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NZ’s largest game studio sending jobs offshore as NZ fails to match Aussie tax incentives, border opening

The good news: our video gaming industry added more than 200 jobs during the lockdown-hit 2021 financial year and now employs just under 1000 Kiwis.

Its earnings – 97 per cent in exports – increased from last year’s $271m to $276m (growth was crimped somewhat by a 19 per cent unfavourable exchange rate movement in the key market), according to the NZ Game Developers Association’s annual survey (see graphic below).

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The bad news: the NZGDA says more than jobs could go begging because of our Government’s failure to match tax incentives introduced for the video gaming industry across the Tasman earlier this year. Specifically, its members plan to hire 331 new staff in 2022, but most are unsure if they will be able to recruit the lure of Australia – or even keep their current complement.

Some staff have already decamped across the ditch. And the head of our largest game developer, PikPok, says he’s reluctantly decided to open a studio offshore because of the pressure from Australia, combined with border restrictions here.

Mario Wynands heads New Zealand’s largest employer in the sector, Wellington-based PikPok.

He tells the Herald he’s added 60 staff over the past 18 months for a total of 190. It’s alsoincreased revenue and its pipeline of games is strong.

But he is feeling the heat from across the Tasman where, in May, Scott Morrison’s Government unveiled a A$1.2 billion package to boost local industry and lure multinational gaming companies to set up shop in Australia.

Its central element is a 30 per cent tax break called the Digital Games Tax Offset, with those gaming companies in Victoria getting an additional 10 per cent tax break – meaning for every dollar they spend on developing a new game, they get 40 cents back.

The measure will kick in on July 1 next year. Game developers have to spend a minimum A$500,000 on R&D to qualify.

“Between the local housing crisis, the announced Australian games industry tax incentives, and large multinational game companies expanding in Australia, we’ve seen a lot of pressure from there,” Wynands says.

“We’ve already lost some people to Australia, and I know other studios have too.

“It is quite possible that as Australia gets more of a handle on Covid that we see this problem get worse.”

NZGDA chair Chelsea Rapp says while the industry has had constructive talks with Digital Economy and Communications Minister David Clark, she was disappointed that a draft of his broad-ranging Digital Strategy for Aotearoa made no mention of tax-breaks on this side of the Tasman (the strategy document was due to go to Cabinet this month, but the Herald understands pandemic-related delays will push that into the new year).

The Herald put the NZGDA’s concerns to Clark.

A spokesman for his office said Clark and Regional Development Minister Stuart Nash met with NZGDA representatives earlier this year “to talk about the industry’s concerns around the potential impact of the Australian tax incentive.”

He added, “MBIE officials are also in regular dialogue with the NZGDA to help us fully understand any impacts on New Zealand game development studios and how government might support industry competitiveness.”

But so far, in terms of tax breaks, that’s come to nought.

“The minister has no announcements to make at this time,” Clark’s spokesman said.

Across the house, National recently held an online pow-wow about technology industry – which called on speakers from a number of sectors but ignored gaming.

Uneven playing field locally, too

The failure to match Australia’s tax incentives comes at a time when the industry already sees itself on an uneven playing field at home. Dean Hall, CEO of RocketWerkz – one of our three largest gaming studios – earlier told the Herald it was wrong for the Government to offer heavy subsidies to the film industry, and none to gaming, when the two industries were often competing for the same scarce pool of visual effects staff.

Rapp said today travel restrictions were also an issue.

Game studios needed to recruit offshore to fill some skilled roles – and the lack of senior staff in turn crimped how many juniors could be recruited locally because experienced staff were needed to train them. Borders needed to open as soon as possible, she said.

Opening a studio overseas

In August, Wynands unloaded on the Government, telling the Herald, “We’ve basically stalled interviewing overseas candidates for other roles because it is frankly unprofessional and embarrassing to do so when we have no pathway or timeframe on which we can reliably bring people into the country.”

Today, he says while the Government is now moving to open things up, it’s too little, too late – and still too vague to address his issues recruiting top talent.

“We’ve still struggled in this area, as the lack of uncertainty around the process has meant it is incredibly difficult to recruit top-end talent from overseas given we can only speak to vague possibilities around timelines.

“So, we’ve had a lot of new specialist roles that can’t be filled from the existing local talent pool which has been difficult to work around within the studio.On top of this, we’ve unfortunately lost some senior talent to opportunities in Australia and other overseas markets, creating new skill gaps we cannot foresee filling in the short to medium term.

“The easing of border restrictions early next year we are hoping signals a general loosening of policy.After 18 months of effort, we managed to recently get our first visa exemption approved, and have a timeline on getting that person into the country.That has been a positive step forward, but there’s still a long way to go to allow effective recruitment.

“As it stands, the need for us to grow and to secure top-end talent to capitalise on numerous opportunities has meant PikPok has now committed to opening a studio overseas.”

Wynands says his company will make an announcement on that front in the new year.

Rapp says an alternative to matching Australia’s tax breaks would be to take the “Code” model the Government had applied in Otago, and expand it and implement it nationally.

In late 2019m, Clark announced $10m for a “Centre of Digital Excellence” in Dunedin, which has supported game developers in the city.

Clark did announce a funding boost for Code overnight – but it was a modest $1.2m.

Another issue identified by the NZGDA report was problems accessing funding for early-stage gaming companies.

Although venture capital investment is at record levels, Rapp said the talent squeeze made it harder to attract money. VCs would not put money into startups that lacked the staff to implement their plans.

The past 12 months have also seen two major game studios sold offshore – Auckland’s Ninja Kiwi and Wellington’s A44 Games, while Weta Digital’s technology division was picked up by US gaming company Unity Software.

Rapp saw such sales as an opportunity rather than a problem for the industry. Jobs were onshore, and the new owners would help with international expansion.

Lack of diversity still an issue

Another issue – and one that’s ongoing – is somewhat more of the industry’s own making.

The NZGDA’s survey revealed the industry is still dominated by white males, mirroring an issue faced by the tech industry overall.

Female employees account for just 19 per cent of game studio staff; 13 per cent identified as Asian, 3 per cent as Māori and just 1 per cent as Pasifika.

Rapp said the NZGDA has created a new executive director role – which will be filled by ex Startup Dunedin director Leanne Ross in January. One of Ross’ key assignments will be assessing ways to boost diversity through the likes of scholarships, sponsoring people to attend events and working with the industry and Government on training and education initiatives that will draw a wider range of people to the industry.

But in the near-term, she conceded the pandemic could have made things worse in terms of gender diversity.

“in response to the lockdowns, a lot of women, especially women in tech, have had to stay home with their children, which is a really tough decision for a lot of families to make. Like much of the tech industry, we’ve also been impacted by that too,” she says.

Wynands says the sector still has a long way to go.

“The games industry globally has historically struggled with diversity and representation, especially for larger mainstream games and studios.

“There has been movement over the last decade, with more women and minorities entering the industry and more diverse content than ever before, and toxic workplaces exhibiting discrimination, harassment, and bullying being exposed.

“But the New Zealand industry collectively hasn’t really managed to get representation of women up past the industry average, and Māori and Pasifika are very underrepresented, though these are known issues to the industry and the NZGDA.

“PikPok has made a lot of headway with our sustained efforts in changing recruitment practices, maintaining a diversity and representation committee, ongoing Maori language classes and starting to translate our games to Maori, ongoing sponsorship of initiatives like Tech Day for Girls, and being proactive around representation in our content.

“We have a lot more to do, especially with respect to neuro-diversity and Māori and Pasifika, but are pleased with our progress with 33 per cent of the studio being women and Māorinon-binary currently.”

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