An ICTC Overview

Overview | Spanning the Virtual Frontier

Canada’s Immersive Technology Ecosystem

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Study Scope

Spanning the Virtual Frontier: Canada’s Immersive Technology Ecosystem is a first-of-its-kind examination of Canada’s immersive technology ecosystem.

Through industry consultation and comprehensive data collection, this report provides a historic context for immersive technology development in Canada, its current state, workforce, requisite skills, and salaries.

The report also examines the following:

• Top immersive technology use cases across Canada’s industries and provinces
• Canadian companies and business models
• Sector challenges

Key Terms

Augmented Reality (AR): The overlay of digital information (in the form of words, images, video, and audio) on a real-world environment, displayed on tablets, mobile phones, wearables, including headsets.

Virtual Reality (VR): Complete user immersion in a computer-generated 3D environment, removing as much real-world sensory connection as possible. Visuals are displayed to users through VR headsets and head-mounted displays, including spatial audio, haptics, interactive controllers, and other hardware to intensify the experience.

Mixed Reality (MR): The integration of digital information into the user’s real-world environment to enable simultaneous interaction with both digital information and the real world.

Extended Reality (XR): Any immersive environment generated by a computer and displayed on mobile or wearable technology. XR is an umbrella term for AR, MR, and VR.

Photo by Lucrezia Carnelos on Unsplash

Study Context

Abridged timeline of immersive technology development:

• Late 1970s: groundwork development of computer graphics, light projection, cameras, and screens
• 1985: VR pioneers found VPL Research, the first company to sell VR headsets. The term “virtual reality” is coined two years later
• 1990: Boeing researcher coins the term “augmented reality”
• 1993: Sega announces a VR headset for its videogame console Sega Genesis
• 1997: Georgia Tech and Emory University use VR to treat PTSD in war veterans
• 2000–01: Open source development software enables interaction between real and virtual objects
• 2005: One of the first AR mobile apps (tennis game is created for a Nokia phone)
• 2008–09: First AR enhanced print ads feature digital components triggered by QR Codes
• 2014: Facebook acquires Oculus (providers of a VR gaming system with immersive, next-level hardware), spurring modern VR revolution
• 2017–19: Oculus and Google releases additional VR headsets and head mounted devices. Google, Magic Leap, Microsoft, and Varjo release new MR headsets. Headsets become smaller, cheaper, and more sophisticated.

General Study Findings

Canada’s Immersive Technology Ecosystem has more than 350 companies, predominantly in four main Canadian immersive technology hubs: Toronto, Vancouver, Montreal, and Alberta. Canada’s immersive industry is active in all forms of computer-altered and extended reality technology.

About 80% of Canada’s immersive technology companies operate in the following industries:

• National defence and first response
• Medical and pharmaceutical fields
• Real estate
• Manufacturing and heavy machinery
• Energy, mining, and other natural resources

Canada’s immersive technology industry is maturing. About 91% of companies in the industry are small to medium sized enterprises (SMEs).

• 98% are Canadian owned
• 83% of Canadian immersive SMEs have fewer than 26 employees
• 63% of companies have between 2 and 10

The predominance of small companies and startups makes the sector vulnerable to economic impacts of COVID-19.

Top challenges identified by interviewees for this study is sourcing domestic financing and adoption of VR, AR, and MR by Canadian companies.

Top Use Cases

Immersive technology is most valuable when it improves or replaces costly, time consuming, and/or dangerous processes or enables new processes that were once not feasible.

Immersive technology has a unique ability to communicate complex information within a 3D environment and with a high degree of user manipulation and is suitable for numerous applications, especially interactive digital media, advanced manufacturing, health and biotechnology, clean tech.

Example: Virtual Walk-Through

Manufacturers in automotive, aerospace and defence, and mining and energy sectors require regular transportation and storage of large, heavy machinery for sales, marketing, and training. Significant financial resources are dedicated to logistics.

• A heavy machinery company can show its products at a conference or office at minimal cost by using VR
• Businesses can provide customers a virtual, hands-on experience or training anywhere and anytime
• Virtual walkthroughs of distant work sites or real estate properties can expand potential markets to international customers
• Immersive technology enables tours/demonstrations of products and buildings not yet built

Canada’s Immersive Technology Industry

“Canada has some of the best XR companies in the world. We’re really punching above our weight class.” — CEO, AR Company

Total and Projected Value

In 2018, Canada’s 350+ immersive tech companies had a total value of approximately $0.6 billion, which is projected to grow to approximately $8 billion by 2022 (AR and MR will account for most of this growth).

• 56% of Canada’s total immersive tech companies are focused specifically on immersive technology
• 44% engage in a broader range of work (digital transformation, videogame development, marketing and advertising, etc.), including immersive technology

Provincial Comparisons

Consistent with other emerging technologies, the size and depth of provincial immersive tech ecosystems depend largely on size, population, and availability of skilled talent with key digital skills.

Canada’s largest provincial ecosystems — Ontario, British Columbia, Québec, and Alberta — now have academic programs dedicated to VR, MR, AR, and related programs in 3D design or game development.

Industry Maturity

Canada’s immersive technology ecosystem is showing signs of maturity.

• New company creation surged from 2013 to 2016, with a startup peak in 2016
• 14% of immersive tech companies have a second office in Canada or aboard

New company creation declined since 2016, with industry consolidation.

Company Size

SMEs dominate the Canadian immersive industry.

Company Expansion/International Companies

• Canadian immersive companies are mostly likely to open offices in the US, Asia, and the UK
• Foreign immersive companies mainly come from US (some from Asia, Europe, and the UK)

Business Models

Immersive tech industry is made up of service companies, product companies, and studios.

1. Service companies build custom ICT solutions at a billable rate

• Benefits of this model — upfront financing of solutions by clients
• Challenges — ability to scale outputs and finding new clients

2. Product companies create products typically across three categories: hardware and software tools (3D scanners, motion trackers, VR headsets, etc.); off-the-shelf immersive tech solutions (general training simulators, AR sports googles, remote work support tools, etc.); and creative content (video games, narrative and creative content, etc.)

• Benefits — greater ability to scale (once the product is built, minor additional costs are needed to find new customers)
• Challenges — finding financing to build the products (typically government funding, angel investors, private equity, and venture capital). Another challenge is creating products that are compatible with subsequent generation of headsets, wearables, and other devices
• Hybrid product/service companies offer both products and services — potentially a more stable business model.

Industry Patents

Since 2015, only 12% of immersive technology patents filed in Canada were filed by Canadian companies. The cost of securing patents can be difficult to justify as funding becomes scarce.

Sector Challenges

Immersive technology companies currently struggle to secure funding in Canada.

• Almost all interviewed companies obtain most of their funding from foreign investors (venture capital firms or angel investors from the United States). Foreign investment sources increases the cost of doing business for Canadian companies
• Interviewees cited risk aversion and lack of understanding of immersive technologies for inadequate Canadian investment
• Canadian investors expectations are often out of touch with industry realities

Canadian Marketplace

Immersive technology adoption in Canada is low.

• One-third of companies interviewed work almost exclusive with foreign clients
• Two-thirds of companies interviewed work with both foreign and Canadian clients
• Those with Canadian clients, work mainly with established companies and government organizations

Reasons for low uptake of immersive technology by Canadian companies include cost and poor understanding of XR use cases:

• “Immersive technology still isn’t cheap.” Costing anywhere between $250,000 to $500,000 for a custom-built immersive technology solution, several interviewees noted cost as a barrier
• “They haven’t been shown what’s possible.” Many companies are not aware of what immersive technology can do or understand its practical potential

Immersive Industry Skills/Learning Curve

Immersive technology companies currently have access to sufficient talent needed to grow their businesses.

A software development background with on-the-job training is a suitable fit for technical roles in AR and VR.

The current workforce is largely self-taught because many of academic XR programs are new (the oldest date back to only to 2017).

• Many immersive technology roles existed in other sectors in some capacity (Software Engineers, UX/ UI designers, and 3D Artists)
• The learning curve in transitioning to immersive tech is described as “relatively flat”
• UX or UI designers face a steeper learning curve, as do workers in the videogame and other entertainment-oriented industries when hired by enterprise-oriented companies

Gender Diversity

Gender imbalance is prevalent across the tech sector, especially for technical roles. Women account for 31.8% of the digital sector but only 20% of digital roles.

• Only 8% of Canadian immersive technology companies have female leaders (CEO, president, or executive director)
• 89% are male led
• 3% of companies are co-led by female-male duos

Working in Immersive Tech

Most immersive tech teams have a combination of Software Developers and Engineers, Product Managers, and System Architects on the development side; and Creative Directors, 3D Artists, and User Interface and Experience Designers (UI/UXI) on the design side.

• Increasingly, technical development teams will have a domain-specific technical advisor
• On average, two-thirds of jobs in an immersive technology company are technical and one-third are in sales, marketing, human resource, and business development
• Interviewees identified a fundamental need for business-related skills (e.g. pitching, fundraising, etc.), given the high number of startups and new companies in the space
• Ability and aptitude to learn were highlighted as important skills because of evolving nature of the business

Top Roles

An analysis of 1,070 unique Canadian job postings from 2017 to 2020 shows the following top six job titles across the immersive technology sector:

1. Software Engineer
2. User Interface Designer
3. Web Developer
4. Programmer
5. Animator
6. Graphic Designer

Salaries

Analysis of 112 job postings from 2017 to 2020 showed an average advertised salary of C$80,300 in the immersive technology sector

• Most frequent salary was between C$70,000 and C$95,000

In-Demand Skillsets

Interviewees highlighted the importance of university and college programs for developing new immersive technology talent.

• Programs in game development, software development, and computer engineering are important for technical development roles

Most common academic backgrounds in immersive technology (analysis of 100 companies in Canada’s immersive technology sector):

• Computer Science, Computer Engineer, and Software Development
• Followed by “Video Game Development, Animation, and Interactive Media and Graphic Design, Multimedia Design, and Visual Communications