Australian Incentives Continue To Threaten NZ’s Interactive Video Games Sector

Aggressive Australian incentives to attract New Zealand’s digital video game developers across the Tasman are having an impact.

Earlier this month over 60 New Zealand digital game developers attended Melbourne International Games Week to exhibit products to customers, publishers and investors. Many also meet with Australian government agencies to discuss 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 coupled with 10-15% rebates in many states.

In a major coup for Australia, Victoria’s Minister for Creative Industries Steve Dimopoulos announced that Wellington games studio A44 Games will open an Australian headquarters in Melbourne. Victoria’s Minister for Economic Development Tim Pallas said: “We are supporting games studios like A44 to come to Victoria because it creates jobs, expands the capabilities of our local talent and enhances our culture of innovation.”

A44 Chief Executive Derek Bradley says that while A44 will continue to keep its team in Lower Hutt, the incentives mean it makes clear commercial sense for any new jobs to be created in Melbourne.
“Australia presents a huge opportunity for A44 and we're thrilled to announce our expansion to Melbourne. We feel incredibly welcomed and supported in Melbourne and we're looking forward to growing a team in Victoria.”

Chelsea Rapp, Chairperson of the New Zealand Game Developers Association (NZGDA), says A44 is not the only New Zealand business planning to expand, or even fully relocate, to Australia.

“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. 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 growth, and have had successes attracting investment. The shame is that promising New Zealand businesses may now create those jobs offshore rather than locally.”

The world’s largest games investor, Tencent Games, recently invested in Christchurch games studio Digital Confectioners, taking a minority stake for an undisclosed amount. Digital Confectioner’s latest release, Dread Hunger, reached number two on Steam’s Global PC Games Top Sellers list this year, selling 1.4 million copies within four months.

The investment means Digital Confectioners has a choice of whether to expand its team in Christchurch or offshore. Director James Tan says he would prefer to remain in New Zealand but, like others, is tempted by Australia’s offer.

“Our earlier successes got us a foot in the door. Then Dread Hunger really just proved what we’re capable of. It’s a huge step forward – allowing us to work on two new projects, as well as explore ways for the company to grow and evolve.”
Ms Rapp called on 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.

“But announcements must be made soon so the sector 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 sector already returns over $75 million in employment and income taxes, which would continue to grow if we can introduce a similar scheme here.
“It’s not too late, but time is running out.”

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