INDU Committee Report
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Mr. David Sweet Dear Mr. Sweet: On behalf of the Government of Canada, I would like to thank the Committee for undertaking its review of the Canadian Entertainment Software industry, and to express my appreciation to those witnesses who appeared before the Committee. I am pleased to receive the Committee’s recommendations, as well as to provide the Government’s response to the Committee’s Report. The Government supports the Committee’s recommendations on the Entertainment Software industry in Canada, as it is an important and innovative Canadian industry that makes significant contributions to the digital economy. The Committee’s report highlights a number of challenges and opportunities faced by this growing industry. Key elements identified by the Committee’s study focused on skills and training issues; fiscal competitiveness and access to early funding to support innovation and small and medium-sized enterprises (SMEs), creation and protection of domestic brands and original intellectual property; and new growth opportunities relating to global trends in the digital economy. The Committee’s examination of these issues and the release of its Report are particularly timely given that the Government recently released Digital Canada 150, a bold plan to ensure that Canada can be a world leader ina modern global digital economy. Digital Canada 150 is built on five pillars: Connecting Canadians; Protecting Canadians; Economic Opportunities; Digital Government; and Canadian Content. The strategy contains a number of initiatives to help pave the way to a more connected and digital country. This includes increasing access to broadband and the latest wireless technologies, modernizing privacy and copyright laws, providing businesses with access to resources and support to develop and adopt new digital technologies, and facilitating greater Canadian content online so that our stories can be heard and shared everywhere. Focusing on these key areas will yield real benefits for the Information and Communications Technologies sector as a whole, and the Entertainment Software industry in particular. Support for the Entertainment Software Industry The Government of Canada continues to support the Entertainment Software industry with project support through the Canada Media Fund (CMF). The CMF is the largest fund for TV and digital content production in Canada. Through the Canada Media Fund Corporation, a private-public partnership between the Government and Canada’s cable and satellite distributors, the Government contributed approximately $134 million of the $368 million budget for 2014-2015. The Government of Canada’s ongoing funding strengthens the CMF, providing continuity and ensuring that Canada stays at the forefront of a changing media world as digital technologies transform how Canadians access, create and consume content. Through the Experimental stream of the CMF, Canadian-owned Entertainment Software developers receive funding contributions which allow them to create new intellectual property and will in turn foster their long-term success in an increasingly global marketplace. The CMF also supports industry research and a variety of industry events like the Montréal International Games Summit, which promote the sharing of best practices, strengthen the entertainment software development community and prepare developers to expand to foreign markets. The CMF’s Experimental stream supports Canadian-owned, typically small- and medium-sized, companies in their development of content and applications for all digital media platforms. The Experimental stream provides support in three phases of a product’s lifecycle: development, production and marketing. Given the upfront costs and time required for the development of a new game, CMF support is often the key that enables a developer to create its own intellectual property, fostering long-term growth and sustainability. Skills and Training to Meet Labour Market Needs The Government of Canada is committed to ensuring that Canadian workers and young people obtain the skills and training required to meet employer demand for workers in key sectors, such as the Entertainment Software industry. The Government has been undertaking efforts on multiple fronts to ensure that employers have the skilled workers they need to grow and succeed. To this end, the Government is in the process of transforming the Labour Market Agreements with the Provinces and Territories, which expired on March 31st, 2014, to new six year Canada Job Fund Agreements and, as part of these new Agreements, will be introducing the Canada Job Grant beginning July 1, 2014. The Grant will be available to businesses with a plan to train Canadians for a new or better job, and has the potential to prepare employees for advancement to more senior levels in the software entertainment industry as well as develop the skill sets of workers in related industries for possible entry into the industry. The Government is also in the process of realigning training to better meet employers’ needs under Labour Market Development Agreements (LMDAs) and Labour Market Agreements for Persons with Disabilities (LMAPDs). In addition, the Youth Employment Strategy (YES), a $330 million per year program delivered by 11 federal departments and agencies, is the Government’s flagship program to help youth, aged 15-30, gain skills and work experience to transition in the labour market. A key component of YES is the Career Focus program, which helps post-secondary graduates transition to the labour market through paid internships. Through this program, $70 million was provided in Budget 2013 to support an additional 5,000 new paid internships. A further $40 million was provided in Budget 2014 to support up to 3,000 full-time internships in high demand fields, such as science, technology, engineering, and math, and $15 million annually to support up to 1,000 full-time internships for recent post-secondary graduates working with SMEs. These internships will be of interest to Canadian Entertainment Software companies as the majority fall within this category. Furthermore, the Government currently funds employment and internship opportunities for Canadian students, including the Mitacs Accelerate program which supports research internships for graduate students and post-doctoral fellows. Given that timely labour market information is integral to supporting Canadian workers and youth in participating in the labour market, the Government is strengthening the National Job Bank with enhanced labour market information and will be introducing a Job Matching service to facilitate the matching of employers’ needs with the skills of available workers. Through its Sectoral Initiatives Program, the Government also provides relevant and timely sectoral labour market intelligence, which helps employers, job-seekers, students, workers, and educational institutions respond to labour market pressures, thereby proactively addressing skills shortages and mismatches in the labour market. The Government is committed to ensuring that Canadians always have the first opportunity for all available jobs. However, because of the highly specialized nature of the skills required for this industry, access to the Temporary Foreign Worker Program may at times be required. Where no Canadians are available, bona fide employers who can demonstrate a genuine need for skilled workers will be able to access the program as a last and limited resort. A Strong Entrepreneurial Environment and Support to SMEs The Information Communications and Technologies sector is very dynamic, performing almost thirty percent of all private sector R&D in Canada. It is important to have the right fundamentals in place to create and grow firms and position them for competitive success. In terms of fiscal competitiveness, Canada has some of the lowest business costs among advanced industrial countries, due in large part to a highly competitive business tax system. In fact, Canada now has the lowest overall tax rate on new business investment in the G-7 thanks to the elimination of the federal capital tax, along with the elimination of provincial general capital taxes. Entertainment Software companies also benefit from the Scientific Research and Experimental Development Tax Incentive Program and various provincial digital media/animation tax credits. Our Government has taken a number of actions to promote firm growth and entrepreneurship. For example, this Government recognizes how critical venture capital is for Canada’s economic future. In January 2013, the Government announced the Venture Capital Action Plan (VCAP), a comprehensive strategy for deploying $400 million in new capital made available through Economic Action Plan 2012. The VCAP includes investing in a few high-performing venture capital funds, and establishing up to four private sector-led funds of funds in partnership with private sector investors and interested provinces which is expected to attract close to $1 billion in additional resources. In addition, the VCAP includes a commitment to additional measures to support the broader venture capital ecosystem, for example, $100 million was made available through Economic Action Plans 2013 and 2014 for the Canada Accelerator and Incubator Program to help accelerator and incubator organizations expand their services to entrepreneurs. Also, $100 million was committed from the Business Development Bank of Canada for strategic partnerships with business accelerators and co-investments in graduate firms. Significant progress has been made in implementing the VCAP. Of note, the Government announced in January 2014 the first closing of the Northleaf Venture Catalyst Fund with $217 million in commitments and a target fund size of $300 million, enabling investments in early-stage and mid-stage venture capital funds as well as directly in companies across Canada. The Government is continuing discussions with private sector lead investors and interested provinces, as well as potential private sector General Partners, with the goal of establishing three additional venture capital funds of funds. Our government has made significant investments to build a more innovative economy. We have doubled funding for the Industrial Research Assistance Program, created a Canadian Innovation Commercialization Program, and funded the Canadian Accelerator and Incubator Program, as mentioned earlier. These investments expand our Government’s overall support for early-stage firms and entrepreneurs, and promote a higher output of innovative SMEs that are investment-ready and able to develop into sustainable, high-growth businesses. We have also enhanced support to the Granting Councils for industry-academic partnerships and transformed the National Research Council to focus on providing solutions to challenges facing Canadian companies. The Government currently supports collaborative research through a number of avenues. The Networks of Centres of Excellence program funds GRAND (Graphics, Animation and New Media Canada) which is a research network comprised of 27 universities from across Canada with more than 60 industry, government and non-profit partners. GRAND has received $23.2 million for 2009-2014 and will be eligible to compete for renewal funding when its grant expires. The Centres of Excellence for Commercialization and Research program funds the Canadian Digital Media Network (CDMN) which aims to advance Canadian digital media innovation and commercialization on the world stage, promote Canadian companies, connect Canadian companies to sales opportunities, and leverage the resources of the Network for all Canadian firms. CDMN has received approximately $22.5 million for 2009-2019. The Natural Sciences and Engineering Research Council and the Social Sciences and Humanities Research Council also fund research relevant to video game development. Intellectual Property The Government recognizes that intellectual property protection is important to Canada’s Entertainment Software industry. Among the new copyright measures that came into force in November 2012 are new protections for technological measures, also known as “digital locks,” which are important to protect digital property and investment. Software producers, video game and movie distributors, for example, continue to use digital locks as part of their business model because they wish to protect the significant investment they make in developing products. The Copyright Act now includes provisions that prohibit circumventing digital locks, and dealing in anti-circumvention devices and services. The recently renewed Copyright Act also recognizes the significant harm caused by illegal file sharing. Copyright owners have the tools to bring civil action against those who enable online copyright infringement in addition to criminal sanctions. In addition, the Government introduced the Combating Counterfeit Products Act (Bill C-8) in 2013, to strengthen existing legislation governing civil, criminal and border enforcement of copyright and trade-mark rights. In particular, new border measures will strengthen the enforcement of copyright and trade-mark rights and curtail commercial activity involving infringing copies and counterfeit trade-marked goods. This will help protect the Entertainment Software industry from piracy and help companies protect their trade-marked brands. Furthermore, Economic Action Plan 2014 announced the modernizing of Canada’s intellectual property administration framework to better align it with international practices. Canada will join five widely recognized international intellectual property treaties that harmonize administrative procedures and facilitate obtaining intellectual property rights internationally. The necessary legislative changes to Canada’s Trade-marks Act to accede to three of the five international treaties have already been introduced in the House of Commons. These treaties will help Canadian businesses access international markets, lower costs and draw foreign investment to Canada, while reducing regulatory burden and red tape. As a result, Canadian Entertainment Software companies in Canada will be able to seek brand protection internationally through one application filed in Canada. Through a range of initiatives being undertaken in multiple federal departments and agencies, the Government has demonstrated its commitment to a growing and innovative digital economy and shares the Committee’s view that the Entertainment Software industry is, and must remain, a thriving industry that is a source of good jobs and an example of how Canadians can compete and win in a global digital economy. Sincerely,
The Honourable James Moore, P.C., M.P. |