The local video game industry’s revenue grew only 7 per cent to $434 million during its 2023 financial year – a period that saw scandal, political arm-wrestling and a post-pandemic hangover.

That compared with 47
per cent growth in 2022 and a five-year average of 26 per cent, according to figures released by the NZ Game Developers Association.

The percentage of women employed in the sector dropped from 25 per cent in 2022 to only 22 per cent in 2023. The number of neurodivergent staff edged up from 7 to 8 per cent and Māori increased from 2 to 5 per cent of the workforce as the sector added only 70 jobs compared with 101 last year.

“Australia’s tax incentives deeply affected our industry over the past two years, constraining our studios in the battle for talent and curbing growth,” NZGDA chairman Carl Leducq said.

But the industry sees a brighter 2024, with 51 per cent of studios saying they plan to hire more staff in the year ahead.

The optimism is based on a reset this year.

In Budget 2023 in May, our government introduced a 20 per cent rebate for game development studios that meet a minimum $250,000 expenditure threshold a year. Individual studios were be able to receive up to $3 million a year in rebate funding, and the $160m scheme will be backdated to April 1, 2023 (the NZGDA figures released today are for the year to March 31, 2023).

The heads of NZ’s “big three” game development studios — Grinding Gear Games’ Chris Wilson, RocketWerkz’s Dean Hall, and PikPok’s Mario Wynands — had said they could be forced to move some of their operations to Australia.

In the event, all were satisfied by NZ’s tax break, even though it lagged Australia’s A$1.2 billion, which offers game studios 30¢ back on every dollar they spend developing a new title — with a top-up in Victoria, South Australia and New South Wales taking that to 40¢ or 45¢ on every dollar in Queensland.

Local studios, owned offshore

The NZGDA’s latest survey touts that 83 per cent of NZ game studios are locally owned — but the stat is shaded by the fact many of the studios are tiny, and that two of the big three have major offshore ownership. West Auckland’s Grinding Gear Games is 93 per cent owned by Chinese conglomerate Tencent (with Wilson and other founders holding the balance of shares), while Commercial Bay-based RocketWerkz is 47 per cent owned by Tencent (with Hall holding the balance).

Overseas ownership has increased over the past couple of years, with deals including mobile games specialist with northwest Auckland-based mobile games specialist Ninja Kiwi selling to Sweden’s MTG for $203m and Wellington’s A44 Games, founded by Weta Digital alumnus Derek Bradley, sold to the UK’s Kepler Interactive for an undisclosed sum, and Tencent expanded its NZ holdings by taking a quarter share in Christchurch-based Digital Confectioners — maker of the global hit Dread Hunger, that gained 100,000 concurrent users on Steam.

Post-pandemic hangover

Aussie tax incentives weren’t the only challenge faced by the sector.

Grinding Gear Games — the only studio to publicly post financials during the period covered by NZGDA’s survey (the 12 months to March 31, 2023) — saw its revenue fall from $105m to $84m; although its after-tax profit increased slightly to $49m, thanks to $11m in foreign exchange gains.

Like video game companies worldwide, the Path of Exile maker has faced a post-pandemic hangover after gamers’ lockdown binge.

A hit for Rocketwerkz, Zuru moves in

Perhaps the biggest release of FY2023 was RocketWerkz’s big-budget Icarus, which has human settlers trying to get a foothold in an alien world. The game got mixed reviews on its release, with reviewers and critics wowed by the production values and gameplay but annoyed by bugs. Hall told the Herald a period of “stagnation” this year was followed by a hit expansion pack that helped fuel sales of 1.2 million units, priced at up to US$34.95 ($56.80).

Next year should be buoyed by Zuru moving into the sector. The toy giant, founded by the Mowbray siblings, has formed a 20-person gaming unit that will release its first title on the Roblox platform in the new year, the Herald recently revealed. 120 more staff have been brought on board for a related push into video content.

Yakutsk to Takapuna

The calendar year ended with another NZ-based firm in disgrace, however. Takapuna-based, NZ-registered MyTona, founded by Russian brothers Eduard Gotovtsev and Aisen Gotovtsev (both from Yakutsk), published The Day Before, a post-apocalyptic multiplayer shoot-’em-up developed by Yakutz-based Fntastic this month.

The game was the most wish-listed on the giant Steam gaming platform, but drew a storm of negative reviews after it was released this month, with players complaining it looked nothing like its flashy trailers. Fntastic closed its doors just four days later. MyTona says it’s working with Steam on refunds.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.