If there’s been one overarching theme in Vancouver’s video-game industry during the past couple of years, it’s been layoffs. As recently as the spring, Radical Entertainment and Slant Six Games shrank in size, adding to the stress of a sector that has suffered numerous job cuts and studio closures since the fall of 2008.

But that may be about to change. In the remainder of 2010 and early 2011, Vancouver developers are set to release some of the year’s biggest, and best, games. While these upcoming titles—from Blue Castle’s Dead Rising 2 to Rockstar Vancouver’s Max Payne 3, expected to land in 2011—were in production during the slump, the fact that they weren’t cancelled indicates that the local industry is rebounding strongly.

As always, EA Canada, the Burnaby studio of video-game giant Electronic Arts, is working on the latest iterations of EA Sports’ signature franchises. FIFA Soccer 11, NBA Elite 11, and NHL 11 will be released in September and October. EA Canada is also preparing the exercise game EA Sports Active 2 for a November 16 debut, and is crafting its next boxing game, Fight Night Champion, set for release in 2011.

But EA has shifted its business priorities to meet new market realities. Recent video-game sales figures indicate that a smaller number of titles are accounting for the lion’s share of revenues. That’s why, according to Pauline Moller, the Burnaby-based senior vice president and chief operating officer of EA Sports, the company has chosen to reduce the number of games it publishes, focusing instead on “fewer, bigger hits”. The industry has become a “hit-driven business”, Moller told the Georgia Straight by phone.

Also busy during the slowdown was Relic Entertainment, a THQ-owned studio in downtown Vancouver. In March, it released Dawn of War II: Chaos Rising, a game in the Warhammer 40000 franchise. In early 2011, two more titles in that series—Dawn of War II: Retribution and Space Marine—will ship. In September, the studio’s free massively multiplayer on-line game, Company of Heroes Online, will launch in North America.

General manager Jonathan Dowdes-well said by phone that Relic is the only THQ-owned developer that makes real-time strategy games, which is one reason his studio has been able to weather the storm of the past two years. He called Space Marine “the big, risky next move for us”, but reasoned that Relic’s portfolio makes it a “smarter play” to develop the game.

Not all studios have had the same amount of support. Independent developer Slant Six Games is rumoured to have had a project cancelled by a publishing partner.

Ken Rosman, Radical’s new studio head, noted that the developer’s February layoffs were a result of parent company Activision’s efforts to streamline its internal development into single-team studios. Previously, Radical had been working on two or three games at a time. The shift, Rosman said by phone, is part of an effort to “make better games”. Radical is working on a new project, but no details have been announced yet.

“Games are expensive, and consumers can’t afford to buy as many games anymore,” Rosman said, citing research conducted by Activision. But the publisher is “certainly a believer in the Lower Mainland as a viable development space”, he noted.

Activision is also working with Yaletown’s United Front Games on True Crime: Hong Kong for release early next year.

The Walt Disney Company is committed to B.C., according to Dan Tudge, vice president of Disney Interactive Studios and general manager of Vancouver’s Propaganda Games. Disney also owns Kelowna-based Club Penguin, a virtual world for kids, and in April launched the Pixar Canada animation studio in Gastown.

On the phone from his office, Tudge said that Propaganda has grown significantly in the past year because the studio has been working on games for two of Disney’s flagship properties. Tron: Evolution, featuring a story that bridges the 1982 and 2010 films, will be released in November, and Pirates of the Caribbean: Armada of the Damned, a role-playing game based on the first three films but possessing its own story line, will appear in early 2011.

According to Wil Mozell, general manager of BigPark, Microsoft is also bullish on Vancouver’s game-development prospects. BigPark, which is set to put out Kinect Joy Ride on November 4, became a division of Microsoft Game Studios in 2009. In an interview at BigPark’s downtown studio, Mozell said the city’s style is “all about showing results”.

“We want our results to be the thing that defines our purpose,” he said.

In addition to acquiring BigPark, Microsoft has enlisted Hanno Lemke, one of BigPark’s founders, to set up a second office to work on a new project. In a phone interview, Lemke said that Microsoft has been impressed with the products that have come out of Vancouver and is “committed to the talent that’s in the city”.

While the global economic downturn is an easy explanation for the woes of the Lower Mainland’s game-development scene, local industry leaders believe there’s more to the story.

Prior to 2008, Radical’s Rosman explained, Canada was a “hyperly competitive space” for game development because the exchange rate worked in Canada’s favour. That’s no longer the case.

EA’s Moller said the video-game industry’s slump was partly the result of a changing marketplace. “The thing that’s really driving the change in the industry is the digital transformation,” she said, referring to both the shift from the sale of packaged goods to digital distribution and the rise of on-line, social gaming.

For his part, BigPark’s Mozell suggested that in the past couple of years, there hasn’t been enough innovation in the local development scene. He warned that if “we don’t continue to move in an agile way to adapt to the industry” any recovery will be short-lived.

“I’m hoping the publishers will support the studios in Vancouver in wanting to have part of their business around innovation”¦around business models and consumer experiences,” Mozell said.

There is a firm consensus when it comes to the significance of the B.C. Interactive Digital Media Tax Credit, which was announced by the provincial government in February and took effect on September 1.

In an interview at his Yaletown studio, Joel DeYoung, director of game technology at Hothead Games, said that while there are still questions about how the new tax credit will work, “It was gratifying to have the provincial government acknowledge that this industry is important to B.C. We think it will really benefit the local industry and help support jobs here.”

Rosman maintained that the credit, which covers 17.5 percent of qualifying B.C. labour costs, will help Vancouver game developers stay competitive. He’s seen the strategic plan for the B.C. Interactive Task Force, a lobbying effort led by local game-industry leaders and credited with helping to bring about the tax incentive.

“If they can achieve what they’re after, I think it will only make the Lower Mainland even more viable,” Rosman said.

According to Mozell, Vancouver is still an expensive city to make games in, though, so he expects the government to “make sure that we’re continuing to evolve on that level”.

For that to happen, Moller insisted, the industry needs to take advantage of the new opportunity provided by the tax. That means bringing to B.C. projects that might have—before the tax credit—been produced in Quebec or Ontario.

Independent studios are also riding the shifting fortunes of Vancouver’s gaming industry.

Blue Castle Games, which has set up shop in Burnaby’s Still Creek industrial area, has been working on two games for Capcom. The downloadable Dead Rising: Case Zero was released on August 31, while Dead Rising 2 will hit the shelves on September 28.

General manager Robyn Wallace told the Straight she’s happy with the current size of the studio, at about 150 people. “We know everybody that works here,” she said in an interview at the studio.

Rob Barrett, Blue Castle’s president, noted that smaller operations are more agile. “We can make a decision on a dime and make it real,” Wallace added.

Not all products being developed in the Lower Mainland are big-budget, premier titles, referred to by the industry as triple-A games.

“A vibrant community is a diverse community,” Propaganda’s Tudge said, suggesting that future growth in the sector will come from a variety of companies working on a wide range of games.

This summer, Yaletown’s Hothead and Klei Entertainment released games developed for digital distribution on Xbox Live Arcade and the PlayStation Network.

Klei CEO Jamie Cheng revealed that his company nearly went under in 2009 after its sole client, Nexon Publishing North America, shut down. Nexon’s demise did force the closure of Vancouver’s Humanature Studio.

“Suddenly, we lost all cash flow in one month,” Cheng said by phone from his office. “It was zero.”

Instead of closing, “what we did was double down,” Cheng noted. Klei sank its remaining funds into creating the game Shank, which was published by Electronic Arts on August 24. Cheng said that his company is committed to creating original products and has something new in the works already. But he’s eschewing big-budget games, preferring to keep Klei focused on smaller, more modest projects like Shank.

Hothead also had difficulties starting at the end of 2008. The company was established in 2006, DeYoung said, because the “prospect of triple-A games is getting worse and worse. It’s already a hit-driven business, very risk-oriented.”¦So we decided to get involved in the indie-games scene, really focus on digital distribution, because we really felt that’s where it’s headed.”

But the industry’s transition to digital distribution has been slower than expected, and the economic malaise resulted in companies freezing product acquisitions.

“It seemed like everything went on pause for a while,” DeYoung said.

Things have eased somewhat of late. The company found a publisher for DeathSpank in EA, and will be releasing Swarm through Ignition Entertainment in early 2011.

Tudge says that even though Hothead and Klei are developing smaller games, the two epitomize the quality of work that the video-game industry associates with Vancouver studios.

“I think the Vancouver scene is evolving,” he explained. “I think Vancouver’s poised to become a high-quality centre, not just a development centre.”

Generally, the mood in the local game-development scene is optimistic. Cheng said that the games being released by Vancouver studios are all “executed really well” and that the scene overall is “leaner and meaner” than it was.

Both Rosman and Wallace believe that the sector in the Lower Mainland will be more restrained, and Moller spoke of how important the strong talent pool in the province will be to the recovery.

BigPark’s Mozell expects to see further growth.

“But it’s going to be far more pragmatic than it’s been in the past,” he suggested. “When you have five, six studios that are leading the charge to awesome, the money’s going to keep coming.”