NZ video game industry warns new Aussie tax breaks will lure studios, top talent across the Tasman

The fast-growing local video games industry warns there is a danger some of our top gaming studios could decamp to across the Tasman.

The warning comes after Scott Morrison’s government introduced a Digital Games Tax offset, allowing game developers to claim back 30 per cent of their expenditure on a game. That comes on top of a 10 per cent rebate already offered by most states.

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“There is most definitely a risk of both experienced developers and Kiwi studios relocating to Australia,” New Zealand Game Developers Association chairwoman Chelsea Rapp tells the Herald.

“Under this incentive scheme, Australian studios will be able to offer higher salaries, better benefits, and be more well-equipped to build their creative IP portfolios,” the NZGDA head says.

Investors could also follow, if our Government doesn’t move to offer video makers the same incentives it extends to movie makers.

Rapp says the situation was already tough after a number of hot Aussie game developers raising tens of millions through ASX listings.

“We already know of at least three New Zealand studios who have lost staff to Australia even before the announcement.”

“With the pressure of IPOs from Mighty Kingdom and Playside, and more aggressive hiring from Sledgehammer, we will start to see a slow drain of both experienced talent and investment from our industry.”

Now, “Australia’s introduction of a 30 to 40 per cent tax incentive for video games will halt the growth of New Zealand’s video games sector, which has been the fastest-growing part of our screen industry in recent years,” Rapp says.

It’s been barely a month since a high-profile NZDGA member, RocketWerkz chief executive Dean Hall complained bitterly about Amazon negotiating a 25 per cent rebate under the Government’s NZ Screen Production Grant programme for filing its $650m Lord of the Rings series in West Auckland – a higher-than-usual rate for an international production.

Hall said he didn’t want a chunk of the screen fund. Rather, he objected to the fact our Government was subsidising Amazon, and other international players shooting films in NZ, when they were competing head-to-head with the local game development industry for the same staff in key areas like visual effects.

If there had to be a screen subsidy, the up-and-coming game developers should get a share.

Lift buddies

The issue literally won’t go away for Hall.

From tomorrow, he will be literally be rubbing shoulders with Amazon as the US giant opens its new NZ office in the new PwC Tower at Commercial Bay – the same building where RocketWerkz recently took the top two floors for a “spacecraft” fitout (see video above).

$1b industry

The NZGDA says game development has become an industry generating $250b per year worldwide.

Our top studio, Grinding Gear Games, recently reported $113m revenue for its 2020 financial year – helping the total sector to a record $323.9m as lockdowns drove a boom in gaming.

Last year, then Economic Development Minister Phil Twyford said the gaming industry could hit $1 billion in annual revenue by 2025.

Today, Rapp was more downbeat, saying, “Our video game industry can’t access New Zealand’s own screen incentives, which is bad enough, but now with this competition from Australia, we’ll see a clear brain drain with investment following.”

Are you ready player one?

New Economic Development Minister Stuart Nash did not immediately respond to a Herald request for comment today.

Last month, after the Screen Product Grant barney, a spokesperson for his office said: “The Minister is open to hearing from the gaming sector with any proposal they may have for how this would work in practice.

“However, clearly there would be significant fiscal implications involved. The rising costs of both the International and Domestic Screen Production Grants would be a factor in any considerations.”

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