Digital media Ontario's 'next step'

As film and TV shooting slows, focus shifts to new sector

TORONTO -- If the Ontario film and TV production levels are teetering on the brink for a lack of foreign location shooting, local politicians and bureaucrats aren't sitting around waiting for the industry to fall off the cliff in 2008.

The Ontario provincial government is rebranding the Toronto-based production sector, long a magnet for Los Angeles producers shooting film and TV projects, as a new hub for the development and production of video games and other emerging digital media.

"Canada's largest pool of digital media talent and software is in Ontario," said Darius Basarab, senior business consultant for the provincial Ministry of Economic Development and Trade.

Basarab said that such world-class educational institutions as Sheridan College and Seneca College, which have long supplied graduates to 3D animation studios in Los Angeles, are feeding growth for about 140 gaming and digital media companies in Ontario currently.

"Digital media is a natural next step for Ontario," he added.

The province hopes its production sector can take advantage of surging sales of video games and hardware in North America and elsewhere. Toward that end, the provincial government is helping underwrite foreign companies that want to set up shop in Ontario, and subsidizing local producers looking to develop video games and other product for the world market.

"The whole mindset is to grow the industry. Colleges are inundated by people who make video games. We have taken on a lot of people from the film industry -- cinematographers and directors -- to help develop video games, even though we see ourselves as a new art form," said Denis Dyack, founder and president of St. Catherines, Ontario-based video game developer Silicon Knights.

But the push into gaming and digital media comes amid warning flares about the continuing drop in U.S. film and TV production here during the current Hollwood labor disruption.

Ontario anticipates a sharp fall-off in the number of Los Angeles producers shooting product here once contract talks between the studios and guilds and networks resolve themselves next summer.

The fact that the traditionally low Canadian dollar now hovers at parity with the American greenback also has a negative impact on the budgets of Los Angeles producers that shoot here.

In fact, Hollywood's uncertain labor climate has fostered an artificial sense of well-being here as the major studios get set to shoot in Toronto a number of features and TV series in early 2008 before the SAG negotiations get underway June 30.

To keep Hollywood onside in 2008, Ontario boosted the tax credits available to foreign and local producers shooting here in mid-December, in particular the basic tax credit for foreign producers, which rises to 25% from 18%.

The provincial government estimates its latest tax credit changes will inject CAN$50 million ($49 million) in financial support in 2008 to the local production sector.

Industry growth next year also will depend in part on incentives aimed at the gaming and digital media sectors. These include the Ontario Computer Animation and Special Effects Tax Credit, which provides a 20% tax rebate based on labor expenditures, and the Ontario Interactive Digital Media Tax Credit, which refunds another 30% of labor expenditures for small companies developing original content.

The Ontario government's Basarab estimates the province's R&D tax credits and other lucrative incentives can reduce content development costs by as much as 60%.

Mark Bishop, a co-founder and president of Toronto-based digital media shop Marblemedia, says subsidies from the Ontario government have been crucial to allowing his company to develop digital content that spins back to traditional TV platforms.

Bishop pointed to "This Is Emily Yeung," a preschool series that streamed online two months before its TV bow. "Viewers decided which episode would be the (TV) launch episode," he said.

Seed money from the Ontario government also was crucial to Trevor Fencott, president of Toronto-based Groove Media, branching out as a video game publisher to combining video games, skill gaming and e-commerce online.

A recent PricewaterhouseCoopers report on the Canadian interactive media industry estimated its total gross revenue at between $2.77 billion and $3.13 billion.

The national gaming and digital media industry is roughly divided into three centers, Quebec, Ontario and British Columbia, with Ontario dividing itself along an Ottawa-Toronto-Kitchen/Waterloo corridor.