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New Zealand’s game development revenue cracks $100 million

New Zealand’s game development revenue cracks $100 million

The game development sector in New Zealand earned $99.87 million in the year ending March 2017, up from $88.9 million in the year previous. That’s double-digit growth – but those in the industry say with a little help, this figure could soar well beyond nine figures.

The data comes from a survey of 29 New Zealand Game Developers Association studio members conducted by independent researchers.

As of March this year, there were 500 professional game developers employed by studios in New Zealand working in a mix of creative and technical roles.

Over half (55 percent) of New Zealand’s game development studios describe themselves as independent self-publishers, while 14 percent focus on contract work and outsourcing.

Developing and publishing original game IP seems to be the most successful strategy to reap profits, as 65 percent of studios’ revenue comes from direct sales and 14 percent from selling advertising in those games. Contract work accounted for only 12 percent of revenues. 

“Much of our success to date comes from creating our own original creative IP and self-publishing it,” New Zealand Game Developers Association chairperson and lead game designer at Weta Workshop and Magic Leap by day James Everett says.

“While this cuts out the middlemen, it also means we must fund our own growth.”

Offshore gaming exports also leaped up from last year’s results. The vast majority of revenue now comes from offshore (97 percent, up from 93 percent in 2016).

An example of this international success is New Zealand-made game Path of Exile was picked up and launched in China by Tencent, the world’s largest games publisher.

Tencent have also recently invested in Dunedin-based studio Rocketwerkz, founded by game designer Dean Hall.

Everett says $100 million is a great milestone for the sector to celebrate, but the goal now is to grow a billion-dollar industry in New Zealand within ten years.

“Game development is a mix of two of New Zealand’s strongest sectors, creative and hi-tech. In a global digital market, New Zealand creators have the same opportunity as anyone else to compete and succeed,” he says.

“With some coordinated support to maximise our export potential, that’s achievable. Finland’s game industry earned over $4 billion last year, for example.” 

Finland’s gaming industry has around 2500 employees, while the Finnish Funding Agency for Technology and Innovation (Tekes) has invested €100 million into the Finnish gaming industry since 1995, mostly through R&D projects. €28 million of that was during the Skene - Game Refueled programme from 2012 to 2015, which led to €53 million in private investment in the sector.

In 2016, the turnover of the industry reached €2.5 billion (NZ$4.14 billion).

“With 500 people employed in New Zealand, there’s a big jump there but it’s not a ridiculous jump [compared to Finland’s 2,500 people employed],” Everett says.

“I’m fairly optimistic we can grow a billion-dollar industry within New Zealand within 10 years, within our borders, if we maintain our export rates of 90 plus percent.”

The biggest challenges facing studios were skill shortages, with 42 percent of those surveyed naming it as a problem.

Everett says the skill shortage is primarily at senior level, as school and universities are doing a good job at training students across art and coding.

“There’s not enough senior experienced staff for what the ambitions of the industry are here, so we have to look to immigration to solve that problem for the time being,” he says.

Initiatives like the Looksee campaign were great for the wider tech sector, he says, but only one or two people came to work in the gaming industry.

Other barriers to growth included attracting early-stage funding, expansion capital and increasing employee diversity.

Similarly to the ICT sector, only 17 percent of employees in the game development industry are women.

Everett says currently, R&D funding is the most pressing need facing the gaming sector.

“It’s what is needed to develop more original creative IP for export. Currently there’s a lack of coordination with the rest of New Zealand’s screen sector which can lead to missed opportunities too,” says Everett.

“For New Zealand teams, we’re competing with the rest of the world. It’s a global market. We’re not thinking about how do we sell into New Zealand or just into Autralia. From day one we think about how we reach a global audience.

"Our opportunities are the same as competitors ­– that’s the exciting thing, Pik Pok’s games have been played by 100s of millions of players. The audiences are out there and there for us to go and find. Those opportunities are there, but we need to support those teams.”

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