NZ Video Games Industry Achieves Record Growth But Faces Mounting Aussie Threat

New Zealand’s digital video games industry boosted revenue by almost 50% to a record $407 million over the past year, employing more than 1000 people for the first time, but maintaining growth is proving challenging with several of the industry’s biggest studios considering moving to Australia to take advantage of tax incentives across the Tasman.

The 74 companies surveyed at 31 March 2022 had 1070 full-time employees, an increase of 101 or 10% on the previous year and more than double the 500 FTEs from five years ago. Total revenue of $407 million, compared with $276 million a year ago, reflects the industry’s high level of productivity and value-add.
NZ Game Developers Association Chairperson Chelsea Rapp said the industry is riding an unprecedented wave of success, and all other things being equal is heading to be a billion dollar industry by 2026, delivering high-value green jobs to New Zealand. But that potential success is creating its own problems. 
“Digital games are New Zealand’s single fastest growing export and one of our most productive sectors. These are exactly the type of jobs and businesses we want to grow in New Zealand,” said Ms Rapp.
Knowing how substantial the benefits are to an economy, Australian government agencies have been actively courting Kiwi companies, offering incentives to create jobs in Australia rather than locally. One of Australia’s flagship economic development initiatives is a 30% Digital Games Tax Offset which can be combined with additional 10-15% rebates in many states.
“Every $1 million of qualifying expenditure could see a $400,000 cash benefit to NZ companies that move resources to Australia rather than stay in New Zealand,” said Ms Rapp. “This is particularly attractive for startups and companies investing in growth, as every dollar goes so much further. 
“The competitive threat to the NZ games industry comes just when we were experiencing record growth, and have had success attracting investment. We’d expect nearly 300 new jobs to be created locally in the year ahead, but the shame is that promising New Zealand businesses may now create those jobs offshore.”
In October, the Victorian Government announced that Wellington games studio A44 Games – one of the biggest Kiwi studios – would open an Australian headquarters in Melbourne. While the company is maintaining its local operation, new job growth would be focused in Melbourne. Other NZ studios such as PikPok, RocketWerkz and, Metia Interactive are also considering growing across the Tasman rather than at home. 
The pressure to base further growth offshore is likely to intensify as the globally-renowned work of Kiwi studios continues to attract international attention. One example is the recent investment by the world’s largest games investor, Tencent Games, in Christchurch games studio Digital Confectioners. The investment means Digital Confectioners has a choice of whether to expand its team in Christchurch or offshore. Director James Tan said the company would prefer to remain in New Zealand but, like others, is tempted by Australia’s incentives.
Ms Rapp called for the New Zealand government to make urgent policy changes needed to retain and grow the sector here.
“We have provided the government with a pragmatic solution that would make a difference, asking it to implement a 30% Interactive Digital Media Grant here. This should be coupled with an Interactive Industry Development Programme to grow skills and startups, similar to the successful Centre of Digital Excellence (CODE) pilot in Dunedin.
“Announcements must be made soon so the industry can make business decisions knowing where the government stands. Our suggested solutions have an estimated cost of around $35 million to the taxpayer but the industry already returns nearly $100 million in employment and income taxes, which would continue to grow if we can introduce a similar scheme here.
“If we can keep this current growth trajectory going, there will be significant benefits to New Zealand, including significant creation of high-paying jobs with a low carbon footprint. That means the New Zealand government must take urgent action. If they do nothing, it will be a massive lost opportunity.”
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