news The Federal Government tonight announced as part of this year’s Budget that it would cut $10 million of remaining funding to the Australian Interactive Games Fund, in a move which at least one commentator has already said will “destroy” Australia’s video games industry.
The Interactive Games Fund was announced in November 2012 by then-Federal Arts Minister Simon Crean. At the time, Crean announced an additional allocation of $20 million over three years to Screen Australia to support the interactive entertainment industry — namely, local video game development.
The Interactive Games Fund commenced in 2012/13, delivering $5 million per annum in the first and second years, jumping to $10 million in 2014/15 — which is the funding being cut tonight. The money had been earmarked to help build a sustainable base for video game development firms to grow in a global market. It billed itself as recognising the international potential and originality of our local interactive entertainment by assisting Australian companies during a period of increased pressure following major shifts in the market.
In its briefing notes regarding the funding program, Screen Australia has noted that a number of factors had stopped Australia’s video game development scene from developing as far as it has in other countries.
Firstly, there has been fewer console titles commissioned, with publishers focusing their resources on established blockbuster titles such as the Call of Duty franchise which typically achieve greater returns than lower profile games. Exacerbating this trend has been the fact that, at the time the fund was established, gaming consoles were late in cycle, with machines such as the PlayStation 3 and Xbox 360 having been in market for many years. This also resulted in a contraction of the overall amount of development work.
The impact of the global financial crisis in the US and Europe had also meant consumers were buying less games, preferring to purchase a smaller number of high-quality titles. Video game development has shifted in some part to lower-cost development regions such as China, India and Russia. “As a fee-for-service location, Australia is no longer considered cost competitive due to the strong Australian dollar, which has risen steadily against the US dollar from the late 1990s to 2011, with severe impacts on the local industry,” Screen Australia wrote.
In addition, “the local talent pool has been severely diminished as a consequence of recent studio closures, which resulted in the loss of hundreds of jobs. As the local industry is too small to absorb the employees from defunct studios, many of them have moved overseas. ”
“The local industry was well positioned to take advantage of digital distribution platforms due to the skills development and training facilitated by local console development activity in the 2000’s. But without a critical mass of talent and experience, the industry will not be able to rebuild in the future, even with the return of favourable trading conditions such as a more competitive Australian dollar and the forecast upturn in physical retail sales over the next five years.”
With the cutting of this Government funding, Australia’s video game development scene now has no buffer against these factors, meaning it is likely to remain nascent.
The funding cut has already been slammed by commentators in the industry. Matt Sainsbury, publisher of site Digitally Downloaded, wrote tonight that it disappointed him “in the extreme” to see Australia’s video game industry unable to compete with the video games output of locations such as Canada or parts of Europe, where developers enjoyed generous tax breaks, or with cheaper development locations in Europe.
“I personally know multiple (multiple) game developers that relied on that money and absolutely needed it in order to get their games made,” Sainsbury wrote. “As an opportunity, that money is now gone. All $10 million of it. No renewals into the future. So, next year, a game developer that might have otherwise been able to get a grant to finish the game won’t have that opportunity. The game won’t get made – and you don’t need to be an economist to figure out that is not a healthy thing for a game development business.”
opinion/analysis
I’m in two minds about this one.
On the one hand, Sainsbury is right — $10 million is a tiny amount for the Federal Government (not even a rounding error) but it will have a huge impact on the local video games development industry, which will probably dry up overnight. In an age where the Federal Government continues to fund all other forms of artistic endeavour (including film, TV through the ABC and SBS, music and even ballet, for example), you would expect a huge entertainment market such as video games would receive at least a smidgeon of capital support.
However, on the other hand, as I have written many times, I personally am a fan of small government. I fundamentally do not approve of the Federal Government meddling in private industry too much, and it seems ludicrous that some video game studios should receive vital funding from a bunch of bureaucrats in Canberra while others go without. Governments should not be making those kinds of choices.
What I would personally like to see the Government doing is supporting the local video game development scene through, as Sainsbury mentioned, the kind of extreme tax breaks we tend to see in Canada and throughout Europe. If you cut the corporate and payroll tax rates for video game developers severely, and incentivise venture capitalists to fund local studios, you’ll see a huge but gradual shift in the local industry. I don’t think we’ll see such tax breaks in reality, meaning this Budget is the worst of all worlds for the local video game industry, but it does bear mentioning that this is the better long-term solution to this problem. A $20 million fund was never going to sufficiently stimulate the sector.
Image credit: Mykl Roventine, Creative Commons
Tonight’s budget is fair.
I don’t support Lib’s: I think it’s a well spread result.
My low income fluctuates wildly, my family doesn’t qualify for family tax B yet I know people better off than us who were getting it.
Great to see middle class welfare handouts stopped, because it wasn’t fair and didn’t benefit those who are the worst off in society.
I don’t think a budget that removes the only source of support – corporate or government – that sustains an entire industry is “fair” at all.
Government saves $10 million. That’s nothing. And in the process they ruin what was left of the games industry.
Fair it may be*, but sensible it is not. They are literally butchering the economy in a desperate attempt to make a short term reduction of the national debt. A national debt which is one of the smallest in the world.
*note I don’t think it’s fair either, given one of the world’s largest industries is being ignored while so many others get support of some kind
The other side and unions wont help.
You worry about $10 mil – In the space of 7 days they will cost Australia $700 mill
http://www.sbs.com.au/news/article/2014/05/12/tugboat-worker-strike-could-cost-700m
Games are a teeny slice that don’t contribute much to the economy. The private sector covers that, find some sponsors be innovative. If they need the government to pick up the tab there’s something wrong with the business model.
So… you don’t know anything about the games industry, huh?
There are no sponsors – all the big publishers pulled out of the market years ago following the dollar hitting parity.
Because there are no incentives (either grants or tax breaks) to encourage game developers to stay in the country there also isn’t the skills or experience required to build a reasonable and competitive studio in Australia.
After successive Governments – both Labor and Liberal – broke the games industry down completely, that $10 million was a critical investment that was helping to encourage developers to stay in the country and produce products – after which they were more sustainable businesses. This had ALREADY BEEN PROVEN TO WORK, with the previous $10 million successfully assisting a few developers.
That $10 million, which means nothing even to the insanely conservative LNP, was seed money that was helping kickstart the industry again. And now its gone, for purely ideological reasons – Labor launched the initiative, so LNP will take it away.
As for the industry – games are rapidly overtaking film as a dominant commercial art media. It’s culturally embarrassing that Australia isn’t a part of it (especially since once, Australia was an important part of the global market).
EA is still here.
But if they were getting any of this funding, I doubt they’ll hang around.
Though I would hope they didn’t qualify for funding being such a large Corp.
EA, the distributor, is a different part of the market; Australia’s games distribution market will remain as long as there are, well, games in boxes to distribute.
EA’s only development studio in Australia is Firemonkeys; the guys that made Flight Control and Real Racing. Firemonkeys and Halfbrick are the only two studios of any real size that I can think of in Australia. Neither was receiving money from these grants. But two studios (especially two so narrowly focused on mobile games) aren’t going to build the range of skills and financial opportunities that this industry needed.
I’ve done some coding. If that counts?
Both my brothers are in business, one makes his own hummus and supplies it to retailers, the other has a small courier run – no grants, no tax breaks, no incentives … they did it.
What makes you different?
The difference is the potential Greg. No offence to you and your brother, but you are small. Your target market is relatively local. To reach a larger market you need a much greater input of wealth.
The potential for the gaming industry is worldwide. So a small relatively cheap to run company, can reap enormous reward. Yes it is a bit of luck. But the potential is there and is being tapped by people all over at the moment. An example is Fruit Ninja. A locally developed game that has done very well.
With a game, you have to invest to develop the concept, build it and then sell it, and you aren’t guaranteed of doing well even then. But if you do get noticed, the potential for earnings is much higher than say driving a truck. Those potential earnings then go to building new games, which are more likely to earn once the first game is “known”. This means that more money comes into Australia from Overseas, which means a small company can grow into a larger company, which employs more people, and can create more products.
Less than 10 years ago we had an excellent pool of skills in the gaming industry. The changing industry and strong dollar killed that. But now small app like games are very lucrative, and even though they can be produced cheaper in china/india/whereever. The baseline cost is still low in Australia.
This fund could have been the $10 grand to get a couple of indies over the hump to allow them to get their game out there. That $10 grand could easily become $400 000(Fruit Ninja as an example) a month, which is taxable income.
http://www.businessinsider.com.au/fruit-ninja-makes-400-thousand-a-month-from-ads-2012-7
So for $10 million dollars, which is chump change, you have the potential to open up much much larger sums of money. Most of which comes from overseas as well, so it is a net gain for Australia, an export in a time when we are importing more than we export.
Considering they have put $240 Million into school chaplaincy programs. Perhaps a little of that could have gone to growing an industry that actually has real potential in Australia.
If I want to keep working in the games industry, looks like I’ll never be able to move back to Australia! :(
Sorry Woolfe – Offense is taken.
Developing a product to sell in the Australia Food sector, requires more than just a truck. Labelling, Recipe and safety testing, market research and the nous and hard slog of getting it onto the supermarket shelf, starting out one supermarket at a time, meeting expansion requirements as orders increased.
Then there are production controls, food safety standards, expiry date labelling, barcodes.
None of that magically fell into my brother’s truck and he was not subsidised. He is now looking at expanding overseas and exploring some pathways to achieve that without needing the govt to hold his hand.
It is unfortunate that you feel you can’t make the living that you want in Australia.
Maybe some of that is internal? Were you brave enough to try?
Shrug, you being offended is your own issue.
You need to think about your base market. Your brother has the potential to reach how many clients? At how much profit?
Now think how many people have mobiles. All over the world. That is the gaming market.
Your market is local you are limited to where you can physically operate. The Gaming market is international. They are limited by who can download the game.
The Games industry has a much greater potential to reach larger markets for a lower investment. Simple as that. Sorry if you don’t like it, but it is a reality, and it is a reality that we could be a much greater part of.
By the By, I think startups like your brother SHOULD be getting assistance with those elements he had to deal with. Because we need competition, and those first hurdles can often be the hardest to get past.
That said I am also of the belief that anyone that gets assistance should have to pay it back.
I think games are great. Don’t get me wrong.
I think games will play an integral part in human society in the future.
There is a growing evidence that supports the view that they are beneficial for people with cognitive disorders.
A smart developer will realise the potential of this and team with experts who understand the neurological and psychological research to find practical applications.
Rock and roll bands and performance artists who are passionate about their field have agents, managers. and promoters.
There is potential for the savvy to see the future medical fund as an opportunity and leave behind those who have a myopic outlook.
Where is the vision in being kept in an incubator waiting for someone to discover your talent?
Thats the thing though, its not about being KEPT in an incubator, but that there is an incubator in the first place. Small business has had handouts in various forms for decades, generally to get started and to have a chance at surviving. The games industry tends to be excluded from that, because of the scale of what they are trying to do.
So they cant get off the ground to have a chance of surviving. Time after time studios have started, had some success, and because of the fickle nature of the industry, closed.
I watched friends working for Krome work on some products that had some success (Ty the Tasmanian Tiger, some Barbie stuff, Spiro) on a global scale, then 2 years later they were out of business because of a failed product or two.
A game of Hellboy was one of them. Millions invested, basically zero returned after it was a massive flop. Reasonably big name product, hampered for one reason or another, and in the end they lost a lot of money. Another game not long after goes down the same line, they cant operate.
You’re not talking about a business that rolls out a product every other week, they’re investing time and money for two or three years before release.
So instead of saying we’ll prop you up in case things go wrong, they say goodbye to these skills in this country. Thats pretty much the result, given our own market is too small to support them. They HAVE to target a global audience, not just the local supermarkets.
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