A still from the upcoming Path of Exile 2. Image / Supplied
A still from the upcoming Path of Exile 2. Image / Supplied
Chinese gaming and social media giant Tencent reported its first revenue drop since its 2004 IPO overnight.
Its second-quarter revenue declined 3 per cent to the equivalent of $31.3 billion on tighter regulation in its home market, weaker online advertising and gamers spending less.
In New Zealand, Tencent has twomajor investments, both Auckland-based computer game studios: a minority (46.6 per cent) stake in RocketWerkz and a majority (87 per cent) holding in Grinding Gear Games.
RocketWerkz has had a busy few months with the release of its big-budget Icarus. But the firm, majority-owned by its Kiwi founder Dean Hall, is not required to file its financials publicly.
Grinding Gear Games - maker of the hit global multiplayer fantasy game Path of Exile - most recently filed in February this year, for its 2021 financial year, ending September 30.
The Henderson-based firm said its annual revenue fell from $116.9 million in 2020 to $104.9m in 2021
Net profit fell from 2020's $54.4m to $44.9m. Pre-tax profit was $80.9m in 2020 and $62.4m in 2021, as Grinding Gear Games paid respective tax bills of $26.5m and $17.5m.
Path of Exile is free to play, but gamers can pay for cosmetic effects to dress up their characters.
Grinding Gear Games co-founder and chief executive Chris Wilson. Photo / Dean Purcell
Profits have dipped throughout the industry as many people return to working in the office, leaving them with less downtime. At the same time, inflation and recession fears have led to gamers tightening their belts.
But co-founder and chief executive Chris Wilson told the Herald that, in his company's case, the revenue shift could be pinned on exchange rates.
In constant currency terms, 2021 revenue and profit was roughly the same as the prior year, he said.
"Anecdotally I'm hearing that in 2022 people are gaming/spending less due to eased lockdowns and economic reasons, but that hasn't yet hit our published financial statements yet," Wilson said.
Exile has several million players worldwide, but the firm is shy of giving an exact number.
"Our players are from all over the world, with the majority coming from North America and Europe, but also reasonable contingents in Russia, Brazil, Korea and China. We're working on a Japanese language version," Wilson said.
Grinding Gear Games was founded in West Auckland in 2006 after Wilson and co-founders Jonathan Rogers and Erik Olofsson decided that, unable to find their ideal multiplayer game, they should make their own.
Crowdfunding campaigns in 2012 (US$200,000) and 2013 (US$2.5m) let early Exile fans help fund the game's early expansion by buying supporter packs.
In 2018, Tencent took an 87 per cent stake, with the founders retaining the balance of the shares, plus assurances that they could keep control and keep and expand their NZ staff.
Talent squeeze
At the time of the Tencent deal, Grinding Gear Games had 114 staff. Today, Wilson said 165 full-timers are working on the game, plus contractors.
A talent squeeze continues to be the talk of the industry - and more so after tax incentives for game developers kicked-in across the Tasman on July 1.
Several game studios, including RocketWerkz, are now shaping up to open offices across the ditch rather than hire more staff locally.
Grinding Gear Games could follow.
"We're certainly tempted to open an office in Australia because of the significant game development tax subsidies over there," Wilson said.
"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."
The long-awaited sequel
His company remains, happily, a one-trick pony. It first announced Path of Exile 2 at its ExileCon event in Auckland in 2019.
Wilson says the live-meet-up will reboot for the first time since the outbreak next year with ExileCon 2023 scheduled for July in Auckland.
