By Jon Scarr
Canada's 2026 federal budget is out, on November 5th, and one thing caught me by surprise: Ottawa actually recognizes the country's video game industry as a global competitor. The catch is that the budget doesn't include the permanent $100 million a year in interactive digital media funding the Canadian Interactive Alliance asked for. Instead, it proposes broader research and investment measures that could benefit eligible Canadian game studios.
Ottawa specifically identifies Montréal and Vancouver as home to world-leading video game development clusters. Video games also appear alongside AI, robotics, and other industries in projections for global growth. It's encouraging recognition, but it doesn't come with a dedicated funding announcement or a National Video Game Strategy.
Canada already supports interactive digital media through the Canada Media Fund, which increased funding for the sector to $57 million for 2026–27. That commitment was in place before the federal budget and is separate from the permanent annual funding the Canadian Interactive Alliance requested.
Ottawa Recognizes Montréal and Vancouver's Game Development Strengths
Chart 18 is an interesting read. Video games are right there alongside AI software, robotics and semiconductors, with global revenue estimated at US$230 billion in 2022. The upper-end projection climbs to US$910 billion by 2040. Those are worldwide figures, though, not money Ottawa is setting aside for Canadian game studios.
Josh Logue, ESAC's Director of Policy and Government Relations, drew attention to the comparison. He also participated in September's Video Games on the Hill discussions about competitiveness, talent development, commercialization and safety.
In a post on LinkedIn, Logue pointed out that video games were being discussed alongside industries Ottawa considers important to future growth. Though, he didn't comment on the alliance's funding request.
No Dedicated $100 Million Funding Commitment Was Announced
Recognition wasn't the only thing the Canadian Interactive Alliance wanted from Ottawa. On September 4th, it asked for a permanent $100 million a year for interactive digital media. The proposal would use the Canada Media Fund and form part of Canadian Heritage's audiovisual-sector modernisation plans.
Budget 2026 doesn't announce that baseline. The broader cultural measures don't explicitly designate equivalent funding for interactive digital media. That isn't a formal rejection, but it leaves the alliance's request unanswered.
The alliance has also proposed a separate $2 billion Innovation Fund through Innovation, Science and Economic Development Canada. That proposal would support Canadian intellectual property and digital storytelling technologies. Ottawa didn't announce a commitment to that fund in this budget, either.
The Canada Media Fund Already Increased Interactive Media Funding
The Canada Media Fund increased its interactive digital media budget from $42 million to $57 million for 2026–27. Interactive Ontario announced the 36 per cent increase in April, following consultations involving the Canadian Interactive Alliance. That funding covers interactive work beyond video games. It predates Budget 2026 and isn't the permanent $100 million commitment the alliance sought.
In July, the Canada Media Fund announced that 10 commercial video game projects had received $8.85 million in production funding. Those awards were made through an existing Canada Media Fund program, months before Budget 2026.
The budget also refers to $600 million in immediate support for audio and audiovisual sectors, first announced on June 3rd. No dedicated video game allocation is identified within that figure.
Research and Investment Measures Could Benefit Eligible Game Studios
Game studios weren't given a new dedicated fund, but some could still benefit from the budget's wider tax measures. One proposal would extend Scientific Research and Experimental Development (SR&ED) incentives to certain commercialisation costs. Ottawa estimates $930 million in support over five years.
Qualifying intellectual property costs can include protection for copyrighted software developed through eligible SR&ED work. That doesn't make ordinary game production eligible by itself.
Another proposal, the Canada Growth Incentive, could provide capital-gains tax relief for eligible founders and investors. The exemption would apply to up to $15 million in qualifying gains, not grant funding for studio development. Announced in September, the Productivity Mega Deduction lets businesses immediately write off the full cost of a broader range of qualifying assets, although eligibility depends on the investment.
Canada Still Has No Announced National Video Game Strategy
The industry has also been calling for a national plan. CIAIC wants a National Interactive Digital Media Strategy covering video games, and ESAC president and CEO Paul Fogolin raised a separate National Video Game Strategy after September's Video Games on the Hill.
Neither strategy is announced in the budget. Existing development funds, provincial credits and export programs remain separate initiatives, not a new national plan.
ESAC's 2024 industry study found different challenges depending on a studio's size. Smaller companies identified access to funding and outside financing as concerns, while larger companies pointed to talent and lower demand.
I spoke with Stouffville-based EPX Games founder Emanouel Pontikakis earlier this month, and he told me why he decided to fund Night Whisper Lane: Anniversary Edition himself after exploring Ontario Creates and Canada Media Fund support. He'd like to see streamlined micro-grants of $5,000 to $10,000 to help independent developers cover costs such as software, development equipment and voice acting. Keeping ownership and creative control of his game was also important to him.
Toronto's Hilltop Studios has had a different experience. I recently spoke with studio director Scott Christian for an upcoming article. He told me the five-person team behind Curse of Resthaven received support from Ontario Creates and worked with publisher Digital Bandidos. Although he valued both relationships, he'd like to see more Canadian publishers and investment capital available to local developers, rather than studios having to look internationally for so many of those opportunities.
After talking with Emanouel and Scott, I keep coming back to how different the funding challenges are for Canadian developers. Seeing video games recognized alongside AI and robotics was a surprise. But recognition doesn't settle the questions the industry raised before the budget. I'll be watching to see whether Ottawa follows up with a decision on the $100 million request and a national strategy.
Jon Scarr
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