The New Zealand game development industry has seen huge growth over the last five years, going from NZ$19.6 million in revenue in 2012 to almost NZ$100 million in the last financial year. But local game developers have set their sights even higher, and aim to be creating games in a a billion dollar a year industry by 2026.
Though the growth trajectory of the last five years makes this look feasible, the New Zealand Game Developers Association (NZGDA) is aware of significant hurdles in meeting this goal.
Micheal Vermeulen is the chair of the NZGDA, as well as the lead designer for developer Aurora 44 (Ashen). He believes reaching a billion a year will require a combination of larger publishers setting up development teams here, and local studios finding success in the international market.
There are also aspects of the local industry that will need to change in order for it to grow, including a shift in the way developers are thinking about meeting this billion-dollar target. Vermeulen said there is a belief among developers that all the New Zealand industry needs is one big hit to catapult us onto the global market, the logic being that a rising tide will raise all ships.
“It is not about waiting for just that one hit,” Vermeulen said. “It’s about working towards sustainable development in games.”
Sustainable development means a studio can recoup its costs from each project, allowing it to cycle revenue into its next title, and hopefully grow larger in the process. Part of becoming sustainable is a more pragmatic approach to game development, Vermeulen said, in which developers can better balance their creative ambitions with the market reality.
“In order for us to grow, we need to make games for a market," he said. "It is not just about making awesome and fun games, but also building the industry and studios sustainably.”
Simply creating a studio is itself a hurdle, with developers often requiring an initial injection of capital in order to get started.
There are institutions around New Zealand that have created kick-starter funds, including the New Zealand Film Commission (NZFC) which launched the Interactive Development Fund last year. This new fund offers NZ$25,000 dollar grants, or NZ$50,000 equity investments to AR, VR, and game projects that have a focus on narrative. In its first year, four games and seven VR/AR projects were funded.
Head of talent development at NZFC Dale Corlett said the Film Commission got involved with the industry because of its potential for new ways of telling stories in NZ.
“We are trying to support the development of story, world and characters in the mediums of VR, AR and games,” Corlett said.
“When we looked at the space, we thought that was our point of difference. We are from the world of narrative film and documentary and so our point of focus is story.”
Corlett said the NZFC is excited to see New Zealand find its voice in games, much in the same way the local film industry is internationally recognised as being great at genres such as horror comedy and indigenous film. The Film Commission hopes to both identify and support whatever that voice ends up being in local game development.
The Film Commission is also looking to learn from the games industry. Head of international relations at NZFC Chris Payne said the games industry has adopted digital distribution in a way the film industry is only beginning to, and that there are lessons to be learned from the way the industry uses the Internet to deliver content and generate buzz.
But of all these motivations, the primary goal of the NZFC fund is to create more sustainable careers for New Zealand writers. The NZFC hopes that by emphasising storytelling in New Zealand game development, it will create more opportunities for New Zealand writers by giving them more mediums to work within.
Senior Talent Shortage
Talent development is also an issue affecting the game development industry, and has been identified by the NZGDA as a major hurdle in reaching NZ$1 billion. A survey conducted last year found 42 percent of New Zealand game development studios thought their growth was being limited by a skills shortage. Specifically, the kinds of skills typically held by developers who have worked in game development for a long time and have experience shipping multiple products.
“We are definitely missing senior talent in studios,” Vermuelen said. “It is really hard in a country this small to find people with senior talent for all the studios we have.”
Vermeulen said all of New Zealand’s senior development talent is taken up, which stops studios from growing larger and limits the number of new studios being created. The only alternative is to bring senior talent in from overseas, an option many studios are taking. But this is an expensive and unsustainable workaround for the industry.
As a result of this shortage, an employment bottleneck has formed. A large influx of young developers is emerging, but studios are too full to hire them, and there is no senior talent to create and lead new studios for them to work in.
“There are a bunch of tertiary educators who keep pushing out junior developers, designers and artists throughout the country, every year. But we don’t have jobs for them,” Vermuelen said.
The NZGDA is looking to develop new ways of building sustainable studios for and with these junior developers. One solution being explored is an internship programme where developers can learn the practical skills they need to successfully run their own studios.
“I believe it is not about going to a tertiary educator to learn these things – in my opinion that is not the best way to learn,” Vermuelen said. “It is really about learning by doing in the field.”
In the long term, this would allow more studios to form, letting developers gain experience and eventually become senior talent themselves. However, this plan will require senior talent to teach these skills, and so in the short term we still need to attract more talent from overseas.
This makes the most pressing question for the industry "how do we entice senior talent to move here?"
Vermeulen said similar problems internationally have been overcome through government assistance. Unfortunately, our natural beauty and way of life is not enough to tempt publishers to set up studios. For these businesses, it has to make financial sense to move here.
“NZGDA gets messages from studios interested in perhaps opening up a branch in New Zealand. It is just about finding why these companies would want to come here. There needs to be some kind of benefit to them,” Vermuelen said.
One way the government could entice publishers is by offering tax credits to game developers. This strategy has been used elsewhere in the world to great effect. The best example is Montreal, which in 1997 began offering tax rebates on 37.5 percent of labour costs to developers of multimedia titles. Since then, it has become the fifth largest video game development centre in the world, with 230 development studios employing more than 10,000 people.
The Wellington Regional Economic Development Agency (WREDA) is looking to mimic the success of Montreal by making Wellington not just the hub of New Zealand’s game development industry, but all of Australasia.
WREDA business attraction lead Dorien Vermaas said the agency has identified five growth industries they want to bring to Wellington: food and beverage, science, deep technology (AI, Bitcoin, etc), technology, and creative industries. Game development became a focus for the agency because it touches on four out of five of these industries.
“We see it at the heart of Wellington’s creative DNA,” Veermas said. “It is a hugely important part of our future, as it involves design, problem-solving and clever technology.”
In an effort to make Wellington the development hub of Australasia, the WREDA is trying to create a business relationship between the region and other countries such as South Korea. Veermas said these relationships will make it easier for Korean studios to move here – and conversely, for our studios to move there.
The Wellington Regional Council has also been using its large marketing team to sell the city to the international game development industry. Veermas said success stories of studios such as Aurora 44 and PikPok help to sell both the city to the world, and the city as a hub for development to the rest of the industry.
This outreach has seen huge success for WREDA, particularly through its involvement in the Look See program. This initiative aimed to fill a shortage of tech industry workers in Wellington by offering 100 successful applicants the opportunity to fly there to meet the leaders of affiliated businesses. The program received an unprecedented amount of interest after being shared by Forbes and The Daily Mail, resulting in 48,703 people applying from all over the world.
“On the back of that, you won’t believe how many developers from all over the world got in touch with me. I have connected them all back to the Game Developers Association,” Veermas said.
As well as outreach to the wider industry, the WREDA has also been working closely with local studios, particularly in helping them with their business capabilities by finding investors for start-ups and channels to market when their game is ready to ship.
There are clearly some challenges ahead for the New Zealand game development industry in meeting its billion dollar goal, but nothing insurmountable. Essentially, the industry just needs to keep developing at its current rate and it will hit its target. But scaling always brings challenges, and it seems the largest challenge to growth right now is making Aotearoa more enticing for international companies and talent.
Unfortunately, there is not much you or I can do about that beyond supporting NZ games, but there is plenty our Government could do to help, as it has done for the film industry. Over recent years we have seen support for the game development industry discussed by both the Green and Labour parties, so there is hope that these discussions will gain traction again soon, hopefully leading to legislative change.