The Ubisoft Montreal studio, housed in an old textile building, sits at the epicentre of the rejuvenated Mile End section of the city. More than 1,800 people work in the building. (Courtesy Ubisoft)

For much of its history, the Mile End district of Montreal hasn't exactly been considered the nicest part of the city. The neighbourhood, just north of Mont Royal on the mountain's plateau, was known for its cheap rents and the squalor they often invited.

Not long ago, buildings were crumbling, the streets looked shoddy and businesses stayed away. Longtime residents considered the area a wasteland.

Over the past decade, though, things have changed. Mile End is now gentrified, condos have taken over, shops have moved upscale and rents have gone up, making it one of the more desirable parts of the city to live in. The area used to be home to low-income artists and immigrants, but it's now the place to be for Montreal's young, well-paid professionals.

At the epicentre of this transformation, in an old four-story textile building on the corner of Boulevard St. Laurent and Rue Saint Viateur, is Ubisoft Montreal, the main Canadian arm of the Paris-based video game publisher.

The floorboards creak as you walk on them, but make no mistake — the building houses cutting-edge technology that has been used to create such hit games as Assassin's Creed and Splinter Cell.

Since its founding in 1997, the studio has driven the area's revitalization by employing a steadily growing number of designers, engineers and artists, many of whom moved into Mile End and parked their big salaries there.

"Thirteen years ago, Mile End was just emptiness," says Alain Tascan, a co-founder of the studio who is now vice-president and general manager of Ubisoft Montreal's main rival, EA Montreal. "If you visit the place now, it's so vivid, so lively."

While many industries measure their contribution to the economy in numbers such as total jobs or revenue generated, the impact of video games goes deeper.

Number three globally

In strictly numerical terms, the industry employs 14,000 people in this country, good enough to rank Canada third in the world, behind Japan and the United States, and just ahead of the United Kingdom.

The total number of workers isn't nearly as high as other big industries, such as aerospace with 82,000 or manufacturing with 1.7 million, but just about all the employees in the video game business are highly skilled and well paid, says Industry Minister Tony Clement, which isn't necessarily the case with their counterparts in other major employers.

"This is an area where Canada is competing in the top rung as an industry," he says. "It's clearly something we want to be a player in."

The Entertainment Software Association of Canada, the industry's lobby group, says video game publishers in Canada generate about $2 billion a year in revenue, and they pump about $1.7 billion of that back into the economy.

Indirectly, the industry spurs jobs and economic activity in related fields, such as special effects production, music and animation.

Video game makers also spend research and development dollars on new technologies that spin out beyond the industry, such as the sort of vibration technology first found in game controllers and now used in cellphones and robotic limbs.

"It contributes to the virtuous circle," Clement says. "The skills that are available for developers in gaming are potentially of use in the auto or aerospace sectors and other [information technology] sectors as well. There's really no downside."

The industry's deeper impact, however, comes from how it transforms — for the better — the places it touches. The average salary in the industry is $68,000 and the average age is 32, according to ESAC. Combine those factors and you have a lot of big spenders.

"People in the games industry are heavy consumers. They love the gadgets and electronics, they love getting the latest TVs," says Dan Sochan, a video game producer at Vancouver's United Front Games. "We generally work a lot of long hours so we have a lot of meals out. They become very active in their neighbourhoods, [leading to] restaurants and pubs."

At Ubisoft, the average income is even higher at $73,000, according to Nathalie Verge, the company's senior adviser of corporate affairs.

"That makes for nicer homes, nicer cars and all that," she says. "That has a big impact on life in Montreal."

For Montreal, Ubisoft was only the tip of the iceberg. The studio's growth — it now employs 1,800 people — helped generate an ecosystem, with software and sound companies springing up and local schools, including Concordia and McGill, developing design courses to feed the industry.

That, in turn, has attracted other big international studios, such as California's EA, which set up shop in 2004, and London-based Eidos Interactive, which opened in 2007.

Montreal has rapidly developed into an international hotspot for video game development, and more new studios are on the way. THQ and Warner Brothers Interactive Entertainment, also based in California, are both launching Montreal studios this year, and the employment numbers are expected to continue to grow.

Marc Garneau, the federal Liberal technology critic and MP for Westmount-Ville Marie, says the video game industry's revitalizing effect has spread well beyond Mile End. His downtown riding, which includes old Montreal, has seen similar growth of condos and high-end shops.

"[Video game designers] don't want to live in suburbia, they want to live downtown where the action is. That has fallout in terms of what happens in neighbourhoods," he says. "It's kind of exciting. It makes the place that much more fun to live in."

Vancouver another hotspot

The same situation has evolved in Vancouver, Canada's other major game development hotspot. The development of the city's game-developer ecosystem actually predates Montreal's by several years, with the opening of EA's studio in Burnaby in 1991.

As in Montreal, local schools including Simon Fraser and the University of British Columbia developed design programs to feed EA, which in turn resulted in numerous smaller spinoff companies. Some of those startups, such as Relic Entertainment and Barking Dog, went on to be acquired by big multinationals such as THQ and New York-based Rockstar Games.

Bernie Magnan, chief economist at the Vancouver Board of Trade, says that just as in Montreal, the video game industry is largely responsible for revitalizing parts of the city. Areas such as Yaletown used to only house businesses, but now there's a mix of residential and offices, which has ballooned the downtown population to more than 110,000 from 40,000.

"That blend and old Yaletown, where several of the studios are located, is something that seems to work for people who are in that industry," says Magnan, who used to work for a company that supplied computer servers to video game companies.

The revitalizing effect is precisely what the respective provincial governments of Quebec and British Columbia were aiming for when they lured the international studios with hefty tax incentives — an issue covered in a separate story in the Pushing Buttons series.

Ontario has noticed and is attempting to get its share of the action. With 1,300 workers in video game design it is already the third biggest in the sector, yet it is still wooing studios. Last year the province awarded $263 million in tax credits to Ubisoft to come to Toronto.

The studio opened in January in an old CGE industrial factory near the Junction neighborhood, a part of Toronto that — like Mile End — has a reputation as something of a wasteland.

The building, which is still being renovated, is cavernous on the inside right now — Ubisoft's 40 current employees fill only a small corner of the giant space. But with plans to ramp up to 800 workers in the next 10 years, the building will soon be as bustling as its counterpart in Montreal.

A condo development has already sprouted up directly across the street from the studio, with units starting at about $600,000. The project, when completed, will strike a big contrast to the dollar stores and fast-food joints the area is known for.

All of the revitalization effects have come during massive growth by the industry. Up until the recent recession, studios around the world were seeing explosive growth as the market for video games kept growing. In Canada alone, employment grew 23 per cent between 2006 and 2009, according to ESAC.

The question when it comes to Canada's future as a force in video game design, is can the growth — and therefore the effects — be sustained? So far, most of the economic benefits of video games in Canada have been delivered by large foreign players. The development of domestic powerhouse competitors to companies like Ubisoft and EA, observers say, is the key to ensuring that continued growth.

Most are optimistic that it will eventually happen. The big international studios have resulted in numerous successful smaller Canadian-owned spinoffs, such as Vancouver's United Front and Silicon Knights, based St. Catharines, Ont.

All it takes for such companies to get on the radar of venture capital investors is one big hit game, such as United Front's ModNation Racers or Eternal Darkness by Silicon Knights.

EA's Tascan, who is originally from France, believes Canada is well on its way to developing its own successful game community.

"Los Angeles didn't create the movie business in 10, 15, 20 years. I don't think it'll take us as long, but we need more time for the universities [to develop] to have a whole pipeline," he says. "We're just starting to see a few of them doing it, but we need even more."

United Front's Sochan says that while there is great temptation for smaller companies to sell out to bigger ones, many are growing more confident in their abilities. Some independent studios are also refusing to give up their artistic freedom, which can often be compromised when they're taken over by a bigger player.

"More studios are trying to be a little more independent," he says.

Clement says the federal government is trying to help things along by luring U.S. venture capital investors to Canada through tax cuts, and with new grants being offered by the Business Development Bank of Canada.

"What we have to do through our policies is to encourage start-ups to be properly capitalized," he says. "All these things are working, we just have to do more of it."