The head of one of the top game studios says the local industry is in an "existential crisis" - and one that could see jobs going offshore en masse.
Dean Hall, founder and chief executive of Rocketwerkz - creator of the global hit game Icarus - says he would like to hire more staff in New Zealand.
But he is now scoping out locations for a studio in Australia, which will employ 50, because of our Government's failure to match tax breaks for game developers that were announced last year and introduced on July 1.
And Hall says the playing field is tilted at home because the Government has thrown large sums at the film industry, while offering only token amounts to the gaming sector - even though the two compete for staff in key areas like special effects and graphics.
"Frankly, why stay in a country that actively funds your competitors with billions of dollars?," Hall told the Herald.
"How the money is spent says all you need about where the priorities lie - to big Hollywood corporations with their IP [intellectual property] owned offshore. That is the future of our games industry, without urgent intervention - IP going overseas forever."
The heads of the other game studios in NZ's Big Three have the same beef. Mario Wynands, chief executive of PikPok - NZ's largest game developer by staff - told the Herald that while his first preference was to hire locally, he would have to expand overseas to get staff (shortly after, PikPok bought a 20-person developer in Colombia, to expand its total head count to around 220).
And yesterday, Chris Wilson, CEO of Grinding Gear Games - NZ's largest game studio in financial terms, with $105m revenue last year - told the Herald, "We're certainly tempted to open an office in Australia because of the significant game development tax subsidies over there.
"It makes hiring staff very difficult because Australian companies can offer so much more for the same position, paying for the difference out of their tax subsidies so that their profitability isn't affected."
This week has seen Wellington host the NZ Game Developers Association's annual conference. It's an unusual point for the NZDA, which is both fast-growing - the Government is picking it to become a billion-dollar export earner by mid-decade - but facing Hall's existential challenges.
"It's a bittersweet moment to have a conference of this magnitude here," WellingtonNZ chief executive John Allan said.
"I am proud WellingtonNZ is supporting this taking place in New Zealand's heart of screen and gaming, but I'm aware if we don't act soon, we risk losing both of these industries overseas," says Allen.
"These two pillars of Wellington's economic growth – gaming and film- need a clear signal from Government they are valued and that it wants them to stay."
The Herald put Allen's comments to Digital Communications Minister David Clark, who said there was a possibility of game studios getting access to a slice of NZ on Screen money - a tantalising prospect for the industry, but also one that the minister has been dangling for more than a year now. The timeline and outcome are still uncertain (see more from Clark below).
"Generally it is great that others such as WellingtonNZ and ministers such as the David Clark, publicly support and acknowledge the situation facing the NZ game development scene that is now nothing less than an existential crisis," Hall said.
But he was not in tune with WellingtonNZ's statement, that had the video game and film industries standing should-to-shoulder.
"There's a somewhat uniquely Kiwi approach of being friendly about everything that I've grown quite tiresome of," Hall said.
"Thanks to successive governments, the video game industry in New Zealand is in direct competition with the film industry.
"If the playing field was level, this would not be the case. We compete for talent. Taxpayers have funnelled billions into international productions for our film industry while paying, at best, lip service to the video game industry. This has set up a most unnatural competition between film and video games in our country that even our own industry doesn't fully acknowledge."
Hall says "it's time for the video game industry, and the public, to hold the film industry, and the Government, to account. All we want is a level playing field, a fair chance. Either the Government removes the artificial barriers placed on [video game makers'] access to the screen sector grants, or they remove such subsidies entirely.
"Otherwise New Zealand will become a footnote as an incubator for game studios that move their operations, IP, and tax revenues to countries that don't stack the cards against them.
"So long as the Government continues with this manifestly unjust funding arrangement for film, they can't coexist peacefully."
Clark told the Herald, "Already, there are successful initiatives in place to support the gaming sector. The Centre of Digital Excellence (Code) in Dunedin was funded [with a $10m grant] to assist sector growth and is having great results. The Ārohia - Innovation Trail Blazer Grant starts in September and will pick up some of the innovation not covered by the R&D, and to date some gaming companies have been able to tap into the R&D fund as well."
The Ārohia R&D grants will be available to startups across all industries.
"In light of the Australian Government's recently-announced support programmes for the gaming sector, shorter-term measures, including those aimed at providing a competitive environment are needed now in New Zealand," Clark said.
"Recently-announced" is in the eye of the beholder. The Australian Government first outlined its Digital Games Tax Offset, which allows developers to claim back 30 per cent of the cost of creating a game (and 40 per cent in most areas once state-level incentives are added to the mix) in May 2021 as part of a A$1.2 billion package to boost the local gaming industry and lure gaming companies from overseas to setup show in Australia.
The NZGDA has been lobbying Clark to make a similar move on this side of the Tasman since the middle of last year, but so far to no avail.
"I have a constructive working relationship with the NZGDA and meet with them regularly," Clark said.
"In both July and August, we came together to discuss what interventions might be required to ensure the continued success of the domestic industry.
"This conversation covered a range of options including exploring the feasibility of giving game development studios access to the 20 per cent Post, Digital and Visual Effects (PDV) component of the NZ Screen Production Grant, or similar."
The NZ Screen Production Grant puts the gaming industry's $10m Code grant in the shade. The Avatar sequels alone received more than $140m in incentives.
Taxpayers have so far paid more than $140m worth of subsidies to help produce the upcoming sequels to the Avatar movie.
Hall says he's not after a slice of NZ on Screen money for Rocketwerkz. But he says he would like to see either no subsidies for either movies or gaming, or up-and-coming game studios getting access to the Crown funds on equal terms.
Clark says the game sector is worth supporting.
The sector had a total revenue of $276m in the 2021 financial year with 97 per cent of this revenue being export-based, the minister noted.
The sector's compound annual growth rate (CAGR) is 34 per cent compared to the average global CAGR of 12.8 per cent. In terms of productivity, the sector earned $285,000 per employee according to a 2021 survey from the New Zealand Game Developers Association.
"New Zealand's game development sector is growing fast and is well placed to contribute to the Government's vision for a low-emission, high-wage economy given its focus on weightless exports and high-skill, high-wage jobs," Clark said.
But it's still not clear if, or when, the minister will come through on the promise to open up the NZ on Screen funding to game studios, or implement any other mechanism.
"Officials will be working through what the support would most appropriately look like, remaining mindful of Australian competition and will report back in due course," Clark said.
The New Zealand sharemarket reached its highest level in a month.