Now in its fifth year, Toronto Canada’s XP Game Summit–a sister conference to the long-running Montreal International Game Summit–offered a unique opportunity to take the temperature of a Canadian games industry that, as in other regional industries, has found itself battered by the winds of change.
Despite doubling in size between 2013 and 2022, the industry has suffered recently due to what some have argued is an outsized emphasis on generous tax incentives slanted towards triple-A multinationals with little oversight or protection for workers. In recent years, this has meant the industry has seen seismic studio closures and layoffs, with Embracer group shutting down Onoma (once Square Enix Montreal) and Ubisoft closing Ubisoft Halifax shortly after the studio unionized (although the company claims there was no connection).
It’s no surprise then that at the XP Summit, attendees were bearish on the future of triple-A development in Canada. What might surprise some is that despite this, the mood at XP Game Summit was optimistic: couched in the recognition that the global games industry has changed drastically due to the “pandemic hangover.”
Jason Lepine, XP Summit’s founder, feels that within five years the summit has already seen it all.
“We launched right before massive layoffs hit the industry,” he said. “Now, though, it feels like we’re moving past that phase. Three years ago it was difficult just to get investors to attend events; now we’re seeing more contracts getting signed, more recruiting activity, and a general sense that momentum is coming back.”
Not recovery, transformation
However, he was quick to emphasize that this change did not represent “recovery” but “transformation.”
“It’s important to say: this isn’t a return to the old industry. It’s a new industry with a new identity.”
That identity? One that supports smaller teams able to move quickly to validate their own market potential.
Jason Della Rocca, co-founder of Excution Labs explained the new mindset required while giving his talk, “The New Timeline for Indie Success.”
“The reality is that publishers and investors are not your client,” he said, arguing against developers that retain a traditional focus on pitching to publishers. “Since [the COVID era] a lot of investors, a lot of publishers, are only making investments based on evidence. Deals these days are not done based only on that the team is cool and skilled and can deliver. Not only that the game feels good. But that you have wishlists, trailer views, a community.”
Of course, he admitted the paradox at the heart of this advice: you need evidence to get funding but you need funding to generate that evidence.
The XP Summit sessions had a particular focus on this, with a general theme that Canada’s new X factor was that—despite comparatively higher labor costs—smaller developers could rely on support systems such as the Canadian Media Fund to allow them to stretch their runway into a viable product before having to turn to more traditional forms of funding.
But this was not considered a silver bullet, with speakers such as Nordicity’s Kristian Roberts arguing in conversation with Game Developer that in order to maintain competitiveness, organizations such as the CMF needed to more deeply consider what it chooses to fund.
“Historically, CMF funding has focused on making products, not necessarily making commercially viable products,” he said. “That distinction matters. Post-2022, investment in games has dropped dramatically … If your support system isn’t designed to encourage market-oriented or audience-oriented decision-making, then you’re not necessarily generating sustainable success.”
There are increasing signs that the CMF are more focused on commercial viability. Their new Commercial Third Party Investment Fund provides funds to projects that already have third party investment under the understanding that this represents proof of market viability. Developers we spoke to however noted the fund seemed paradoxical at a show where third party investment was not merely considered difficult to get but far less attractive than self-publishing.
“The [funding] model’s broken, right? It’s broken,” said Shum Sing, Managing Director of Agnito Capital during the “State of Game Funding” roundtable. “Investors don’t want to take risks until you have demonstrable attraction, but at that stage, you’re asking the question ‘why do I need you?’ I could go get some bank debt… I could work with some smaller marketing agencies. There are all types of options available for indie developers to sidestep investment.”
From the developer perspective, there wasn’t a sense that it was quite that easy. Everyone Game Developer spoke to agreed that securing any form of funding was harder than ever, and that survival—even for indies—could mean cuts.
It comes down to burn rate,” Andrew Carvalho, co-founder of Laundry Bear argued. “The studios that have survived–including ours–are the ones that have stayed lean. We’ve had layoffs. We’ve had to reduce hours. We’ve made cuts wherever we’ve needed to.”
Community and collaboration are keys to the future
While government funding was a factor, developers expressed that community and collaboration was a major reason for the Canadian games industry’s continued survival.
As a co-developer, Carvalho stated that they had “more contracts with Canadian studios than we’ve had in the past four years,” noting that independent Canadian developers that had success were redistributing their success to others, such as Black Tabby Games, who recently got into publishing after the success of Slay The Princess.
“While some teams have been hit really hard, the teams that survived are often trying to support others,” he said. “It’s not ideal, but it’s definitely not as catastrophic as what we’re seeing in parts of the U.S.”
This collaborative view of the games industry is shared by Eileen Mary Holowka, at the show representing Baby Ghosts, a nonprofit created to support cooperative game developers.
“The old model of ‘build a game, get a publisher, scale endlessly’ just isn’t reliable anymore,” they said. “The giant studios are showing the limits of their own models. Ubisoft shutting down Halifax after unionization is obviously discouraging, but we’re seeing successful indie studios helping fund other indies,” they stated. “There’s power in collective organizing.”
Holowka also noted that the signs were encouraging for developers interested in operating as a cooperative, with the CMF now allowing cooperatives to apply for funding.
Such moves were viewed as part of a genuine shift from Canada’s support system to reflect the new development landscape, and while the majority opinion was that there was more Canada could do to support its games industry, attendees didn’t have a singular focus on access to funding.
“The easy answer is always ‘more money’,” said Carvalho, “Canada has the talent; what we’re missing is better industry connectivity. We shouldn’t always have to leave the country to build meaningful industry relationships.”
Lepine agreed. “There’s a real opportunity to strengthen the industry domestically by collaborating more closely with each other here at home.” As for those famous tax credits? “Tax credits still absolutely have a role,” said Roberts, who in particular pointed out New Zealand’s tax credit system as a model to emulate. “But we can’t rely on tax credits as the primary support mechanism forever.”
“We need to think about the total ecosystem more cohesively–not just funding, but trade missions, startup support, mentorship, education, and how we prepare developers for a world where self-publishing, audience development, and small teams are becoming the norm.”