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Local games industry continues to grow

The New Zealand Game Developers Association (NZGDA) has released some of the results of its recent survey of the local industry, and the news is good.

The independently-run survey was conducted to collect information for the period up to March this year, with Statistics New Zealand providing input into the questionnaire design in part to enable some of the figures to align with those from the annual Screen Industry Survey.

The main areas of growth were in income, although no dollar figures were released in the survey, and in the amount of work being done – a 46% year on year increase in the number of jobs (measured as full-time equivalent) in the sector.

380 FTE game developers were working by the end of March, split roughly into the popular 4-4-2 football formation, the fours being artists and programmers, the twos mostly marketing and management.

NZGDA Chair Stephen Knightly explained that the industry was currently enjoying good revenue flows. A couple of years back there was a substantial level of local private investment put into the sector. After a year of hiring and developing product, that product – much of it NZ-owned IP – was now flowing through to market and kick-starting revenue streams.

Knightly also stressed the opportunities that digital was presenting, particularly with respect to low distribution costs and higher profit margins. Kiwi game studios released 73 commercial games in the last year, primarily sold digitally for i-devices and Android smartphones or via websites.

Unlike the film industry, but not unlike the porn industry, the games industry globally has learned to embrace and capitalise the digital opportunity. “We’ve learnt how to make money from business models like digital distribution, freemium, virtual goods and crowdfunding. Exporting and acting global from day one have been key to the industry’s growth,” said Knightly.

Again reversing the norm of the film industry, 99% of local games studios’ sales revenues come from export. Also impressive is the news that so much of that income is coming from Kiwi-originated product and IP, with only 32% of total revenue coming from service work.

The future looks even better, Knightly explained. From the survey 13% of revenue came from royalties from intellectual property, and this passive income is expected to grow as studios continue to expand their portfolios. By comparison, the 2010 Screen Industry Survey noted that New Zealand screen production companies earn an average of 2.7% of their income from royalties.

The growth opportunities aren’t diminishing, according to Knightly. Successful games turn into successful franchises that are often longer-running than their film equivalents, and with considerably higher profit potential given the recyclable nature of some game content and game-play mechanics.

While filmmakers are in the early stages of exploring the potential of crowd-funding projects, Auckland-based Grinding Gear Games has raised over US$1 million (at US$10 a time) by selling access to its Closed Beta development of Path of Exile.

The transition from small-time, sometimes solo, operator to sustainable business is where the real challenge lies, according to Knightly. Some of the country’s best-known game studios make the NZTE list of “Focus 500” companies, with the organisation offering them support.

However, those are the companies with a proven track record. Below that level, the industry doesn’t receive government support or subsidy. And, Knightly argues, it should – not only because there’s a cultural case for telling NZ stories on game screens as well as in theatres and on TV – but because there’s work being lost.

The game industry doesn’t have access to the Large Budget Scheme, SPIF or the PDV incentive schemes – introduced to help NZ attract inbound projects or co-productions and compete with the many other countries and US states which do offer incentives. Naturally, the NZGDA has made submissions to the recent Screen Sector Review on this and other issues.

With or without government support, the industry has been advancing apace in the last year. It held its first (and ridiculously low-priced) national one-day conference earlier this year at Media Design School (MDS) in Auckland; MDS last month commenced the country’s first game development degrees, in Game Art and Game Programming (remember the 4-4-2 split of employment in the sector).

Later this year Wellington sees two separate games-related exhibitions: New Zealand video game art in Arcade; and the internationally-touring Game Masters exhibition at Te Papa.

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