Griffin on Tech: Corporate welfare or the key to retaining top tech talent?
It was great to walk through Wellington’s Tākina Convention Centre last Friday and see such an eclectic mix of video game developers and entrepreneurs gathered for their annual industry conference.
Some of the projects showcased there demonstrated an industry using cutting-edge technologies to break new ground in video games and AI is set to exponentially expand what is possible.
Video games are now a sizeable industry here. New statistics released by the New Zealand Game Developers Association suggest the industry grew 26% to $548 million in 2024, impressive growth in a dire economy and with the vast majority of that revenue generated as exports.
Video games are also a high-value industry segment, generating revenue per employee of $499,500, up from $390,000 last year. There are 1097 people employed in the industry here. A years-long campaign to win tax subsidies for the industry paid off towards the end of Jacinda Ardern’s second term in government when Labour introduced the Game Development Sector rebate with funding of $160 million over four years.
It was aimed at countering generous rebates on offer in Australia, where between federal and state tax subsidies, developers can access tax rebates of up to 45% on development costs. Our scheme allows for 20% of costs to be recouped and it was revealed at the NZGDA conference that 32 game developers had been awarded a total of $22.3 million of a total allocation of $40 million for first year of the scheme.
Source: NZGDA
Among the recipients were Grinding Gear Games, PikPok, RocketWerkz and Wētā Workshop. They are required to do all of their R&D in New Zealand, an important point given some of our larger game development houses are now in foreign ownership.
There has been criticism of this scheme as corporate welfare, mirroring long-held concerns about the subsidisation of the film industry.
“As a businessman, Luxon knows the only way to balance the books is to end corporate welfare,” former ACT Party leader and MP Richard Prebble wrote in the Herald this week
“The taxpayer subsidising Hollywood movies makes no sense.”
Well, it does if you actually want to continue to have an industry that attracts some of the best projects from around the world. When it comes to video games, our industry was bleeding talent to Australia at an alarming rate. The subsidies seem to have staunched the flow. According to a NZGDA survey, 53% of video game studios expect to grow 2025 financial year, with a third forecasting growth of 20% or more. 35% expect to hire more staff in the next year.
The success of our video games and film industries are intertwined, sharing technology and people. The subsidies are worth it to keep a highly-skilled workforce here, diversifying our economy away from primary sector exports.
But as IT Professionals NZ chief executive wrote on Tech Blog this week, the dire state of our economy and the lack of opportunities for graduates in the tech sector will see our best talent heading for the doors.
“If our tech graduates cannot find jobs, they will either switch industries or leave for Australia, creating a skills gap that will be felt for years. The ripple effects of under-investing in junior talent will have profound and lasting consequences,” Vic wrote.
The video game sector is feeling that underinvestment, with 31% of studios identifying a shortage of experienced programmers as their most acute talent bottleneck. 15% of new hires came from overseas and 25% from other gaming studios - poaching talent is rife.
“98 staff were on work-supported visas as of May 2024, highlighting the industry’s reliance on international talent to address skill shortages,” the NZGDA pointed out.
It makes sense to subsidise industries that we value and that would probably disappear overseas if we didn’t. But if we aren’t doing enough to build the talent pipeline to supply our tech sector and sub-sectors like video game development, we’ve got much bigger problems that R&D subsidies won’t fix.
