‘Unmatched export margins’: Game development could be serious business for Australia — if there was some support

Recently, Creative Victoria and Film Victoria announced the state government would open a $19.2 million fund, earmarked for “attracting international and local screen projects” to the state, to video games studios for the first time. Previously the initiative was only open to film and television production.

This initiative is in addition to various other support the Victorian government has provided to video game studios over the years, and significantly eclipses the investments other state governments have put into local game development.

Federally, there has been no support for game development in any form for years now.

So is it any wonder that the bulk of Australia’s game development activity happens in Melbourne? 

As with any creative industry, video game businesses are self-sustaining once they have intellectual property (IP) and cashflow, but the initial production of video games is both expensive and time-consuming.

To foster a healthy, thriving sector, where startups are viable, it’s important to have access to avenues to cover that initial resourcing.

That’s where government grants and support have been so valuable in building up the Melbourne development community. 

The bulk of these development studios are small businesses — with teams of 1 to 50 people — that have produced IP that has seen both commercial and critical successes worldwide.

Melbourne-produced games in recent years have included The Untitled Goose Game, Crossy Road, Necrobarista, Armello, Cricket 19 and Real Racing — and these are all highly valuable brands in the gaming market. 

What’s more, the games industry is one that brings money and investment into the country.

Because games are sold worldwide, a full 83% of revenue from game sales comes from overseas markets to game developers.

There are few sectors that able to contribute to the growth of an economy with those kinds of export margins.        

And, as a result of COVID-19, the games industry has been an investment darling.

With people staying at home and relying on home entertainment more, video games have enjoyed robust sales, and this has translated to US$9.9 billion ($13.3 billion) in worldwide investment activity from just three quarters.

One acquisition alone — Microsoft’s acquisition of Bethesda — was valued at US$7.5 billion. And earlier this month, Take-Two acquired UK publisher Codemasters for almost US$1 billion.

The interest by investors in video games is hitting renewed fervour.     

Finally, game development requires STEM-based skills, and many developers and engineers begin in game development before moving into other, highly technical fields.

As Australia looks to transition its economy from resources-based to one that focuses on high-value innovation and technology, the games industry can be a valuable feeder sector for STEM talent, and an innovator in its own right.

A few years ago, NASA tapped the talents of one Melbourne-based game developer, Opaque Media, to design a simulator that it could use for training astronauts. This is the kind of innovation that governments love to celebrate.

Earlier this month, the NSW government announced a $175 million investment in screen production through the Made in NSW fund which will, among other things, assist with having two Marvel films shot in the state.

There is no doubt there’s value to having such large productions made in Australia — for the jobs, expertise and opportunity that they provide the local screen industry.

However, they’ve yet again missed the opportunity to introduce support for the games sector. There remains no dedicated game development incentive in NSW, and that’s a story common to many states across the nation.

It is important that governments at all levels understand the opportunity that is present here. 

All the indicators are that Australia’s games industry could explode in size and scale with the right infrastructure support.

So we continue to ask why — outside of Melbourne where the success of government support to this sector is so clearly proven — are state and federal governments so hesitant to invest in the local video game industry?