How the feds help small game developers: tax credits and grants

Game developers can access both entertainment and R&D funding


Screengrab courtesy Magmic

Josh Ostrowalker says video game developers love government. And it’s not just because Magmic, the developer where he serves as chief technology officer, is based in the federal government’s company town. (That’s Ottawa, if it wasn’t clear.)

Last week, parliamentarians on the House of Commons’ heritage committee opened up a study on Canada’s entertainment software industry. They heard from representatives of three of the largest developers in Canada: Ubisoft, BioWare and Warner Brothers Games. Those are pretty big corporations, each with hundreds of employees. When MPs asked them about how they interact with government, the reps didn’t have a whole lot to say.

I wondered if small game developers might have a different perspective, and Magmic’s Ostrowalker certainly provided it.

Small game developers benefit hugely from generous tax credits and grants offered by both the feds and the province, Ostrowalker told me while we sat in the company’s boardroom in the ByWard Market. And game developers are lucky, he added, because they’re able to apply to two pools of funding: entertainment, and research and development.

Magmic accesses grants and tax credits offered by the Ontario Media Development Corporation. That covers the entertainment side of the equation. As for research and development, they also access tax credits offered by the  Canadian Scientific Research and Experimental Development Tax Incentive Program, better known as SRED, and the National Research Council’s Industrial Research Assistance Program (which, by the way, saw its funding doubled for 2012-2013 in Budget 2012).

“Being at the intersection of both entertainment and technology means we get to play with all of them,” said Ostrowalker. He said Magmic’s sales and marketing expenses are offset by OMDC grants and credits; its engineering, research and development costs are offset by SRED credits and IRAP grants.

“All told, we can recover a lot of our expenses,” he says.

Magmic’s staff numbers about 50. It launched in 2002, and doubled its staff every year until 2008. The recession that crippled the economy didn’t spare Magmic, but Ostrowalker says the company’s found a “sweet spot” in the years since, and is currently growing.

So, tax credits and grants help small game developers. What else can government do for them? I’m talking to a number of other small developers this week, so expect to hear more soon.

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How the feds help small game developers: tax credits and grants

  1. When I set up a custom red alert online game, it increases the # of crates avaiable so the whole thing turns into a crate hunt. I’m still left handicapping a game by myself with AIs. I’d like more Nectaris maps. The 4 player multiplayers were good, especially the canyon map. Again, need to handicap no air units, no bases with air units taken over, and the green computer is stuck in the north middle with only 9 units; his panther can’t cross the gravel to a road. You can edit some of the maps units in Japanese, but not the terrain. And you shouldn’t have to wait so long for the computer’s turn. And why not a King’s Gambit theme chess program? Only the best. Keep off the grass, 2500 credit, crates, 7 AIs, hard, tech level 6, no base defenses, (walls and fences fine), only one ore refinery and war factory on the map, no nukes or bombing….the computer ore trucks shouldn’t freeze up and the AI should go for crates a bit. And then our nuclear silos. And then AI will build machines that terminate us. Most of us. You guys for sure.

    • And Catan “Bug” map, the game is too short still and there is no ship-building. So you are left with all these sheep. I think 9 die hits or something is a good starting handicap with never a centre wild-die-hit town. You get the same card near the end. I guess it is an incentive not to card a victory….mmmbaa-haaa-ahhh.

    • If you play the Nectaris canyons, 4P map, with blue and let the computer go 1st, and don’t take any bases with air units, your only hope is to use Tukhachevsky’s strategy and bust a hole through to their artillary. The computer is trying the alternate Soviet school strategy of attrittion. Keeping the battles close to your base, but not close enough to experiance the brunt of artillery, you are in the position of the Soviets under Zhukov, except the unit totals are reversed and you are outgunned. (saving most succesful early moves is the only successful newbie strategy here).
      The games I like are my future basis for defeating any AIs that sneak through…and history of course.

  2. Blades of steel with 7 opponent skaters and no penalty shot?

  3. Am I wrong to assume that their business model is not profitable if they’re relying on the government “covering” most of their expenses?

    • Since when does “a lot” mean “most”.

      • It’s worth saying that a lot of these tax credits can take quite a bit of time to process, once the documentation’s been submitted (up to two years, in some cases). So even if these companies get money back, that doesn’t help them with current cash flow; in other words, they still need to make enough money to pay their bills while they wait.