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Ready player one . . . to head over the ditch

The best and brightest of New Zealand’s gaming industry are concerned that an Australian tax subsidy could hit the local industry hard as talented staff depart. reports.

Daniel Smith

Derek Bradley is a world-builder. The chief executive of Wellington game studio A44, does not discuss his work in terms of consoles or gameplay, but in the meticulous environments his studio creates.

But the world of this local game studio is under threat.

Unlike the games he creates, the threat is not dragons, wizards, or trolls, but Australian tax incentives.

The Australian government is rolling out a 30 per cent federal tax offset for the video game industry. Businesses that set up in the Melbourne CBD are offered an extra 10 per cent on top.

This means that every time a video game company worth over $500,000 spends a dollar in Melbourne, they get 40 cents back.

That discourages global companies from investing in New Zealand, when there is a much better deal next door, Bradley says.

“It is just a simple risk calculation in an industry that is inherently high-risk. If you can take 40 per cent of the risk away it is an easier sell for investors,” he says.

The move will also give Australian game studios the ability to offer much higher salaries, which could see the local talent pulled out of the country at a rapid pace.

“It will create a vicious cycle. If Australia is able to offer more money, they will attract more talent, making their creative endeavours more successful, which in turn will entice more Kiwis over the ditch.”

Chelsea Rapp, chairwoman of the New Zealand Game Developers Association, says tax incentives have long been an issue, but now it is right on our doorstep.

“Pretty much every gaming industry in the world operates through some kind of tax incentive. Up until now those programmes didn’t affect us because they were so far away.

“But with Australia it is different. We are basically one labour market and the difference in wages is so high. If any worker has a choice they are going to go to Australia,” Rapp says.

A junior developer in New Zealand can expect to earn between

$45,000 and $65,000, while in Australia starting salaries can be as high as A$90,000, Rapp says.

Last year the New Zealand games industry had revenue of $267 million.

But Rapp is calling on the Government to match the Australian tax incentive, if the industry is to survive.

“We really need to level the playing field. If we don’t offer this incentive then Australia is simply going to drain the talent from us,” she says.

Grinding Gear Games, a west Auckland game development company employing 160 staff, sold an 80 per cent stake in the business to Chinese gaming giant Tencent in 2018.

But despite the success of the studio, chief executive Chris Wilson says there are already whispers among his staff about opportunities overseas.

“The thing that is keeping them here is entirely loyalty at this stage, because the correct financial decision is to move to Australia and get the big money, that is a big concern for us.”

For Wilson, the economics of a subsidy are a no-brainer. The cost to the taxpayer for an industry-wide subsidy would be covered by the tax paid by Grinding Gear Games, he says.

Though Grinding Gear will survive the changes, many smaller companies might fail.

“We have resources, we have Tencent’s backing, we will find a way. But many companies in New Zealand will not. It will certainly disrupt the tax revenue the games industry is generating by far more than a subsidy would.”

Digital Economy and Communications Minister David Clark says government

Business

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2021-10-24T07:00:00.0000000Z

2021-10-24T07:00:00.0000000Z

https://stuff.pressreader.com/article/282690460396362

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