A tax rebate scheme has helped boost New Zealand's gaming companies.
A tax rebate scheme has helped boost the number of people employed in the video game sector by 20.5% to 1300 over the past year, NZ On Air says.
The latest recipients include Splitting Point Studios, whose breakout hit Grow a Garden hit 16.4 simultaneous users last month, earning it a splash in the New York Times – and its 28-year-old founder Janzen Madsen a spot on the Listener’s 30 Under 30 list of young New Zealanders shaping our future.
New Zealand Game Developers Association (NZDA) executive director Joy Keene says the local industry had total revenue of $548 million last year, up from $434m the year before.
This financial year just ended will show another big jump, she says (final figures won’t be released until mid-September), which should bring total growth to around 61% over the first two years of the scheme - after just 7% growth in the year before the scheme, 2023 (albeit in the context of a hangover after the pandemic lockdown gaming boom).
And yet the increased activity has not been enough to take full advantage of the funds on offer.
For the second year in a row, Kiwi video game makers have left a big chunk of cash on the table, failing to take full advantage of a tax rebate scheme – which was initiated by the previous Government after game studios threatened to decamp to Australia, where tax breaks were already on offer.
The four-year, $160m ($40m per year) Game Development Sector Rebate (GDSR) was set up in 2023.
It offers 20c back on every $1 spent on creating a video game, from a $250,000 minimum up to a $3m cap per application.
The National-led Government chose to continue the scheme, which is administered by NZ on Air under guidelines set by MBIE.
Last year was the first round, with NZ on Air announcing rebates totalling $22.3m of the possible $40m. This year, that nudged up to $22.4m of the possible $40m.
It was not a case of NZ on Air rejecting applications. The agency tells the Herald the $22.4m paid out was close to the amount applied for – as was the case last year.
Unclaimed funds are returned to Treasury.
The scheme is time-limited, with no rollover of funds, and as things stand will wind up after its fourth year. Funds unspent will be lost to the industry.
The Ministry for Business, Innovation and Employment (MBIE) is about to embark on a review of the rebate – always planned for its halfway mark.
The Game Developers Association already has its submission lined up, Keene says, including a solution to take fuller advantage of the $40m on offer each year: Increase the rebate to 25c in every dollar spent on game development, with the per-company cap raised from $3m to $4m.
The 25c rebate would take the scheme close to Australia, where there is a A30c federal rebate that can hit A45c with state-level incentives.
Madzen’s Splitting Point – he started his firm as a 19-year-old from the basement of his parents’ Auckland home – specialises in creating games for the US-based Roblox gaming platform. Today, he employs around 20 staff.
“The GDSR still makes a meaningful difference,” he told the Herald.
“As a fully remote company, we often face a tough decision between hiring locally in New Zealand and hiring globally from a more experienced Roblox talent pool.
“The GDSR helps soften that trade-off by making it more viable to invest in training New Zealand-based talent.
“Before receiving the GDSR, only about 5% of our workforce was based in New Zealand, whereas now it’s almost a 50/50 split as a direct result of the GDSR.”
Gaming is a US$300 billion ($499b) industry, he added. Right now, most developers in New Zealand have few options for finding a place of employment and often look overseas to pursue their career.
“As a small nation of five million, New Zealand is already starting to prove itself on the world stage, with a flurry of commercially successful gaming titles in the last few years, many who were GDSR-supported.
“Anything to support the New Zealand game development industry is a huge value add to the economy. I personally would love to see even more Government support, especially with smaller grants for up-and-coming studios.”
Reti had no comment on the NZDA’s suggestion to bump up the rebate, but told the Herald: “It’s encouraging to see the continued growth of the game development sector and it’s great to hear feedback on the positive impact GDSR is having for Kiwi studios in creating jobs and growing revenue. The findings of the upcoming review will help inform the future of the GDSR scheme.”
The $22.4m was paid in rebates to the 40 studios listed below. NZ on Air won’t say how much each got, citing commercial sensitivity. It says more detailed figures will be released two years after the payout.
Some of the biggest names in the industry, like Auckland’s Grinding Gear Games (owned by China’s Tencent) and Ninja Kiwi (bought by Sweden’s MTG) are now controlled offshore, but still qualify for the rebate if they keep most of their activity in New Zealand.
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.