Australia is back.
After years in game development obscurity following the global financial crisis, an article from GameIndustry.biz has called it: the resurgence of Australia’s game development industry. But, of course, there’s more to it than that.
That’s because the true hero of this comeback story isn’t the studios or the broader ecosystem — and that’s not to talk down their involvement and generosity to one another in supporting each and every game release.
But rather, it’s government support, both at a federal and state level. Many new games get off the ground thanks to state government grants. Meanwhile, larger companies operate competitively on a global stage — in spite of higher costs in Australia — thanks to the country’s fairly new Digital Games Tax Offset.
Yet government support can come with its own challenges, and at times puts the industry in a precarious position of constantly having to sing for its supper. Expanding on GameIndustry.biz’s coverage, this explainer aims to dig into that delicate balance, criticisms of the current regime, and what it all means. Let’s get into it.
What does government support in Australia look like?
There are two main schemes that directly benefit games companies:
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Grants: These are offered by the various screen-related peak bodies across the country and also by Screen Australia. They directly fund new games, often with stipulations that the funds earned go directly into game development. They are competitive too — not all games that apply get funded.
The Digital Games Tax Offset (DGTO): This is a 30 per cent refundable tax offset for eligible businesses that spend a minimum of $500,000 on qualifying Australian development expenditure. That minimum amount is important here, as it rules out a lot of indie developers. This was introduced in the 2021–22 Federal Budget, and is incidentally up for review in the coming years.
Why does the Aus games industry prefer government support ?
This is an interesting one, as there’s definitely a push within the ecosystem for more support from the government. But then again, that’s not unique to Australia either.
Government support, whether in the form of a grant or tax offset, is broadly considered across the games industry as the a desirable form of funding, because it allows full creative control over the end product and is generally free of commercial conflicts of interest.
While the government remains a key stakeholder, its involvement tends to be more passive than that of a venture fund, company, or publisher.
What are the challenges?
First and foremost, it’s not permanent. It’s vulnerable to budget cuts, a change of government, or a simple change of priorities. That’s true of any government-led program.
0Secondly, it’s public funds. This means it’s wide open to scrutiny and needs to provide a clear return on investment to taxpayers — even if it’s a cultural one. That accountability aspect can be difficult for the games industry to grapple with, and can also be difficult to measure more broadly.
That’s largely shouldered by Australia’s gaming peak body, the Interactive Games and Entertainment Association (IGEA). “Policymakers want to see employment, location and revenue statistics as a minimum, along with information on skills development and the cultural value of games,” IGEA CEO Ron Curry said.
It’s a “significant” challenge, he added, yet they’ve managed it to date. In March, IGEA announced that the Australian video games industry contributed $608.5 million in revenue to the economy. A strong figure for a sector with only 2,443 full-time employees.
That’s impressive. Are there any industry criticisms?
While it’s not universally held, there is an undercurrent of frustration with the current grant regime.
Industry veteran and Xsolla’s Area Vice President Simon Slee said that while the grants are valuable for game development, their allocation often leans a little more towards supporting the “art” aspect of games as opposed to those that may be commercially successful. This may be because they are allocated by the screen arts government agencies, where the focus is on cultural narratives and getting people started in the industry.
“Culturally, it feels like there is a bit of an allergic reaction to making money sometimes,” he said. “It has to be a balance, and right now, we’re a bit too far in the art camp.”
Moreover, Slee adds that the system has created a perception among budding developers straight out of university that the correct pathway to making games in Australia is with the grace of a grant.
Slee also advocates that, as opposed to more direct government funding, they could lower the DGTO threshold to around $350,000 and provide offsets for the business of games services costs — both of which could help studios from grassroots indie level to more sustainable, longer-term businesses that can be financially self-sufficient.
He points to New Zealand as a country that has the right balance when it comes to evening out commercial return with the art of making games.
The other main criticism, which came to the fore earlier this year with Freeplay failing to receive a new grant, is that there is little in the way of funding for services or groups that support the gaming industry — or targeted support for launching a game, which is the biggest chokepoint for all new titles.
You mention New Zealand. So what has it gotten right that Australia’s missed?
A very different focus, for starters.
New Zealand has a national economic target for its games industry — and an ambitious one at that: an industry worth $1 billion in revenue by 2026.
This is partially guided by CODE NZ, a government-backed agency aimed at helping grow the sector from skills training through to game development. It was originally founded to support the Dunedin games industry, but in 2023, with government support, expanded its remit to the whole country.
The broader criticism of this approach is that by focusing on commercial return, it undermines creativity in the games that are produced. Though CODE NZ’s Industry Development Manager Vee Pendergrast refutes this.
“Creativity is a key criteria for us. Given Steam is sitting at over 20,000 new releases per annum for the past couple of years… creative project selection is part of the cut-through that any indie developer needs in a crowded marketplace.”
“However, CODE is very specific about informing developers about market trends, techniques to generate market validation and pitching, and training our audience to think commercially as well as creatively. It’s a Venn diagram, not separate circles.”
The numbers back this up. According to CODE NZ, around 35% of games that leverage its program succeed in securing a publisher, compared to the industry average of 0.0016%.
More importantly, the New Zealand government itself is championing similar figures and the sector more broadly — a stark contrast to most jurisdictions, including Australia.
“Games funding isn’t fickle when you can show the returns like we do,” Pendergrast added.
“Regardless of which side of politics is currently in government, return on investment and employment generation and retention talk louder than any ideology.”
So what do you make of all of this?
Some global contrast is needed. Australia and New Zealand are both ahead of so many other budding games industries, and both have different challenges too. In Portugal, for instance, the local games industry would greatly appreciate reduced versions of some of the policies discussed in this story.
As its head, Diogo Rato, Executive Director of local peak body Associação de Produtores de Videojogos Portugueses, put it, grants and tax-related support for new games would go a long way.
“For our emerging studios, ‘good’ support means funding the pre-production phase; grants for prototypes that bridge the gap between a student project and a viable business,” he said. The Portuguese local and national governments both support the ecosystem, but not to the extent of other countries.
Thanks to its current level of government support, the Australian games industry can take more moonshots than a lot of other jurisdictions. One striking feature of our ecosystem is that there are fewer indie games in Australia that fast-follow market leaders and attempt to copy their success than there are elsewhere in the world. And that is something to relish.
But it’s not perfect. Quietly fragile, in fact, as it puts the Australian games industry in a continual state of justification for art. As such, IGEA’s efforts to put a figure to that and support its continuity are admirable, especially when the grants funding many of the country’s newest games do not place as much emphasis on commercial return.
Though it doesn’t have to be that way, as Pendergrast explains: “If the premise is that government funding is vulnerable, then the obvious answer is to equip the studios and broader community with the skills so that they can find their own sources of development funding and not be wholly reliant on the government.”
Yes, Australia’s games industry is back. But if the government ever pulls the pin, for whatever reason, will it remain that way? If we’re finally now in any position of strength, that is now the challenge.
What do you think about the state of government funding for games in Australia? Or government funding of the games industry globally? Let me know in the comments.
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