Chelsea Rapp, Chairperson, NZ Game Developers Association
Over the last few months the NZGDA has been talking with the Government to respond to aggressive Australian incentives, which threaten to halt the growth of NZ’s interactive screen and game development sector, and to introduce an industry development plan.
We’ve met with Hon Dr David Clark, Minister for the Digital Economy, several times now as well as officials, other MPs and Ministers. We’ve proposed:
- funding a nationwide Interactive Industry Development Programme, and
- a new 30% gaming and interactive digital media rebate to level the playing field with Australia’s 40% rebate, but
- if a rebate is not possible quickly, then make interactive media eligible for the existing Post Digital & Visual Effects Grant, part of the NZ Screen Production Grant (NZSPG).
We’ve been talking with the Government and the sector for many years but, with the Australian incentives being eligible from 1 July 2022, action is now urgent.
Separately, we have already laid the groundwork via the Government’s upcoming Digital Technologies Industry Transformation Plan, which identifies interactive media as an export growth sector for New Zealand. This is separate again from the Government’s current review of investment in the Screen Sector. The NZGDA will participate in that and strongly supports continued investment in programmes such as the NZ Screen Production Grant. The role the NZSPG has had in establishing New Zealand’s reputation for excellence in filmmaking cannot be overstated, and our proposed rebate for interactive media is partly inspired by the success of the NZSPG as well as best practices from interactive rebates in Australia and overseas. However, we need a fast response from the Government separate from these reviews.
Our long term vision is for a comprehensive industry plan that supports pathways from study to employment to creating indie teams to growing larger studios to serious and cultural games.
Globally many countries offer screen incentive programmes, which have been demonstrated consistently to generate jobs and economic growth. In New Zealand our Screen Production Grant has helped grow a world-leading film industry worth over $3.5 billion annually.
A similar situation exists for the interactive media and video games sector. Our Interactive Aotearoa report identified over 20 similar schemes for video games with 25 – 40% rebates around the world, such as in Canada and the United Kingdom.
What has changed is that these incentives are now next door in Australia – a shared labour market with New Zealand.
Industry surveys make it clear that with borders opening, and incentives only available in Australia, that jobs will flow one-way to Australia. In 2021, New Zealand employed 969 professional game developers while there were only 1327 in all of Australia. We already are seeing aggressive recruiting of New Zealand game developers, often experienced team leads who we need to train others and develop skills.
Australian Incentives make New Zealand Uncompetitive
In last year’s budget the Australian Government announced a Digital Games Tax Offset of 30% with an eligibility date from 1 July 2022. This is on top of a 10-15% rebate from several Australian 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.
While New Zealand studios absolutely want to retain the talented people we already work with, the reality is that those businesses simply cannot compete with the offer of a 40% discount to relocate to Australia. The imbalance makes it more attractive for New Zealand-run and founded studios to create any new jobs in Australia rather than at home. Several NZGDA member studios have already begun or investigated this process.
Increasing Productivity and Diversifying our Economy
The investment Australia is making demonstrates the potential the interactive and games industry has. It earns over $250 billion annually and in New Zealand we earn exports of over $300m each year from digital games.
The interactive media sector has been one of the New Zealand economy’s rising stars. It is high-tech, fast-growing, clean, green and pays high-wage salaries. These are exactly the type of jobs we need to grow and diversify New Zealand’s economy, but Australia could benefit from them instead if we don’t act now.
On average, each job in the New Zealand games industry generates over $285,000 of economic activity, making it one of our most productive sectors. With a rebate in place and industry development, the industry expects to create 300 new high-tech jobs by 2025.
The rationale for Government intervention is to ensure a level competitive playing field to protect one of our most productive and previously fast-growing sectors.
Screen Sector Review
Separately, the Government is currently doing a review of investment in the screen sector. Funding video games and interactive media is not part of this review, although considering the increasing cross-overs and common skills between film, TV and interactive is.
Film and TV productions are increasingly adopting virtual production and real-time graphics technologies pioneered by the games sector; and gaming borrows heavily from film script, audio and production disciplines. For instance, following NZGDC22 we had an incredibly successful Convergence Day that brought together creatives working with emerging technologies across the video game and screen industries in Aotearoa, especially virtual production and real-time CGI as well as storytelling.
The NZGDA’s preferred solution is a separate rebate for interactive media but if this can’t be implemented quickly then joining the existing Post Digital & Visual (PDV) Effects Grant, part of the NZ Screen Production Grant, should be considered. Many of the activities eligible for PDV rebates are the same as in game development, such as computer graphics and animation. However, game productions are more likely to be ongoing over many years rather than discrete productions.
Digital Technologies Industry Transformation Plan (ITP)
The Government has already considered, but not implemented, similar proposals in its draft Digital Technology Industry Transformation Plan (ITP), which now need to be fast-tracked.
Earlier this year, many NZGDA members made submissions on the draft ITP, which has set the scene well. The draft ITP singles out Interactive Media and Software-as-a-Service as two sectors with economic and export growth potential for the plan and NZ Trade & Enterprise to support.
One of our proposals, for an Interactive Industry Development Programme, is already included in the draft ITP. Currently, interactive media and video games are effectively excluded from Government screen, arts and culture and R&D programmes that provide training, scholarships, diversity programmes, joint trade missions, prototyping and business capability building. While our strength is that we are a hybrid of creativity and technology; it also means we fall between the cracks of existing Government support programmes.
Such a programme could be modelled off or extend the Centre of Digital Excellence (CODE), a Dunedin-based hub designed to progress the local game development industry. In its first 18 months, CODE supported 16 new studios and almost 70 jobs. However, CODE is funded by the Provincial Growth Fund for the Ōtepoti Dunedin region only, so nation-wide funding is required.
The interactive screen sector is also receiving increasing support from local Government, such as the partnership with WellingtonNZ for the NZ Game Developers Conference and Convergence Day, the Create Auckland 2030 plan and the Canterbury Screen Action Plan.
We’ve spoken in the media regularly over the past few months (check our newsletter for highlights) and have talked closely with our studio members about how to make any rebate and industry support work best. In October many New Zealand studios will be attending Melbourne International Games Week so we expect to have more updates about studios’ plans after that trip, but hope the Government responds before then.
The NZGDA will continue to engage with the Government, officials and other screen industry stakeholders over the coming months and will share updates in our newsletter and other channels.