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

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).

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"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.