"Watch this," Cord Smith tells the woman next to him, grinning broadly as he sharply turns his speeding car off the road, across a sidewalk and into the plaza in front of an office tower — and keeps going.

Smith accelerates, crashing through the glass entrance, sending a spray of glittering shards through the cavernous lobby as he speeds across the polished marble floor and through a vaulted archway. He smashes through the floor-to-ceiling windows on the far side of the building, skids across a public square and blasts up another street into a tunnel behind his racing rival.

"There he is!" Smith shouts over the din and presses a button to fire a rocket that slams into his opponent's car with a spectacular explosion that litters the road with chunks of metal and rubber debris.

He triumphantly crosses the finish line, and turns the car's controls over to Sarah, the woman next to him, for a run through Full Auto 2: Battlelines, a new video game that launched with Sony's PlayStation 3 on Nov. 17.

The scene borders on the surreal as Smith, director of product strategy for Pseudo Interactive, the Toronto independent studio that made Full Auto 2, guides Sarah through the game on display at Sony's PS3 launch party at an uptown Toronto nightclub while recording artist Wyclef Jean performs on stage before a roaring crowd.

It's familiar territory for Pseudo, which has earned a solid reputation in the video game industry for its ability to deliver a polished product on time — and in time for the launch of a new console.

The PlayStation 3 sequel to the original Full Auto, which was released on Valentine's Day for Microsoft's competing Xbox 360 console, took the 55-person studio about a year to complete — fast by industry standards.

The fact that the PS3's final specifications — and therefore the software development kits — were not finalized until midsummer underscores just how grand the accomplishment is.

It's akin to making a big-budget Hollywood feature while the cameras are still being invented.

Asked about the differences between making a game for a console under development versus working on a title for a completed system, Smith is diplomatic.

"We're looking forward to finding out what it's like to do one of those," he chuckles.

A wave of homegrown talent

Pseudo is part of a wave of Canadian companies and talent that have carved out a disproportionate share of success in the video games industry, leaving the country well represented in the current generation of console wars.

From software to hardware and every specialty in between, Canadians are helping to shape the future of the increasingly popular entertainment medium whose North American sales alone top $7 billion US annually, rivalling movie theatre box office receipts.

Much of the industry's success is built on the shoulders of Canadian talent, a key reason that businesses like California-based $3-billion industry giant Electronic Arts, Inc., French firm Ubisoft and Japanese company Koei have established major studios here over the years.

A quick scan of video games on store shelves will quickly yield dozens of bestselling titles made by EA and Ubisoft's Canadian studios, and Koei is set to launch its first made-in-Canada title, Fatal Inertia, for next-generation consoles, in the new year.

That may be part of the reason why government is starting to take notice. On Nov. 8, Telefilm Canada, a federal Crown corporation, announced its $2 million Great Canadian Video Game Competition, with the aim of developing the domestic industry.

Epic sales boom

It's something of a surprise for Mark Rein, who says that in the U.S. video game companies don't get any of the government support or incentives that the Quebec and B.C. governments offer companies like Ubisoft and EA.

But that doesn't bother the Aurora, Ont., native because, like Pseudo, he wants to succeed on his own merits.

The vice-president and founder of Epic Games, Inc., based in Raleigh, N.C., holds the keys to some of the most lucrative software in the games industry, upon which scores of games are built.

The latest version, the Unreal 3 engine, named after the bestselling series of action games for which it was created, is at the heart of Epic's newest title, Gears of War, which is exclusive to Microsoft's Xbox 360 console.

Launched the week of Nov. 5, the third-person science fiction action game has already sold more than one million copies, making it the fastest-selling title in 2006, outstripping Microsoft's blockbuster Halo series, and driving a surge of subscriptions to the company's Xbox Live online service.

Rein knows well the difficulties that can crop up when a software company develops a launch title for a new hardware platform, which is why he avoids making them.

"There are too many problems … because you're dealing with a system that's still in development, and things are constantly changing," he told CBC News Online. "That's why we don't do launch titles."

Rein says that when publishers and console makers push for his company to finish a game before his staff is satisfied with it, he has one answer for them: "You can have it right now or you can have it when it's right."

That often ends the debate, Rein says.

Message in a console

Back at the PlayStation 3 launch, Wyclef Jean has whipped the crowd into a fervour as Sarah, with coaching and encouragement from Pseudo's Cord Smith, goes head-to-head against a journalist on Full Auto 2.

"Look out, he's behind you!" Smith exclaims as blasts from a volley of missiles send her car spinning through a brick wall, showing off the power of the physics engine Pseudo has built into the game.

The pyrotechnic display is a far cry from the kinds of games and features one might find on Nintendo's new Wii console. Aimed at expanding the video games market to include people who don't or wouldn't normally play video games, the machine includes what company spokespeople refer to as "day-to-day" functions, such as the ability to send and receive e-mail.

Calgary, Alta.-based Zi Corp. is at the heart of the console's language functions, incorporating its predictive text input technology into the machine.

"We've been working with Nintendo for a while," Maydelin Nunez, the company's global marketing manager told CBC News Online.

Zi's eZiText software lets people use a standard numeric keypad, such as those found on a telephone — or in this case, the Wii's remote — to enter words and phrases into a text message. The software gives Wii users the ability to quickly type out messages in 58 languages, and learns the individual user's word preferences on a continuing basis, automatically customizing the individual experience.

Zi had previously worked with Nintendo, supplying the company with its Decuma handwriting recognition software for use in the handheld DS line of gaming devices.

Nunez says she thinks the inclusion of messaging functions in the Wii will broaden the console's appeal and is a logical course for the game maker to take.

"Because of the competitive nature of that industry, there's going to be pressure on all companies to make the best use of their consoles," she said. The natural outcome is for multiple functions — including non-gaming ones — to reside in one device, she added.

"That's a trend in everything, and the phone is just one example," she said. "There's more appeal when there's more features."

Software billions

Even so, one of the most important features of any console is the graphics, and Ontario-based ATI Technologies, Inc. has made the most of that necessity with the latest round of machines.

The company, based just north of Toronto in the city of Markham, established itself as such a major force in the video game industry that the world's No. 2 chipmaker, Advanced Micro Devices Inc. of Sunnyvale, Calif., bought the company in a $5.4 billion US cash and stock deal this year.

The maker of high-powered graphics processing chips is responsible for the visuals in the Wii, which employs current generation technology, and the amped-up next-generation graphics for the Xbox 360.

Despite the acquisition by AMD, the ATI brand won't disappear due to its popularity among gamers, spokesman Dave Erskine told CBC News Online.

The ATI logo can be found pressed into the case of every Wii rolling off the assembly line, and the company's presence in the Xbox 360 has led Microsoft to include the Canadian software technology in the next version of its own graphics software, he said.

"Microsoft asked us to design the graphics for the Xbox 360," Erskine said. The results spoke for themselves, prompting the world's largest software maker to incorporate the technology into its forthcoming DirectX 10 software, he added.

Much of the chip and software design work is done in Canada, something that will continue as AMD presses forward with its plans to grow, Erskine said.

Rapid expansion continues

The same goes for Pseudo, Cord Smith says.

The company has just moved into new studios to prepare for rapid growth as it tries to recruit the best and the brightest the country has to offer.

"We're growing fast and looking for more people all the time," he said, noting that the company has already begun work on its next project, a wholly owned original property that's still under wraps.

Asked whether the company will make a version of Full Auto 2 for the Xbox 360, Smith responds with a smile and a cryptic, "We'll see."

Meanwhile, Sarah has lost the match against her opponent — after defeating him in the four previous contests. She puts down the controller and strolls off into the crowd to enjoy the rest of the Wyclef Jean concert that has pulled the hundreds of gamers and industry professionals in the club away from the gleaming black consoles, if only for one night.

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