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Home / Business

NZ video game industry booms amid pandemic

Chris Keall
By Chris Keall
Technology Editor/Senior Business Writer·NZ Herald·
11 Dec, 2020 04:22 AM7 mins to read

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A still from Path of Exile, created by Grinding Gear Games. Image / Supplied

A still from Path of Exile, created by Grinding Gear Games. Image / Supplied

New Zealand's video game industry continued its strong growth in the year to April 1, 2020 - a period that caught partial impact of the coronavirus.

The sector had total revenue of $323.9 million for the period, an increase of $121m over the prior year, according to an NZ Game Developers Association survey released today.

Some 96 per cent of local creators' income came from overseas audiences, making gaming a notable export up-and-comer.

The survey also predicted the industry would create 142 new jobs this year, taking the total employed in the sector to close to 1000 from the 550 reported in 2018.

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The industry has had a boom period worldwide, with the two largest gaming publishers, Activision and Electronic Arts, both seeing their sure share prices surge over the pandemic.

The industry benefited both from being able to continue production during lockdowns as well as soaring demand as people around the world stayed home and played digital and online games.

The largest local player, RocketWerkz, underlined the sector's growing profile as it took the top two floors in the recently-opened PWC Tower on Auckland's waterfront - the sort of premium commercial real estate previously reserved for the likes of the big law and accounting shops (though some staff let go from the company's former HQ in Dunedin were less than impressed and vented on social media).

NZ Game Developers Survey 2020
NZ Game Developers Survey 2020

Some issues, remain, however. The NZGDA asked the 42 local interactive, gaming, virtual reality, augmented reality and education tech companies it surveyed on their top barriers to growth, each ranked out of 5 (with 5 being worst).

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Here, Covid-19 did rear its head.

The biggest barrier was a shortage of experienced staff (3.9), followed by pandemic travel and event restrictions (3.7).

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The other two major barriers were perennials: Attracting early-stage funding (3.5) and Attracting investment for expansion (3.4).

Our two largest gaming studios, RocketWerkz and Grinding Gear Games have both turned to China's Tencent for capital. The gaming and entertainment giant (recently targetted by departing US President Donald Trump) now owns close to half of the former, and took a majority stake in the latter in a $100m+ deal.

Earlier this year, the Government sought to address the venture capital gap by retooling Crown agency NZVIF as NZGCP, and more than tripling its funds to $300m with an injection of NZ Super Fund money.

Last year, then Economic Development Minister Phil Twyford said the gaming industry could hit $1 billion in annual revenue by 2025.

RocketWerkz founder Dean Hall told the Herald his industry would get to the billion-dollar revenue mark faster if it could tap the same $130m in government funding and rebates that is available to the special effects-heavy local film industry (which has a lot of cross-over with gaming; Hall has recruited a number of Weta Digital alumni).

An image from Guardian Maia by Metia Interactive.
An image from Guardian Maia by Metia Interactive.

"A good start would be levelling the playing field with film. The NZSPG [New Zealand Screen Production Grant] specifically excludes games and is directly subsidising film - when we compete for the same people," Hall said.

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The request fell on deaf ears. Twyford's successor in the portfolio, David Clark, has been asked for comment.

Last year's Interactive Aotearoa report by the Game Developers Association recommended that the Government create an interactive innovation fund and industry development plan to grow the pipeline of new interactive firms.

The Government is currently consulting on the Digital Technologies Industry Transformation Plan and the Screen Sector Strategy 2030, which these could be part of.

Boys' club

Diversity remains another challenge. The NZGDA survey found 23 per cent of staff were female.

"Last year 21 per cent of employees identified as female. So while that's a pleasing increase it's not statistically significant," NZDA director Stephen Knightly told the Herald.

"However, it is similar to the rest of the NZ ICT sector. Inclusion and diversity is something the NZGDA has activities focussing on, and it is an area the Government's Digital Technologies Industry Transformation Plan will work on too," he added.

NZDA chairwoman Chelsea Rapp said: "Games and interactive media have given so many people the opportunity to come together when lockdowns and border closures have kept them apart.

"The games industry has proven itself particularly resilient during the Covid-19 pandemic, both here in New Zealand and around the world. We are uniquely positioned to contribute to our economic recovery with weightless digital exports, but that growth will depend heavily on our ability to support young and emerging enterprises."

The 10 largest studios earned 95 per cent of this revenue but are now 11 years old on average.

However, 75 per cent of studios employ five people or fewer and the association is concerned by the lack of support to grow these firms to take advantage of the export opportunity.

Some 49 per cent of studios surveyed predicted significant growth (10 per cent or more) this coming year. Only 17 per cent of studios predict any decline in sales.

While lockdowns have increased the market opportunity, travel restrictions have made it harder to make publishing deals and secure funding. The top four challenges studios reported facing were a shortage of experienced staff, Covid-19 travel restrictions, attracting early-stage funding and attracting investment for expansion.

The New Zealand Game Developers Survey 2020 Highlights

• 86% of studios say they are independent game developers who create their own IP, although 19% of those also make products for paying clients. 11% contract to other clients solely, while 3% create educational and serious games.

• Interactive studios are spread around the country, with 40% in Auckland, 26% in Wellington, 14% in Otago, 10% in Canterbury, 5% in Waikato and 5% in Bay of Plenty.

• 96% of revenue was earned overseas, mostly by selling digital services to consumers via various digital platforms. 5% of revenue also came from royalties, 8% from selling advertising in games and 7% from selling services.

• New Zealand studios target audiences around the world, with 65% reporting significant income from North America, 41% from Europe and 21% from Mainland China.

• The industry employed 747 full-time creative technologists, and expect to create another 142 new jobs this year. This is an increase of 9% from last year.

• 29% roles were for artists, 29% for programmers, 11% for game designers, 10% for management, 8% producers, 6% quality assurance, 2% audio and 1% writers.

• 23% of studio employees identified as female.

• For the studios that reported skills shortages, 89% were seeking programmers, 33% 3D artists, 33% game designers, 15% 2D artists, 15% management, 11% producers, 4% quality assurance, 4% audio and 4% writers.

• The sector attracts staff from a variety of sources. 48% of studios said they had hired staff directly from tertiary education in the last year, 48% from another game studio, 45% from overseas, 35% from other creative or tech companies.

• 111 employees, or 15% of the industry, are currently or have previously been on work supported visas.

• 61% of studios create games for PC, 48% for mobile devices, 36% for consoles, 27% for virtual reality, 18% for augmented reality and 24% for websites.

• On average studios are 6 years old, with the oldest being 23 years old.

• The top 10 studios employ 78% of the industry's full-time workers and account for 95% of revenue.

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