The start of the year was pretty disastrous as Riot Games (530 people), Microsoft Gaming (1900 people), Sony (900 people) and Electronic Arts (670 people) all laid off hundreds of employees. In Quebec, it is estimated to have lost between 500 and 600 jobs out of 15,000 since the start of 2023. Eidos-Montreal laid off around 100 people on January 29 while 42 positions were eliminated at Beenox in Quebec a few days later. Recently, it was the turn of Behavior Interactive, creator of Dead by Daylight, to throw out around a hundred employees. Avalanche Studios also closed its Montreal location.
For Jean-Jacques Hermans, general director of the Quebec Video Game Guild, this wave of layoffs certainly hits hard, but is not a surprise for the industry.
“There has been big growth during the pandemic. There were a lot of players and a lot of money available. There are studios that have grown too quickly. Everyone expected a plateau. Did we expect this magnitude? Probably not, but there was less impact in Quebec, because I believe the industry was better controlled.”
Additionally, with around 1,000 games launching on Steam each month, competition is too fierce to support so many studios according to Mr. Hermans. And it’s especially the little ones who suffer.
“There is a craze for independent studios all over the world with all kinds of economic incentives,” he says. It has become extremely complicated for studios to stand out. So I think it’s normal to see a restructuring. We got too big, too fast.”
The famous tax credits
Another dark cloud on the horizon for the industry in Quebec, tax credits will become much less attractive, according to the Guild, from January 1, 2025. From now on, the first $18,000 in remuneration will no longer be part of the calculation. for obtaining credits. In return, the capping of this measure, previously at $100,000, was set aside. These measures were put forward by the government in the last budget to refocus tax assistance on highly specialized and well-paid jobs.
However, according to the Guild, these measures do not achieve the desired target while 80% of studios in Quebec have 50 employees or less.
“There is no $100,000 salary in these companies,” explains Mr. Hermans. Uncapping gives them zero. The average salary in these companies is around $60,000 or $65,000. The overall industry average in Quebec is $88,000, but that includes big salaries in big companies.”
Jean-Jacques Hermans, general director of the Quebec Video Game Guild (Provided)
The Guild commissioned an impact study with PricewaterhouseCoopers. It was shared with the government a few weeks ago in a meeting between the Ministers of Finance and the Economy.
“In summary, small studios lose between 45% and 68% of their tax credits over a three-year period,” says Mr. Hermans. For medium-sized structures, it varies from 30% to 50% while large companies are hit between 5% and 16%. What the government has been told is that it is hitting businesses that it probably doesn’t want to hit.”
Mr. Hermans is clear; if the changes pass as they are in a few months, the industry is heading towards decline in the province.
“We are not innocent either, we understand the economic reality and we understand that there are 11 billion deficits. We also understand that we are in full employment. But credits are no longer used to create jobs, they are used to remain competitive with the world. We are a mature industry, it’s true, but now that everyone has copied this model across the planet, how do we stay competitive with Saudi Arabia, Kuwait, France or Ontario who now have stronger economic incentives than us?
The Guild will continue its representations to government authorities.
“We are not under the illusion of thinking that the government would suddenly be ready to make accommodations in video games when it has not wanted to make any in other industries, but we are doing our part. work, summarizes Mr. Hermans. Perhaps we are able to put in place ways to finance studios differently than with tax credits with other ministries?
