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BC Video Game Industry September 18, 2012 Rick Griffiths Partner, Media & Technology Global entertainment and media market (US$ millions) Segment 1999 2005 2009 2016 27,407 137,582 228,060 493,390 5,316 25,758 60,558 188,069 N/A 141,885 185,901 290,596 101,254 146,170 148,560 254,745 Recorded music 35,247 34,525 26,372 25,274 Filmed entertainment 60,971 79,717 85,137 99,657 N/M 29,402 52,507 82,976 78,605 71,475 80,184 179,419 154,887 181,224 45,487 43,190 56,244 Internet access: wired and mobile Internet advertising: wired and mobile TV subscriptions and license fees TV advertising Video games Consumer magazine publishing Newspaper publishing Radio PwC Slide 2 Global internet access PwC 3 Video games globally Shift from console to online games PwC Slide 4 Video games in North America Online growth lagging Asia but climbing PwC Slide 5 Video games in Asia Online growth far exceeds console growth PwC Slide 6 Video game spending (US$ millions) 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 2007 2008 2009 2010 2011 Global console/PC games PwC 2012 2013 2014 2015 2016 Global online/wireless games Slide 7 Miscellaneous relevant video game industry data 2011 BC Quebec Ontario Total jobs 3,882 8,236 2,600 Companies 83 86 96 Console 86% 77% 62% (CES) Estimated Canada jobs data 1998 (PwC) 4,000 nk nk 2009 (PwC) 3,100 nk nk 2007 (CES) 52% 26% 16% 2011 (CES) 28% 53% 17% • Estimated company data BC PwC 1998 2011 2013 (PwC) 41 (CES) 83 (DigiBC) 90+ Slide 8 BC GDP 2008 GDP Employment GDP per employee Forestry and logging 2,027 17,300 117,168 Wood products 2,594 33,600 77,202 Oil and gas extraction 7,795 2,200 3,543,182 Mining 4,468 14,100 316,879 Retail trade 11,380 263,000 43,270 Tourism 7,068 131,400 53,790 High tech 10,508 85,580 122,786 3,039 171,109 Video games (PwC) 520 Source: BC Stats; millions of dollars PwC Slide 9 Canadian Digital media tax incentives BC Quebec Ontario Manitoba Nova Scotia 17.5% No 37.5% 50% 40% 100% 40% No 50% No 30% 150% 30% No - - - 500k - - Restrictions - - - - $500k or $15k per employee - Eligible Marketing & Distribution - - 40% up to 100k - - Qualified Direct Provincial Labour Expenditure Contract Labour included Maximum Credit PwC Prototyping & development 50% up to $100k PEI New Brunswick Slide 10 Observations since mid 90s • The big console studios built this industry but are under severe pressure • Small and mid size companies’ recent growth is significant – the landscape has diversified • Complementary digital media industry growth is strong (social media/VFX/animation) • We still grow companies to sell • Venture capital is thin but angel capital is robust • A united voice of the industry has been slow • Little political vision or leadership PwC Slide 11 To sum up • Global domination of the internet • Digitization of all entertainment & media • Maturation of console business • Explosion of mobile/social business • Small can compete with big and become big quickly • BC is no longer number 1 • Over-investment in high cost structures and console? • Poor political championing and competitive economic policy? • Vibrant community of world class talent PwC Slide 12 The Challenge Are we are at the end of the beginning or… • I am really proud of this industry • The industry has evolved radically and rapidly • But… digital production talent is now global • Lower cost structures are now vital to big studios • Companies can/will go anywhere – governments want this industry • But… we have come from nowhere to become a world class player • Spawned a vibrant ecosystem with little help • But… the ecosystem is creaking and we’re maybe losing our edge? • But… we are in the entertainment and media industry’s sweetest spot • Are we happy, or if not, what are we going to do about it? PwC Slide 13 © 2012 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.