New Zealand In Danger Of Losing Its Gaming Sector to Australia by 2022

New Zealand’s gaming sector has become our fastest growing creative industry and digital exporter in recent years. Our interactive media sector earned $323.9 million in the year to 1 April 2020, an increase of $121 million in one year alone. But all this might be about to end with Australia seeing the potential and offering lucrative tax cuts to lure the industry over to their side of the ditch.

A 30 per cent refundable tax offset for eligible businesses that spend a minimum of $500,000 on qualifying Australian games expenditure will be available from 1 July 2022. This will be accessible by all Australian resident companies or foreign resident companies with a permanent establishment in Australia.

This tax cut is similiar to what New Zealand already offers to Hollywood productions, an industry that is actually dwarfed by the total value of the gaming industry. In 2019 the global entertainment industry celebrated the market topping over $100 billion in value, less than half of the interactive entertainment industry which is worth over $250 billion annually. Heaven forbid cinemas close and ruin everything.

“Film productions often leave town when they are finished, whereas a game studio is far more likely to remain in New Zealand, contributing to the local economy and helping to build lasting skills and communities,” says Chelsea Rapp, chairperson of the NZGDA. The New Zealand Game Developers Survey 2020 found that the industry employed 747 full time creative technologists, and expected a projected 9% growth. This has been done without the need to squash a decade of collective bargaining rights.

“While New Zealand has an incredibly talented and globally successful games industry, we can’t compete when you could get a 40% discount to relocate to Australia,” says Rapp, “Any chance we had of attracting overseas studios to set up shop in New Zealand ends in 2022, and some New Zealand studios are already looking at expanding into Australia instead of expanding locally.”

The NZGDA has already lobbied for years that the New Zealand Screen Production Grant should be opened up to include interactive entertainment. However it appears the slow pace on the part of the government could cost New Zealand’s growth in this area now that Australia is beginning to offer lucrative incentives of its own. Currently the government is working on a Digital Technologies Industry transformation plan which could be used as the vehicle for change.

“This is not speculation, studios and investors are already huddling today about a shift to Australia, in order to be more competitive,” says John McRae, VP of the New Zealand E-sports Federation.  “Kiwi jobs have unfortunately been lost to inertia. Given the times, our Government should be seeking to accelerate the industry, not handicap it.”

“I fear if this incentive is not met or better, we will see a hollowing out of the gaming and e-sports industry in New Zealand. That will hamper innovation and job creation in related sectors including defence, medical tech, education technology and film.”

“Australia’s tax breaks have proposed a huge problem for game development studios in New Zealand,” Ben Carnall, Tech Lead from Rocketwerkz told M2. “We are already in a tight battle for good talent and valuable clients, now Australian companies can provide very competitive salaries whilst maintaining the bottom line cost for their clients. New Zealand has a gaming sector that is economically superior to our Trans-Tasman cousins and a part of me wonders if this tax incentive is some what driven by our success. If Australia is taking NZ game development seriously, why aren’t we?”

Earlier in 2020 we saw the industries resilience and actual growth during the pandemic and several lockdowns. Consumers all over the globe had nothing to do but hang out at home and play games, giving the industry a huge boom.

 

“The games industry has proven itself particularly resilient during the Covid-19 pandemic, both here in New Zealand and around the world,” said Rapp in 2020. “We are uniquely positioned to contribute to our economic recovery with weightless digital exports, but that growth will depend heavily on our ability to support young and emerging enterprises.”

A 2018 report by the Australian based Interactive Games & Entertainment Association (IGEA) noted its own slow growth compared to New Zealand, and the steps it needed to take to catch up.

“The size of our industry has not reached anywhere near its potential and was outpaced by even the New Zealand game development industry, which generated AUD $131 million in the 12 months to March 2018 and has grown 43 per cent since the preceding year. However, it is not too late and with the right support, an Australian game development industry can become a powerhouse of the economy.”

Included in the list of recommendations is the exact recommendation that is now being implemented, followed by this justification: “…it will draw global game developers to work or base in Australia, potentially setting up studios with hundreds of jobs each and bringing over projects worth tens of millions in expenditure, if not more.”

“If we don’t support our industry, we will continue to lose an entire generation of talented Australians to grateful studios in the US, Europe, the UK and Canada.”

It now appears NZ could be on the backfoot itself. In a time when dairy industry heavy hitters like A2 are taking a hammering, it’s important now more than ever that NZ continues to diversify its business prospects on the world stage.

 

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