Government support for the video game industry
Many submitters commented on current and previous government assistance
available to Australia's video game development industry. This chapter outlines
the Australian Interactive Games Fund (which was discontinued in 2014),
existing non‑specific industry support that the video games industry can
access and state government programs that support video games developers. Following
this, the chapter outlines specific government support programs for the video
games industry that are available in several other countries and which various
individuals and organisations endorsed in their submissions.
This chapter concludes with the various arguments put to the committee
for providing government assistance to support growth in the domestic video
game development industry.
The former Australian Interactive Games Fund
In 2012, the then Minister for the Arts, the Hon. Simon Crean, announced
the establishment of the Australian Interactive Games Fund (AIGF), to be
administered by Screen Australia. The objectives of the AIGF were to 'promote
industry growth and sustainability, support the development of new [intellectual
property], encourage skills retention and renewal, and maximise the creative
opportunities of fast broadband'.
Mr Tony Reed, the Chief Executive Officer of the Game Developers'
Association of Australia (GDAA), explained that the AIGF was intended to
address the 'lack of sophisticated investment' that creative industries such as
the game development industry encounter. He stated:
Without that investment it is very, very difficult for
companies to invest in experimental ideas and to take risks. As such, when we
built the fund and created the guidelines for it, it was about exactly
that—addressing that need to take those risks. We still do not have that
network. There are no incentives for investors to invest in the innovation in
Australia. That was what the fund was originally intended to address.
The AIGF commenced in 2012–13, with $20 million earmarked for three
years. Of the $20 million, $5 million per year was provided to Screen
Australia in the first two financial years of the AIGF's operation. The
remaining $10 million was not provided as, in the 2014–15 Budget, it was
announced that the program would be discontinued. The AIGF ceased operation
from 1 July 2014, with new applications no longer accepted following the Budget
Design of the AIGF
Screen Australia developed two programs as part of the AIGF: the Games
Enterprise program and the Games Production program. Under the Games Enterprise
program, applicants could seek funding of up to $1 million (allocated over a three‑year
period) for operating costs that would grow their business as well as a
contribution towards the costs of specific projects being developed.
The funding was provided to recipients in two components: grant funding and a
loan. At least 25 per cent of the funding was treated as a loan.
The Games Production program provided assistance of up to $500,000 per
individual project (that is, funding to assist the development of a single
Under this program, funding below a $50,000 threshold was provided to
developers as a grant, whereas funding over $50,000 was treated as a recoupable
The AIGF was intended to be self‑sustaining; that is, funds repaid
or recouped would be allocated to further funding of the programs.
The GDAA advised that the industry proposed the self‑sustaining feature
of the AIGF as it was determined 'not to become a sector reliant on patronage
The self-sustaining design of the AIGF was demonstrated by evidence from
a funding recipient, Tin Man Games. Mr Neil Rennison from Tin Man Games
informed the committee that a quarter of the funding provided to his business
is required to be repaid within five years.
Another noteworthy feature of the AIGF's design is that Screen Australia
utilised advice from industry experts, both in Australia and from other
countries, to assist it when deciding which companies to support.
Projects funded by the AIGF
The $10 million available to Screen Australia during the operation of
the AIGF was spent as follows:
approximately $6 million was used to support ten development
approximately $3.7 million supported 36 game projects
around $120,000 was used for sector building, such as to support
'professional development and screen culture activities'.
Evidence regarding the abolition of
Mr Reed noted that the decision to discontinue the AIGF was taken by the
Government 'without consultation or any attempt at understanding the purpose or
structure of the program'. He added that although the abolition of the AIGF
created a 'new hurdle' for the industry, it 'did not stifle creativity...[it] did
not hamper production'. However, Mr Reed is of the view that the 'absence of
the fund impedes the growth of the sector'.
Whether the AIGF was designed appropriately and was a successful
program, or likely to be a successful program, was discussed in submissions and
explored by the committee at the public hearings. The Interactive Games and
Entertainment Association (IGEA) stated that it is difficult to assess the
effectiveness of the scheme given it ceased after one year of operation. However,
IGEA submitted the following comments:
Anecdotal evidence suggests that many of the studios that
were recipients of the initial funds were able to leverage those funds for
commercial success. One studio, Flat Earth Games, noted that initial AIGF funding
allowed it to bring its successful Australian release of Towncraft to
new platforms and overseas markets. Based on that success Flat Earth Games has
since developed three further interactive games. Such examples provide an
initial positive indication of the potential of a self-funding model of seed
assistance for interactive games development.
The GDAA commented that since the AIGF was discontinued 'several
companies and projects that received support through the program have achieved
global success'. The GDAA argued this demonstrates 'that the sector's
commitment and determination that the fund be self-sustaining was reasonable
At the Melbourne public hearing, the GDAA's Mr Reed added that the AIGF
'was working'. He elaborated:
Some funding recipients have generated export revenues more
than 10 times the original investment from the fund. Some have doubled or
tripled the size of their studios or moved from contract arrangements to full‑time
employment. Many have won international awards for their work.
The committee was provided with examples of how the AIGF help facilitate
growth in the industry. Mr Neil Rennison from Tin Man Games told the committee
that prior to receiving funds under the AIGF program, the two directors of the
company were essentially working from home offices. Funding from the AIGF
enabled the business to hire junior programmers, which Mr Rennsion confirmed
was only possible at that time because of the funding provided.
As the following description of Tin Man Games' early days demonstrates, funding
under the AIGF program had a direct and significant influence on the
realisation of the business' expansion plans:
We were working really hard with lots of contractors around
the world, probably punching well above our weight for two guys sitting at
home, but we had massive plans and we had already developed lots of
relationships with potential licensors. We were building our tech, and getting
that enterprise funding was just the catalyst. It opened so many doors for us.
We immediately hired three staff. We moved to permanent offices.
Having those key staff enabled us to suddenly have skill
diversity, because obviously the other director and I had a certain number of
skills, and having new staff on the team brought a whole load of new skills to
the table which meant that our technology became better very quickly. We were
able to release more titles quicker than we were before. Just since we have had
that funding, for example, we have released 23 new titles on iOS and Android,
and we have taken 11 of those and released them on PC, Mac and Linux.
Mr Rennison further highlighted the benefits to the business from the
additional employees made possible by the AIGF. He explained that Tin Man Games
was initially not planning to release its titles on PC, Mac and Linux
the titles would only be available on iOS and Android. However, the addition of
another team member with knowledge about the marketplaces for PC, Mac and Linux
products led to titles being released for those platforms. As a result, Tin Man
Games achieved a greater amount of revenue than it would have otherwise. Mr
I just looked at the figures this morning, and our 11 titles
on that marketplace since he has been employed have grossed US$160,000. So that
is just one person coming onto the team and the impact that person made.
Other businesses also highlighted the benefits from the AIGF for the
industry. Mr Benjamin Britten, Technical Director, Mighty Games Group, told the
committee that the AIGF's enterprise fund assisted Mighty Games to offer more
stable working arrangements that were necessary to attract skilled employees
from overseas. He explained:
As an employer at Mighty Games, right now it is kind of hard
to find talented people. Often we are looking for mid-level people or better
and it is hard to find those people locally. We do not have quite the long-term
stability that we need to say: 'Relocate back to Australia. We can guarantee
you 12 or 24 months.' We do not quite have that stability yet. The enterprise
fund was a stopgap to provide that for certain companies: 'Here's a chunk of
money so you have a stable base for two to three years. We know you're not
going to go out of business.' You can then start to take those risks and bring the
talent back in. Right now—at least at Mighty—we are looking at our current
growth and success, which we owe very much to the funds we got. With our
current success we can now start to look at bringing people back in. I think
trying to bring that stability out to the industry as a whole will allow us, as
an industry as a whole, to reclaim our Australian talent back to Australia.
The Chief Operating Officer of Screen Australia, the agency that
administered the program, argued that although the program was 'short-lived',
it 'did deliver against its objectives'. In particular, Ms Cameron noted how
the AIGF has assisted businesses to expand and retain local intellectual
property. Ms Cameron referred to the game Hand of Fate produced by
Defiant Development to illustrate this point:
The game is an original title for PC, PS4 and Xbox, and to
date has returned over $4 million to the developers—more than twice the
development cost. The team are already working on a sequel to the game. Defiant
owns the IP, controls the distribution and is the chief beneficiary of all
revenue...Defiant Development has gone from a company staffed entirely by
contractors to a company now with 18 full-time staff. We believe the fund has
made a difference, especially with reference to retaining local [intellectual
property] and building Australian businesses that can compete for a slice of
the fastest-growing entertainment sector.
In addition to the permanent employment created, Mr Morgan Jaffit from
Defiant Development informed the committee that the company now makes a
valuable contribution to government revenue. He advised that the business
received 'relatively small amounts of funding: $650,000 over three years',
which is 'roughly equivalent to the tax we are paying this year'.
Ms Cameron noted that, for the 36 game projects funded by Screen
Australia, the $3.7 million provided generated total production budgets of $14
million—a 'multiplier of more than four'.
Ms Cameron's evidence also indicated that, as ten of the 36 games are yet
to be released, the observable benefits from the AIGF are likely to increase
Current Commonwealth support
Since the abolition of the AIGF, Commonwealth support programs available
to video games businesses are not industry-specific. Programs referred to in
evidence received by the committee were the research and development (R&D)
tax incentive and the Export Market Development Grant (EMDG) scheme.
R&D tax incentive
The R&D tax incentive provides eligible entities with a tax offset
for expenditure on eligible R&D activities and for the decline in the value
of depreciating assets used for eligible R&D activities.
KPMG suggested that the R&D tax incentive is of limited utility for
video games businesses. It stated:
While some fledgling companies under $20 million aggregate
turnover benefit from this incentive months after the expenditure has been
raised and spent, the vast majority need upfront capital, not post-tax refunds.
By extension, more established companies or subsidiaries with global
parent companies, over $20 million aggregated turnover only receive tax breaks,
not cash refunds, under the Incentive. This means that if you are a game
developer in losses (a common scenario in the current Australian climate) the
only assistance program available to you simply adds to your losses, with no
immediate benefit whatsoever. More importantly, support for this industry
should not be limited to innovation that meets the requirements of the
Incentive; innovation in gaming is more subjective, and can come in the form of
new features or styles rather than completely new technologies.
KPMG added that the development of new engines or functionalities are
the types of development that are generally eligible under the R&D tax incentive.
However, it noted that these activities, 'at least initially', were undertaken
by the major global companies that have billions in revenue and the necessary
capability and flexibility.
Export Market Development Grants
The EMDG scheme is a financial assistance program administered by
Austrade that provides partial reimbursement of eligible export marketing
expenditure for small and medium enterprise exporters. KPMG argued that the
current EMDG scheme 'has limited application for software companies and game
developers' for the following reasons:
cashflow—KPMG stated that 'small game developers require upfront
cash to develop an exportable product, but the EMDG reimburses funds already
spent and up to 24 months after they were incurred'; and
the reality of exporting digital products—KPMG argued that 'the
current EMDG framework...precludes the claiming of in-house labour costs for the
production of display equipment...which are the vast majority of export product
development costs for video games'.
Changes that submitters suggested could be made to the EMDG scheme are
discussed in Chapter 4.
Initiatives under the National
Innovation and Science Agenda
In December 2015, the Australian Government released a policy statement
entitled the National Innovation and Science Agenda (NISA). As part of the NISA,
the Government announced that it will 'promote investment in innovative, high
growth potential startups by providing concessional tax treatment for
investors'. One aspect of the concessional taxation treatment is a 20 per cent
non-refundable tax offset on investments, capped at $200,000 per investor per
Mr Reed from the GDAA commented that the offset would 'very definitely' be of
use to businesses in the industry. He stated:
What we have seen in international territories where you do
have a very similar model is reinvestment straight back into the company. That
would be exactly the same. Back in the early 2000s, the games industry, for a
very short period of time, had access to the 10BA which provided a very similar
tax break. We saw, in that very short amount of time, reinvestment straight
back into the companies. The games sector does not generally take that money
and hide away with it. They want to play more so they make more.
Although this aspect of the NISA was viewed favourably, the committee
was informed that, despite the recent emphasis on innovation and preparing
Australia 'for the jobs of the future',
the Government has not engaged with the video game industry about how it could
support future jobs and growth. When questioned about his engagement with the
Government, Mr Reed stated:
In all of the dialogue and the vocabulary being used by the
Prime Minister right now...it describes us to a T. There is no question; we
encapsulate every one of the innovation arguments that he makes. But the
federal government has not reached out to us in any form at all—yet.
State government support
According to the GDAA, Victoria currently has the largest number of game
development businesses in Australia, with 48 per cent of businesses located in
that state. Queensland and New South Wales follow Victoria with 19 per cent and
18 per cent of total businesses respectively.
When discussing the support provided to the industry by the state
governments, submitters focused on the programs implemented in Victoria.
The programs offered by Film Victoria were put forward by the GDAA and
IGEA as being the most comprehensive support available in Australia for
interactive games developers. The GDAA and IGEA advised that Film Victoria
administers the following three programs relevant to the video games sector:
Assigned Production Investment—Games: under this program, funding
(generally capped at $150,000) is available to 'assist Victorian games
companies to produce a prototype or full game, and also for marketing and
related expenses'. In 2013–14, 14 games projects were funded at a total cost of
Games Release: grants of up to $30,000 are available to support
'newer and smaller interactive games studios to deliver a well-planned and
marketed release of their project'. In 2013–14, nine projects were supported
with a total commitment of around $173,000.
Games Professional Placements: a program that supports Victorian
games companies to engage a Victorian practitioner (six companies were
supported in 2013–14).
A former program referred to in submissions was the Victorian
Government's Technology Trade and International Partnering (TRIP) program,
which enabled Victorian ICT companies to apply for a grant to attend a trade
show or event that is relevant to their business.
Several witnesses indicated that the approach taken in Victoria to
support for the video game development industry has been successful. Mr Reed
from the GDAA provided the following overview of the current programs available
that are supported by the Victorian Government:
Victoria supports production funding, understanding that,
especially for new businesses, that project funding will help a new business
and mitigate some of the financial risk to them. It supports, very cleverly,
marketing. One of the great issues that we have in the digital distribution
space is getting to that audience and making them aware of the product.
Film Victoria have a special program that endorses and supports marketing,
and they also support internships into game digital studios, so they are really
nurturing that talent going forward.
Mr Benjamin Britten, who represented the Melbourne Chapter of the International
Game Developers Association (IGDA Melbourne), stated:
We tend to owe the maturity in the Victorian market almost
solely to Film Victoria support. They have been very good at supporting
games and very forward thinking in their support of the small-screen industry
as it were. 
The GDAA argued that the state level support has 'contributed
substantially' to the large share of businesses that Victoria has.
The submission from QUT's Digital Media Research Centre stated that, based on interviews
and other discussions with developers, the programs in place in Victoria and
the 'lack of government support in Queensland' may have contributed to the
shift in 'the centre of gravity for games development in Australia...from
Queensland to Melbourne'.
Government support available in other countries
A variety of tax incentives and dedicated government programs designed to
support video game development are in place in countries with established and
successful video game industries. The following paragraphs outline the key
programs that submissions identified.
Submitters outlined both provincial and federal support that is
available in Canada.
IGEA submitted that several Canadian provinces 'provide competitive tax
incentives for games development as digital media' consisting of refundable tax
credits ranging from 17.5 per cent to 40 per cent.
Various submitters highlighted the programs available to game companies in
Toronto. These include:
the Ontario Interactive Digital Media Tax Credit—a 35 per cent–40
per cent refundable tax credit for eligible labour and marketing expenses up to
a C$100,000 per product;
grants up to C$50,000 for concept development and up to C$250,000
for production 'with a 1:1 matched funding model';
support from the Ontario Media Development Corporation (OMDC),
which provides grants up to a maximum of 50 per cent of a project (capped at
C$150,000). The OMDC also has 'a trade development program they finance by
partnering with existing trade and event organisations'.
Support available in Montreal was also noted. The committee was advised
that the provincial government in Quebec provides video games companies with a
tax credit of up to 37.5 per cent. Further, the Montreal local government
provides support through 'programs to drive investment such as Montréal
International'. The following description of that program was provided:
Montréal International is a private/public nonprofit
organization dedicated to aggressively encouraging growth in the creative
industries in Montréal. It enjoys support from all levels of government
and also from the creative industries resulting in the immense benefits that
these structures create for the growth of said industries. Since its creation,
Montréal International has helped to attract $10.6 billion in foreign direct
investments to Greater Montreal. From these investments, 52,000 jobs have been
created or maintained. To date, MI's activities have also allowed almost half
of some 60 international organizations to establish themselves in the city and
attract and retain more than 9,000 international strategic workers.
The federal support available in Canada includes:
upfront R&D support, which can provide companies with less
than 500 employees up to 50–80 per cent of the total project
cost—Mighty Kingdom explained that 'unlike the R&D tax offset in
Australia, the Canadian R&D support 'is paid up front and not at the
conclusion of R&D activities';
support from the Business Development Bank of Canada, which has a
mandate to 'aggressively support video game start-ups within Canada';
'favourable visa conditions' to attract overseas talent;
support from the Canada Media Fund, which provides 'repayable
contributions for specific funds, and for development, production, and
Helsinki, Finland is home to large mobile game companies such as Rovio,
which developed Angry Birds, and Supercell. Mighty Kingdom prefaced its
overview of the Finland system by noting that Helsinki 'has become one of the leaders
in mobile gaming', with the combined annual revenue from these two companies surpassing
A$2.64 billion. Mighty Kingdom added that the companies 'are former
beneficiaries of government funding'.
Mighty Kingdom explained that support in Finland stems from the
Tekes system, which 'consolidates a number of different grants and loans
that cover almost the entire lifecycle of a business, from initial planning, to
R&D, and then on to commercialisation'. Relevant grants under the Tekes
the Planning for Global Growth grant—grants of up to 75 per cent
of various early stage business costs such as market research are available to
any small business under five years old Finland;
R&D grants—small businesses can apply for a grant of between
50–65 per cent of the R&D project cost, with simplified reporting
models available for small companies where the grant funding is under €100,000;
the Development and Piloting program—under this program, which is
intended to assist with commercialisation, small companies are eligible for a
low interest loan (with no collateral required) to cover 50–70 per cent of the
project cost. 
Mighty Kingdom added that the above programs are 'just the tip of the iceberg
when it comes to Tekes'. He elaborated:
Amongst the many other offerings, the system also identifies
promising young (6 years or less) companies that it will then provide
additional funding to accelerate their growth. Recognising the potential of the
games sector, a special €70 million Tekes fund, Skene, was set up in 2013 just
for game companies.
The committee was advised that, since 1 April 2014, companies can claim
Video Games Tax Relief for games that 'are British, intended for supply
and where at least 25 per cent of core expenditure (expenditure on
pre-development, principal photography and post-development) is incurred on goods
or services that are provided from within the European Economic Area'.
The games 'must be certified as a British production by meeting certain
Under this scheme, 80 per cent of eligible spending can be deducted or,
if the business is loss-making, these losses can be surrendered 'for a payable
tax credit worth 25 per cent of core expenditure (i.e. effectively a
payable credit of a maximum 20 per cent of total core expenditure)'.
Other tax benefits that are available to businesses generally, such as R&D
Relief, may also be utilised.
Mighty Kingdom, which expressed its preference for the profit-oriented
models used by Helsinki and Toronto, questioned the effectiveness of the
cultural criteria. It argued that 'there is still a place for arts-based
funding of games, but we are unlikely to see significant growth if funding is
still applied using irrelevant eligibility criteria'. Mighty Kingdom explained:
In theory, having cultural criteria leads to more uniquely
British products, but in practice, due to the commercial and global nature of
the business, they tend exclude far too many projects. At best, they result in
developers simply 'ticking the boxes' in order to get the funding. At worst,
they force developers to look elsewhere for support.
This situation often occurs when support for the games
industry is funded through creative or arts funding, often through an extension
of existing film or television funding. There are many problems with this
approach, not the least of which is that a game project never 'ends' in the way
that a film does; the most successful gaming projects are continuously
developed and updated for years.
The committee also received evidence about the support for video games
companies in the following countries:
France—a 20 per cent tax offset for production expenditure for
games is available.
New Zealand—the committee was informed of the Grow Wellington
program, which is intended to 'turn Wellington into an innovation destination'.
Grow Wellington provides a single point of contact for R&D, training,
mentoring, investment and funding programs. Mighty Kingdom explained that
'although they have limited resources themselves, by acting as a mediator for
all these services they take a lot of the burden off SMEs and allow them to
focus on building their product'.
United States of America—several states (including Florida,
Louisiana and Texas) have a tax incentive program for video games production,
with tax credits for interactive game development of up to 35 per
The case for government support in Australia
A recurring theme in the evidence taken by the committee is that the
video game development industry presents many economic opportunities; however,
the potential has not been recognised adequately in Australia. As the preceding
paragraphs suggest, many other countries have favourable taxation and
regulatory frameworks designed to encourage game development companies to be
based and grow in their jurisdictions. It was suggested that the lack of
similar incentives in Australia provides an additional challenge for Australian
companies that compete in the global marketplace with companies that have
benefited from support provided by their governments. Submitters also contrasted
the government support available to other domestic industries. This section
outlines submitters' views about the approach to government support in
Australia and explores the case for government support of the video game
Government support to help manage
recent economic difficulties and structural change
One of the reasons put forward for government attention to be given to
the video game development industry is the effect that the global financial
crisis and the appreciation of the Australian dollar had on the size and
structure of the industry.
Mr Zachary Griffin, the Founder and Chief Executive Officer of Black
Delta, focused on the effects that the studio closures and job losses caused by
the global financial crisis had on the ability of firms to recruit experienced
employees. Mr Griffin outlined the difficulties that Black Delta has faced
in recruiting employees; he informed the committee that two candidates the
business sought 'were both picked up by Microsoft and Amazon'. Mr Griffin
remarked that, in his experience, 'the only talent we do have in Australia
will, if it is any good, get poached offshore'. Mr Griffin concluded that the
industry 'needs to be artificially supported until such time as it can be on
its own feet and we have this talent here that we are fostering'.
Given the recent decline in the size of the video games industry in
Australia, submitters highlighted what they consider is an inconsistent
approach to the provision of government support to industries that have faced challenges.
5 Lives Studios commented:
In the past 10 years, we've witnessed the collapse of
companies like Krome Studios, which at its height had 400 employees, along
with Pandemic Studios, THQ Australia and Sega Studios Australia—each having
100+ employees at their peaks...When an automotive factory employing several
hundred workers is forced to shut down local operations, the government and
media take note. Compare that to when a multitude of games studios close their
doors in Australia, nobody is any the wiser.
Challenges with accessing finance
Even without developments such as the global financial crisis, video
game developers face difficulties obtaining finance. According to IGEA,
government support could mitigate the perceived financial risks that are often
associated with the development of interactive games (and many other forms of
content and technology).
The risks associated with video game development were explained by
Mr Morgan Jaffit from Defiant Development. He noted that 'never before has
it been so easy to get started in game development, with access to technology
and markets through digital distribution'. However, he added that successful
games in the industry 'remains at a one in five or 10 level' and 'few, if any,
private investors can afford to fund nine misses'. Mr Jaffit noted that
government support can provide a 'safety net' that allows 'developers the time
to find and polish' the experience that is needed to 'stand out from the crowd'.
Even when financiers are familiar with technology businesses there can
be challenges. Mr Leon Young, the Chief Executive Officer of 2and2, explained
that 'games creation is a content creation business and therefore it is quite
different from other tech start-ups'. He elaborated on this point:
Whereas typical tech start-ups only need to fund a minimum
viable product—that is, a very cut down version of that product to attract
initial customers and validate the market—video games are much more like
feature films. No-one wants to pay to see 10 minutes of rushes of a recently
commenced feature film. Likewise, no-one wants to buy a half-baked video game;
they want to see the fully realised creative vision. This means that the
financial ecosystem that has recently blossomed in Australia to support tech
start-ups is in some ways pretty inadequate for, and not very relevant to, the
video games industry.
Treatment of the video game development
industry compared to the film, television and music industries
The government support given to the film industry was also presented as
a reason for government assistance for video game development. Similarities between the nature of projects within the
video game industry and the film industry were highlighted; for example, ODD Games
observed that 'the video game industry is best akin to that of the film
industry whereby the success of the business lies on the typical hit or bust
In addition, it was suggested that video games should be considered an
art form and, therefore, there are cultural reasons for government
policies and frameworks that support the growth of the Australian game
Mr Paul Turbett, the founder of the Perth-based company Black Lab Games,
...games are becoming increasing[ly] important as a form of cultural
expression. Just as film started in the late 1800s as a technology experiment,
and went on to become an art form that reflected or challenged values in
society, games are fast becoming an art form also. The technology of games is
still in development, and the constructs and delivery means for provoking
thought and asking questions of the audience are also still being discovered.
Having seen the medium evolve significantly from the 1980s to today, I [firmly]
believe that games as medium will become a dominate form of cultural expression
in the 21st century.
This leads to an important question: Does Australia want to
be a contributor and exporter of 21st century culture, or merely a consumer and
Also on this matter, Mr Adric Polkinghorne wrote:
As I have ventured deeper and deeper into the games industry,
my life resembles that of an aspiring artist more each day. Game Development is
an art form, regardless of what trade you take up within it. Whether you work
for a multinational game developer or as an aspiring indie developer, you are
an artist none the less. As a result, it is only sensible that we treat the
games industry as equal to our film and music industry.
Various tax concessions are available to the film and television
industries, however, these are unavailable to the video game industry.
Stakeholders in the video game industry queried the rationale for this. An
individual quoted in a submission expressed their view that:
...there is a great deal more potential for the games industry here
in Australia than the film industry (which receives a lot more attention) as
games are not as vulnerable to cultural difference as films tend to be (accents
The relative stability of the video game industry, compared to the film
industry, was noted. The following observation given by Mr Reed of the GDAA is
instructive in that, potentially, government support for the video game
industry could have longer-lasting effects than support provided to the film
...we are a very labour-intensive industry as well, unlike
film, where it is quite disparate; after a project, people vanish into the
ether. We do not. We provide full-time employment, and our talent is
Submitters also questioned why video game development was not included
in other arts programs.
In particular, some submitters objected to the Government's decision, as
announced in the 2015–16 Budget, to redirect funding from the Australia Council
to establish a National Programme for Excellence in the Arts (NPEA). Interactive
games were not included in the NPEA.
The program that replaced the NPEA similarly excluded interactive games.
Other programs available to
small-to-medium sized enterprises are of limited use
The point that video game developers need access to measures designed
with the specific features of the industry in mind was also made by
highlighting existing small business measures that are of limited use for video
game developers. For example, Stirfire Studios remarked that the expanded
accelerated depreciation for small businesses that the Government announced in
the 2015–16 Budget
was 'not particularly useful to a single developer or small team working
on their project'. In this scenario, Stirfire Studios explained that the
chief investment is the labour cost; that is, the time of the people working on
the project. Stirfire added:
Although as game developers we do have hardware and software
costs, often we are starting off with small budgets, if really any capital at
Government support for the game
industry is successful in other countries
The approach to government support for video game development elsewhere
was also discussed. It was argued that tax credits and government support
programs in several other countries (such as Canada and the United Kingdom)
have been successful in supporting the growth of the video games industry in
Mighty Kingdom submitted that 'investing in new [intellectual property]
is risky, and therefore government support is crucial'.
It argued that the existence of extensive government support programs in other
countries makes it challenging to compete with international firms. Might
There is not a level playing field internationally when it
comes to support for the games industry. When considering starting a games
company there are many more reasons to look overseas than there are to look
The video game industry can make a
valuable contribution to the Australian economy and government revenue
The contribution that the video game industry could make to the economy
was another issue canvassed by stakeholders in support for targeted measures
designed to encourage growth in the industry. In this regard, the export-oriented
nature of the industry was emphasised. Mr Reed from the GDAA stated:
Our markets are around the world. We are entirely export
orientated...and we look at all territories as potential markets. We do not make
games specifically for any particular territory. This is particularly true of
Australia. We are export-oriented because Australia is two per cent of the
global market. It really could not sustain an industry of our scale. So we look
to the Western markets. The reason we are as good as we are is that we do not
see ourselves as being competitors. We see the rest of the world as our
competitors. That is the bar we challenge ourselves with.
Mr Reed added that the Australian industry's focus on foreign video game
markets provides a benefit for the Australian Government, as the revenue
generated from overseas sales 'comes back into Australia as taxable income'.
Accordingly, Mr Reed argued that the 'economic argument for supporting
games is compelling'.
Submitters also suggested that the treatment of the industry in other
countries supports the development of other emerging technologies that will be
essential for future economic activity. Mr Jack Kimberley commented:
One of the more important factors of how the games industry
is treated in Canada, is that it is not just recognised as entertainment, but
also as research...[G]ame development is at the forefront of computer
science/entertainment/animation/psychology and communications research, and is
more often becoming involved in the creation and development of the emerging
technologies across a multitude of different industries which will ultimately
change the future of the world.
Key stakeholders saw government assistance as being necessary to enable
the industry to grow, not to support an industry that was fundamentally
struggling. For example, Ms Giselle Rosman from IGDA Melbourne noted that
the Australian game development industry will continue to exist and make games
without government involvement. However, Ms Rosman stated that 'we want to grow
the sector, stabilise the industry and ensure Australian games have the best
opportunities with regard to commercial, cultural and artistic success'.
Mr Reed similarly argued that the industry seeks government intervention to
allow it to grow:
Why do we seek government intervention? It is for the same
reason we always have. The sector wants to grow. We want to create more
content. We want to provide more employment opportunities. We want to be
significant contributors to Australia's cultural knowledge and financial
To support this reasoning, the exceptional potential for growth in the
Australian industry was emphasised. Ms Giselle Rosman from IGDA Melbourne
argued that the Australian industry benefits from being 'native speakers of the
language of the internet—English' and from cultural similarities with North
America: 'the powerhouse of the Western game development world'. In addition,
Australia benefits from its geographical and social ties 'with the lucrative
Asian market'. Ms Rosman concluded that Australia needs to 'make the most
of' these advantages.
Professor Stuart Cunningham noted that the video game industry does not
appear to be as reliant on government support to survive as the film industry.
Instead, support is called for to enable the industry to grow. He explained:
Film industry leaders have always been clear: we cannot
survive without ongoing government support. Games industry leaders do not make
that claim. The claim they do make is: if you want to grow an industry and have
it achieve some viability and have it play an important growth role in
employment, high-tech recruitment and cultural outcomes, then you probably do
need to support it. The amounts are tiny, but the impacts can be significant.
People do not stay in the games industry if they are not viable. Businesses go
bust. They are small businesses typically, but if they are not making enough
money, they go bust. As you saw, almost every leading games company, or
two-thirds of them anyway, went bust in the GFC. How many film industry
companies went bust in the GFC? Not nearly as many.
Furthermore, evidence of government support successfully enabling
opportunities and growth was provided. Mr Benjamin Britten from the Mighty
Games Group provided the following example of a successful return on government
Mighty Games, specifically, were funded by Film Vic and
Screen Australia for two different projects and when we do our tax at the end
of this year we will have paid back by twice in taxes the amount we got from
the government. If you do the math, that is about 10 times or 15 times
Referring to Mighty Games again, Ms Rosman stated:
Mighty Games was fortunate enough to receive funding from
both Film Victoria and the discontinued Screen Australia fund. These funds were
instrumental in making it possible for them to release Shooty Skies, which has
already had over five million downloads since its release in October last year.
Shooty Skies has already generated revenue nearly 10 times the funding it has
The Victorian Government assistance has been particularly useful for
smaller businesses. Ms Giselle Rosman, who represented IGDA Melbourne told the
committee that the amounts of funding available from Screen Victoria 'are not
massive but they are enough to make a difference to start-up studios'.
However, the committee was also informed by Mr Benjamin Britten, who also
represented IGDA Melbourne, that at least ten studios have successfully
expanded and are now 'a bit too big to take advantage of Film Vic funding'. Mr
Britten argued that other potential government programs, such as tax offsets
and investment funds are more relevant to those larger businesses.
Other matters to consider
Although key stakeholders were in agreement that government assistance
presents several benefits, consideration needs to be given to how any support
provided by the Australian Government can be most effectively deployed.
As this chapter has demonstrated, the Australian Government and state
governments can develop incentives and programs to support the video game
development industry. It was argued that it would be desirable for some degree
of coordination between different levels of government in the development of
support programs. Mr Mark Goninon suggested that the Australian Government
should also encourage state governments to complement any Commonwealth
assistance with state-level support for video game development.
Policymakers were also warned against the adoption of programs and tax
incentives in place in other countries without consideration of whether they
are appropriate for Australia or need to be adapted for Australian conditions.
For example, Dr Dan Golding submitted that 'Australia has a global profile as a
hub for thoughtful, creative, and independently-minded game makers'. Although
he acknowledged that Canada and the United Kingdom 'do in many ways have
admirable industries', Dr Golding argued that:
...endeavouring to uncritically transplant the international
model for success can only continue to fail to grasp what kind of creative
videogame culture already exists and is already successful in Australia.
When considering and designing government assistance programs, it was
also argued that care should be taken not to risk the future of the studios
that have survived or started since the global financial crisis. Mr Reed argued
that if an incentive scheme was developed to encourage large, international
publishers back to Australia, it 'would swallow the talent that we have in our
independent space right now'.
Mr Reed stated:
We do want to protect what we have. It has been a lot of hard
work and a lot of sweat equity for the developers to build the success that
they have. We do not want that undermined in any form.
The final point that this section will discuss is the argument that any
government support provided to the video game development industry should
ideally encourage, or be contingent on, recipients of the support working to
address identified problems in the industry. For example, with respect to
gender diversity, Dr Golding argued:
I would...strongly suggest that, if any tax breaks or funding
mechanisms were installed to focus on the games industry, it would be a
terrific idea to include at least a program that rewards companies that
actively pursue a diverse workforce, and possibly representation as well.
The evidence presented to the committee provides several examples of how
government programs for video game developers, both in Australia and in other
countries, have been valuable in promoting the growth of a sustainable
Additional government programs or policies that support or are favourable to
video game development could help ensure that Australia secures a greater share
of the economic activity and highly skilled jobs this growing global industry
Nevertheless, Senate committees and the Australian Government often hear
enthusiastic cases for particular industries to receive government support or
tax incentives. Of course, it would not be possible for the Government to
fund every program that interested parties propose, regardless of merit.
Accordingly, the committee has devoted a significant part of its deliberations
and this report to considering the merits of the various specific measures that
video game industry stakeholders proposed. Among other things, it is essential
for proposals to respond to a demonstrable problem, have a clear goal and be
The next chapter examines specific proposals in detail. The committee's
overall conclusions are outlined in Chapter 5.
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