It's been a devastating summer for the game industry in Vancouver, as major publishers closed studios there: Activision gutted Prototype developer Radical Entertainment, while Max Payne 3 studio Rockstar Vancouver up and relocated to an expanded facility near Toronto.

That's far from the extent of it: Ubisoft also closed its Vancouver office, while Capcom, Slant Six and Relic saw layoffs. This city, once such an active game development hub, is seeing massive challenges, and the threat of a talent drain to currently-thriving Montreal and Toronto, where attractive tax incentives are helping compound Vancouver's challenges.

"Back in the glory days of gaming, Vancouver was Canada's 'it town' where things were happening," says Shane Neville, who has spent 15 years in the city's game industry, with companies including Electronic Arts, before going indie. "People were moving here from all over Canada for jobs. With the oil jobs in Alberta and the incentives in Quebec and Ontario, things are going the other way now."

These factors, plus increasing challenges for so-called "mid-tier" console developers, have combined to leave an entire dev community high and dry, and many fear that a lack of government support alongside incredibly high real estate prices may constrain the flourishing of new small studios that usually follows layoffs at bigger ones.

Vancouver's Matt Toner is a game and transmedia industry veteran, professor at the city's Center for Digital Media, and founder of entertainment tech firm Zeros 2 Heroes Media. This year, he's emerged as an advocate for Vancouver's game industry -- and he's running for public office.

Toner says that at the core of the Vancouver industry's current crisis is the fact the government doesn't understand its needs, and just lobbying won't help within a complex bureaucracy. "One of us" is needed at the administrative level, he believes, and he also worries that the government doesn't have a plan to save Vancouver's interactive entertainment industry.

"Games are a big part of Vancouver's ecosystem for innovation," Toner tells Gamasutra, citing the city's history of diverse "screen-based" entertainment, which includes film, television, and mobile entertainment as well as games. Having also lived and worked in New York City, where a traditional triple-A industry has also struggled to take root, Toner says there are major parallels.

But New York has a plentitude of the three elements Toner views as essential to driving this industry: Clients, talent, and capital. "In Vancouver, we have a lot of talent. Clients, not so much, and capital is in short supply," he says.

"There are two things that result from that: New companies can't raise the money they need to really get going, so they flounder around, and more die than probably need to die," Toner says. "On the other hand, there are bigger companies that have been here -- EA has been an anchor locally -- but the next [size] level down, Rockstar, Radical, Nexon, Relic, Ubisoft Vancouver, have been rotting away pretty quickly."

The landscape of Vancouver has also been affected by the increasing shift in importance for the mobile and social spaces, a trend that's also seen mid-tier console games vacated. "These mid-size companies have been bought by U.S. companies, or other international companies, and what happens is you become a branch plant as opposed to being your own little shop... When you're being managed by a U.S. or a Japanese company, your fate is decided by a spreadsheet."

Meanwhile, more attractive tax schemes are making Montreal a lot more attractive for companies wanting to do business in Canada, with Toronto learning from its example and following suit. "[Ontario] gave Rockstar a sweetheart deal," says Toner of Rockstar's expansion in Toronto at the expense of the Vancouver facility.

Even the film and television arenas are starting to be outbid by other places eastward, says Toner. Vancouver's crediting scheme is under enormous pressure, he says -- it's only half of what's available elsewhere, but at the same time it's significant enough that the government wants to closely control where the money's going.

Toner also says the tax scheme is "queerly worded," and the net effect of all that is that small companies have a hard time actually accessing the money meant to be laid aside to help new interactive entertainment businesses break ground. If more resources were allocated to small businesses it'd be a good start in helping pull Vancouver back from the brink.