the expansion of the video game cluster in Montréal. We do strive to find the right balance in the number of companies, the type of activities that they do and we want to provide the best possible platform for them to succeed. We strongly believe in the creation and development of strong clusters and we actively work on filling holes and developing opportunities in the cluster value chain."   

Asked a series of questions by e-mail about the site selection, his past experience in the industry, and how the new studio will differ from WBIE studios in Chicago, Seattle and the U.K., Tremblay, citing proprietary issues, would only issue a blanket statement recapitulating what he said at the March press conference. But others are able to color in the details.

In press accounts, Montréal Mayor Gerald Tremblay has claimed the studio's site selection considered locations the world over, from China to Australia to India. David McFarlane, the project manager for Invest Québec who closed the deal with WBIE, while unwilling to name locations, confirms that the geographic scope was worldwide. In fact, it more or less recapitulates the scope of Ubisoft's search more than five years ago, when it considered cities in Asia, Western Canada and the U.S. before selecting Montréal for an expansion that aimed to add some 1,000 jobs to its local work force by this year.

This time around, McFarlane says the Québec delegation in California began working with Tremblay about two years ago to pull together the project. Unwilling to offer a play-by-play of the process, he does admit there were ups and downs along the way, as much on the corporate side as on the part of government agencies. In the end, however, the man they were pitching already knew all there was to know.

"This project is a little special because of the significant role Mr. Tremblay played as a local champion," McFarlane says. "Our job in a case like that becomes a little easier."

Even Within Canada, Competition is Fierce

Not that it wasn't an easy sell already: McFarlane cites the 5,000 people studying information technology at various universities in the Montréal area, as well as a special training program designed for the industry by Emploi Québec.

And, of course, there are the Québec incentives, which are as maligned by other provinces (citing unfair government largesse via equalization payments to Québec for public services) as they are appreciated by incoming companies.

"A program like the multimedia tax credit is an incredible tool," says McFarlane. "It helped build this industry here. To be able to present a clear offer, bound by law, to a company, in as simple a format as a tax credit on salaries, yes, that is a fantastic program."

Even amid hard times and mounting provincial debt, the program, along with others supporting e-business and R&D, was reupped in late March in the provincial budget for 2010-2011, which earmarks $175 million for the city between now and 2016-201 to support its Montréal 2025 Projects plan, $200 million for a new rail shuttle between Montréal-Trudeau Airport and downtown Montréal, and $30 million over two years to be invested in the Plan Emploi Métropole to consolidate skills development, help job seekers and support investment and entrepreneurship. That's over and above Canada's and Québec's well-known R&D tax credit programs.

In an early March interview, Québec Minister of International Relations Pierre Arcand said that in the span from 2007 to 2008, Invest Québec's funding awards in the form of guarantees or loans went from $800 million to $2.1 billion, including a near tripling of guarantees.

Meanwhile, says McFarlane, "the competition is fierce for a high end company like WBIE, and other places are busy emulating Québec's tax credit structure."

He's talking about British Columbia, which according to a summer 2008 survey by the Entertainment Software Association of Canada already employs 44 percent of the industry in Canada, compared to 37 percent in Québec. In early February, the B.C. government passed its own version of an interactive digital media tax credit.

Toronto, meanwhile, just attracted a major studio investment from Ubisoft, and has recently launched its own aggressive effort to build the digital media industry. McFarlane welcomes the age-old neighboring rival to the gaming table.

"That's great for Toronto. Ubi has been awesome to us here," he says. "Whenever I'm working on these things, we're always compared to Toronto, Dallas, Singapore, Taipei … it's not just a local competition anymore. And every time, it isn't the incentives the company identified as the most important factor. It's the availability of the labor, the intellectual infrastructure, that wins out." The incentives, he says, are "the cherry on the sundae, not the sundae itself."

That sundae's talent includes not just the toiling game developers, but the leaders who develop that talent. In this case, the word "champion" is used yet again by another party to the deal.

"The key success factor for Warner was the identification and engagement of [former Ubisoft VP] Martin Carrier as a local champion to spearhead the project for the company," says Montréal International's Élie Farah. "Martin Carrier is now heading up the studio in Montréal. In our experience, when a company can work and collaborate with a local stakeholder like Mr. Carrier, the probability of landing the project increases significantly."

As Talent Accumulates, So Does the Evidence

According to cost/quality graphs that are part of metro-area benchmarking analysis performed across 15 industry sub-sectors for the Canadian federal department of foreign affairs by IBM-PLI, Montréal is among the leading value propositions among peer cities in North America in medical devices, and is the best value proposition for gaming and for financial services.

Those findings were reinforced in early April when the annual KPMG "Competitive Alternatives" study, which compares 41 metro regions with a population of 2 million or more, found Greater Montréal to have the most competitive business-operating costs among the main industrialized regions in the world.

All sectors combined, the cost advantage of operating in Greater Montréal compared to the average of American cities is 5.8 percent. The advantage rises to 22 percent in clinical trials, 18 percent in electronic systems testing, 14 percent in software design and web/multimedia, and 12 percent in biotechnology.

"When developing a project like this," says Élie Farah, "several factors come into play but the cost structure around human resources becomes the core driver. The province of Québec has successfully structured a large portion of its incentive policies around this element. With a large portion of salaries (up to 37.5 percent) and, for example, costs related to training (50 percent of expenses) included in the overall package for a video game developer, the availability of over 160,000 university students and a progressive college system (Cegep) creates that dynamic ambiance that a company needs to hire and nurture talent."

Open to Innovators

The Montréal subsidiary of WBIE will house various departments in the same studio: high-end interactive gaming product development, digital and cinematographic animation, quality assurance of products developed by the Montréal studio, as well as the adaptation and translation of its products into various languages. That international flavor fits ideally with Canada's, Québec's and Montréal's collectively progressive attitude toward foreign talent.

"The ability to easily move qualified talent across borders (and projects) is a recurring success factor in attracting projects like Warner, THQ and Funcom," says Farah.

Arcand points out the five-year personal tax holiday for qualified foreign experts, and the existence of Québec's own ministry of immigration. And he suggests the province's aggressive family policies dovetail nicely with that openness to immigrants, especially given the younger age cohort usually associated with such sectors as video game development.

According to a report issued in 2009 by the Entertainment Software Association of Canada, Canada is the third-largest employer of video game professionals behind Japan and the U.S., with more than 14,000 workers at some 247 companies, and more than $1.7 billion in annual revenues. B.C. leads the way, followed by Québec and Ontario.

"For example, we are famous for daycare centers for $7 a day," he says. "If you are not able to go to one, and you have to go to a private daycare center, you get the tax deduction. We have universal health care, and tuition fees so low that we are going to increase those. And don't forget real estate in Montréal is quite a bit less than in Vancouver, for example."

"Over the years, Montréal has progressively been positioned as a location of choice for foreign talent," says Farah. "The Governments of Canada and Québec have gone to great lengths to support this process. As a matter of fact, Montréal International has a complete division of specialists that help companies like Warner to bring in talent from abroad. The group has streamlined the process of obtaining work permits and permanent residency for qualified workers. Our commitment and belief in knowledge transfer and capacity development process even extends as deep as providing a free service to support workers' spouses through a customized counseling service to help them integrate socially and professionally."

WBIE's two Martins (Tremblay and Carrier) shouldn't have much trouble integrating socially and professionally. Tremblay's return from not so far abroad is a triumphant one, and marks yet another milestone in Montréal's steady evolution in digital media. The reverberations from such connections can multiply, says Invest Québec's McFarlane, noting the large numbers of Canadians in Silicon Valley and other innovation clusters.

"It is a homecoming," he says of the WBIE project, "but more than anything, from a prospecting point of view, it's about identifying and working with local champions like that."

Story in Pictures

Martin Tremblay, president, Warner Bros. Interactive Entertainment
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