Video game business owners are uncertain about the future after the provincial government announced Thursday it will axe a tax credit used to cover salaries.

The previous NDP government introduced the Interactive Digital Media Tax Credit last year.

It covered 25 per cent of salaries and bonuses for staff, along with an additional five per cent for employees from diverse or under-represented backgrounds.

The current provincial government's budget, which was unveiled on Thursday, eliminated the tax credit.

"In contrast to targeted tax credits, the corporate tax rate reductions and enhanced CCA rates create a competitive environment for all industries to grow and succeed," reads the budget document.

Ontario, British Columbia, Manitoba, Quebec and Nova Scotia offer an incentive similar to the one terminated in Alberta.

Trent Oster, CEO of video game studio Beamdog, has a studio close to 50 employees and had planned to double the number of employees. Those plans will now need to be assessed after the tax credit was eliminated.

"I felt betrayed," Oster said.

"When the NDP announced after a long and slow consultation process with us that there was going to be an interactive digital media tax credit to level the playing field with a bunch of other provinces, which have honestly still superior tax credits, I was really hopeful," he said.

With more employees, the company was going to be able to expand its projects and game development.

"I think we're going to start looking at some other locations as well," Oster said. "We've got a lot of interest. We have a lot of excitement just coming off console launches of our titles."

Aaryn Flynn, general manager of Improbable North America, says the company is dedicated to keeping its office in Edmonton, but may have to invest elsewhere. (Travis McEwan/CBC)

Aaryn Flynn, general manager of game technology developer Improbable's North America branch, said the tax credit helped the company's Edmonton office startup this year.

"I'm disappointed. This was a program that we had relied upon as we grew from four people last summer to almost 70 here in Edmonton," said Flynn.

The termination won't lead to Improbable moving its office to another province, but will change how the company sees future investment, he said.

"We've made a commitment to build our game here, so that commitment isn't going to change," he said.

"I think the longer we go without a signal from this government as to how it wishes to support this industry, if at all and how it sees it fitting into its larger diversification plan, the more we will be looking to spend more money possibly elsewhere."

Last year, the province estimated more than 50 interactive digital media studios operated in the province, employing more than 500 full-time workers.

Company banking on tax credit

Calgary has also experienced growth in video game development. This year New World Interactive, a developer specializing in first-person shooter games, opened New World North.

A screen shot of shows a scene from Insurgecy: Sandstorm, a game developed by New World Interactive, who has a studio in Calgary. (New World Interactive)

The Denver, Colorado-based company had planned to apply for the tax credit, but the government wasn't taking applications at that point.

The company was banking on using that funding to recruit talent.

"That unfortunately doesn't exist currently in the Calgary marketplace in the type of engine that we use to build our games. Therefore, our process of bringing the right people in and growing the ecosystem here is slowed down substantially if not completely halted," said Keith Warner, New World Interactive president and CFO.

Banff hosting gaming conference

The timing of the tax credit termination comes right before video game developers and investors from around the world meet in Banff on Oct. 30 at Reboot Develop Red conference.

Warner will be giving two talks that focus on the future of gaming in Calgary and Alberta.

"I can guarantee this is going to be a hot topic," he said.

@Travismcewancbc

Travis.mcewan@cbc.ca