With Canadian tech firms starving for talent, should Quebec be subsidizing Ubisoft’s labour costs?
Ubisoft Entertainment SA blitzed Quebec media at the end of the November. Yannis Mallat, who runs the French video-game maker’s sizeable Canadian operation, was so keen to talk to the press that his people even offered me an interview. I mostly write about central bankers and the last video game I played was NHL ’94.
So of course I accepted.
Ubisoft generated revenue of more than 1.7 billion euros in 2018, much of that thanks to its 3,000-person studio in Montreal, which is responsible for Assassin’s Creed, the company’s trademark game. The company also has offices in Quebec City and the Saguenay region and is considering adding a fourth studio somewhere in the province.
If current plans hold, it will have invested $9 billion in Quebec by 2027, helping turn Canada into a global leader in the production of video games. Next week, Ubisoft will host a three-day E-sports tournament at the Bell Centre, which should generate millions of dollars for the local economy.
“Ubisoft is a Quebec success story,” Mallat said in a speech hosted by the Montreal Metropolitan Chamber of Commerce last November.
Maybe too much so. The company might now be hurting the technology scene that it helped create.
Quebec generously subsidizes the labour costs of international multimedia companies that come to the province. That wasn’t a problem a couple of decades ago when the program began; the region was an economic basket case that needed all of the help it could get.
But now, Quebec is home to one of the stronger economies in the country. There isn’t enough talent to go around in Montreal and Quebec City, forcing ambitious executives to curb their expansion plans. And yet a portion of their contributions to the provincial treasury is being used to help companies such as Ubisoft claim precious resources.
It’s gotten tense.
Last year, four chief executives of up-and-coming tech firms — Louis Têtu of Coveo Solutions Inc., Eric Boyko of Stingray Group Inc., Dax Dasilva of Lightspeed POS Inc., and Fred Lalonde of Hopper Inc. — went public with their frustrations ahead of the Quebec election.
“In Quebec’s tech sector, we have been at full employment for a decade,” they said in an commentary published in the Globe and Mail on Sept. 19. “Despite this, government officials in Quebec and across Canada have been investing considerable amounts of time, energy and political capital into attracting multinational technology companies to Canada without any studies on the effect they have on the domestic tech ecosystem and our economy as a whole.”
So you see why Mallat might have wanted to get his voice out there. Quebec had just chosen a new premier, François Legault, who had spent a lot of time during the campaign talking about how he thought the province needed to generate more wealth.
In 2015, a major study of the province’s tax system recommended getting rid of various business sops so that the government could afford to cut the corporate income-tax rate. Ubisoft is popular, but a movement has begun to force it and other international media companies to stand on their own.
“This program is helping to make Quebec and Quebecers richer,” Mallat told me when he spoke after his speech at the chamber of commerce.
Ubisoft employs about 4,000 people in the province, and has trained 12,000 since it arrived two decades ago. Many of those people now are working for competitors or have started their own companies. “We are contributing to net growth in terms of the economy,” Mallat said. “When you [make] such a big investment, of course you want some guarantees.”
Legault has said nothing to indicate that Ubisoft’s subsidies are in danger. The reason to revisit the issue is that Quebecers will soon get to vote again along with the rest of the country. Justin Trudeau, the Prime Minister, also tends to get more excited by Big Tech than Canada’s local heroes. Like the bright young things who want to go to work for the international behemoths, he’s heard they’re cool.
But does Canada really need to pay them to come and hire people?
The Institut du Quebec, a think tank, said last week that Legault’s government should stop incentivizing more job creation because there are 100,000 unfilled positions in the province. Parts of Ontario and British Columbia are in similar positions. The emphasis on using policy to create jobs is a holdover from a time of relatively high unemployment. The jobless rate now is around a record low and it’s expected to stay there because of the aging population.
What Canada needs is stronger productivity, suggesting policy should focus on creating wealth, not jobs. But politicians like to be seen to be doing things.
Mallat told me that every province, with the exception of Saskatchewan, would be willing to give him money to hire game designers within their borders. Ubisoft officially opened a new studio in Winnipeg earlier this month. It also has offices in Toronto and Halifax.
“I think $9 billion of investment is better than nothing at all,” Mallat said when I asked about the criticism that companies like his treat Canada like a maquiladora. “It’s a false problem. These are the modern rules for doing business on this planet. We are making sure that we generate growth here for the economy. The figures talk.”
Mallat spoke on the same day that General Motors Co. announced that it was shutting its plant in Oshawa. Policy makers should keep that in mind. Ubisoft is a success story, but if the day comes when the gaming industry shrinks, the jobs in Canada will disappear and the royalties from all those games will flow to France. Politicians have been importing success for a long time. It’s time to focus policy on creating some.