Quebec’s animation industry is in a decline following a change in the Canadian province’s animation and VFX tax credit regulations.

According to the Quebec Film and Television Council, there were 8,000 people employed in the province’s animation/VFX industry in 2022, and more than 4,000 of them have lost their jobs in the last 20 months.

The strikes in Hollywood last year certainly hurt. And then the Quebec government made a significant change to its animation and VFX tax credit this May, increasing the base rate of the credit from 20% to 25%, but capping eligible expenses at 65%. Before this adjustment, all eligible labor costs — including the costs of a contract with a service provider for VFX and animation — were covered.

Quebec VFX and animation studios sounded an alarm just before the new tax credit terms went into effect on May 31. Rodeo FX put out a release, supported by more than 20 studios, stating that the industry “is facing a major revenue loss and reduced competitiveness” because of this change.

The release also predicted that thousands of jobs would be at risk, and that Quebec talent would either move to other parts of Canada or to countries that provide better support for animation.

According to the International Alliance of Theatrical Stage Employees (IATSE), “on August 28, DNEG, a seven-time Academy Award-winning visual effects and animation studio, announced it would be making significant staffing changes in the next few weeks.” Currently, it’s unclear whether these anticipated job cuts represent a new round of cutbacks or are part of layoff talks the company reportedly initiated in May that are expected to result in a 5% worldwide staff reduction (affecting all offices, including those in London and Quebec).

But either way, IATSE attributes these upcoming layoffs directly to the tax credit change. “The consequences have already been devastating for the province,” said John Lewis, the union’s director of Canadian affairs. “We’re seeing a talent and economic bleed. Highly skilled workers are making plans to leave, and studios are closing their doors and relocating.”

The tax credit change may have also exacerbated a problem that Canada’s francophone animation industry has been facing for the past few years: there just isn’t enough supply or demand for its work.

On the broadcast side of things, TFO’s director of acquisitions and co-productions Marianne Lambert told Playback sister publication Kidscreen in May 2023 that the channel had seen a drop in the amount of French-language content being made, potentially driven by a combination of the pandemic, a lack of qualified workers and the rising cost of production. The Canadian Media Producers Association put out a report that same month stating that French-language kids and youth production had declined in 2021/2022.

“It is much more difficult for us to find content that has originally been created in French,” said Lambert. “Of course, our preference would be to buy original French content, but it’s hard to secure the rights as there is not much available and all francophone Canadian broadcasters need the content. So it’s competitive.”

A version of this story originally appeared in Kidscreen

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