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Chasing a Slice: The Current State of Video Game Funding In Australia

Australian video game developers are trying to find success in a billion dollar industry, but what’s the government doing to help, and are there any alternatives asks Nathan Manning


Would you be willing to leave your stable job at a well-known company, sell your house, move to another country and use your life savings to fund your dream with the risk that it might not pay off? In 2006, Nic Watt did just that. He left his position as Lead Designer at Electronic Arts in the UK, sold his house and used his savings to set up a game development studio in Sydney, Australia with business partner Bruce Thomson. They called the studio Nnooo, developing games for digital distribution, an emerging form of video game distribution at the time.

One of the largest entertainment industries in the world, global video game software revenues are predicted to total $90 billion in 2016. In Australia alone, sales of “interactive entertainment” reached $2.83 billion in 2015. Digital sales are increasingly playing a bigger role in those figures, accounting for $1.59 billion of the 2015 total. Game developers no longer need to release their games in a physical format to sell massive numbers. Minecraft, from independent Swedish developer Mojang, sold millions of copies globally before being available physically; it was only available to purchase online.

You have to invest millions to make millions, and that’s what the big AAA publishers like Microsoft, Sony, Electronic Arts and Ubisoft do through investors and shareholders. However, it’s a lot harder to gain a slice of that revenue if you’re making games in Australia, with limited government support to help local talent gain a foothold in a growing industry.

nic watt

Nic Watt, fan of games. Photo supplied by Nic Watt

“Unlike the big AAA development, you self-fund the development,” explains Watt, “So we were having to put our own money and time and everything behind the product.”

Nnooo’s first game, Pop, was released on the Nintendo Wii in 2008. From 2006, until the game’s release, Watt says he was basically working for free, employing extra staff with his savings. It’s worked that way for all of Nnooo’s titles, funding the development of its next game from savings and sales of previous games.

Thankfully, all of Nnooo’s games have been financially successful. However, it’s a risky business. “For the most part, I don’t go home at the end of the day getting paid,” remarks Watt. “I don’t get paid until the game ships, and you guys all buy it. And if no one buys it, I’ve obviously made a bum game and I’ve worked for three years for nothing.” The tone in his voice changes as Nic speaks these words. It doesn’t appear to make him nervous, but there’s clearly a sense of uncertainty; it troubles him. I spoke to Nic a week after the launch of his latest game, Blast ‘Em Bunnies, so he was anxiously waiting to see whether his years of hard work would pay off.

Government Funding

Government funding for video game development in Australia currently is near non-existent. In 2013, the Federal Government implemented a $20 million Interactive Games Fund, providing grants to Australian game developers across three years. From March 2013 to May 2014, $10 million was injected into the Australian video game industry. Depending on a game’s ambitions, grants from as little as $30 000 to as large as $270 000 were handed out. Then it was cancelled.

Australian developers can gain some additional funds for projects through State Government funding. Blast ‘Em Bunnies benefited greatly from the small amount of government funding that Nnooo was able to acquire through Screen NSW. It allowed the studio to take more risks on the game. “Originally the game was designed for 3DS and Vita and we wanted to add on PlayStation 4 and Xbox One, which we hadn’t any direct experience on,” Watt noted, “So the additional funding allowed us to bring on some additional staff for temporary parts. We got an additional programmer to help us do some graphics and we got some animation work, and so it really allowed us to add some extra features and polish onto the game that we otherwise wouldn’t have had.” Watt didn’t disclose how much additional funding Nnooo received, but it is unlikely to have been much compared to what was being offered under the federally funded Interactive Games Fund.

Chris Wright is Managing Director at Surprise Attack Games, a publishing company that is helping Australian independent developers reach larger audiences. He believes, “the abolition of the fund has been more of a qualitative impact on the industry. The funding awarded in the years it was active and, prior to that, the previous funding programs for games from Screen Australia, helped companies like The League of Geeks (Armello), Defiant (Hand of Fate), the Voxel Agents, SMG (OTTTD), Tin Man Games and others to successfully launch more substantial titles and grow their businesses, employing developers and becoming real pillars in the industry. Those projects and those companies benefitted greatly from the funding programs and that helped accelerate their success.”

surprise attack games expo shot

Surprise Attack Games helps Australian developers show their games at consumer trade shows globally. Photo supplied by Surprise Attack

“There will always be a wealth of people trying their hand at indie development but we need these larger independent studios and more established developers to employ developers, create opportunities for new developers to learn and gain skills and to provide more stability in the industry.”

Earlier this year, a Senate Inquiry on video game funding heard the views of local developers and industry spokespeople, and passed on recommendations to the Federal Government. Nnooo was represented at the Senate Inquiry on March 11, submitting a proposal. Among other things, the committee suggested that “advanced economies such as Australia need to embrace innovation and transition to a knowledge economy that relies on technology and highly skilled jobs” (Kotaku), something the video game industry provides. It also suggested some form of a tax-break or tax offset system be implemented.

Watt advocates for a tax-break funding model similar to the UK and Canada, wherein game development companies are given tax deductions. He believes the current grant system is problematic because, “it’s susceptible… to whether people like or don’t like the particular product or companies that are coming through.”

“If you want to make a game and you believe in it and you’re willing to spend the time and get the people together, then the Canadian government is like ‘well that’s fine, we’ll give you a tax break on that and if you don’t make any money out of it well that’s on you, but we’re willing to support people taking creative risks’. We really like that sort of strategy,” says Watt.

Looking at the bigger picture, Chris Wright believes that funding should be focused on helping companies grow. Rather than being small teams of two to three people, Wright believes funding should exist to help those companies establish themselves as places that employ people and create more stable studios with more opportunities for graduates and developers.

It’s not all bad news for video game funding, with Film Victoria offering up to $150,000 in funding to game developers. However, the funding has to reach a national scale for the industry to be as successful as possible. During our conversation, Watt pointed out that many Victorian developers were in the United States showing their games at the Game Developers Conference – which attracts the big gaming press sites – because they were able to access funding that Nnooo couldn’t. Australian television program Good Game has an excellent episode on GDC 2016 that focuses on some Australian developers at the show and how it benefited them.

When only a portion of developers can afford to visit trade shows overseas to show their projects to a global market, it’s difficult for an industry to thrive. Chasing a slice of a $90 billion pie isn’t easy, especially without help.

Alternatives to Government Assistance

However, Government funding is not the only method of assistance available to Australian game developers. Both Nnooo and Surprise Attack provide support for game development studios by handling business aspects of game development such as marketing and distribution. Wright says that Surprise Attack handles everything from “figuring out the positioning and messaging for the marketing of the game, all the PR work with media and Youtubers, streamers etc, producing assets like trailers and marketing art, screenshots etc, exhibiting at events, organising dev kits for console platforms, access to stores like Steam, all the financial reporting and collecting the money, setting up sales promotions and bundles, some of the customer support and general business development.” Nnooo’s publishing branch acts very similar to this too. Both Wright and Watt stress that these services are things that developers can do themselves, but most new developers do not have the resources or experience to properly handle the business side and development side. It also helps that both Nnooo and Surprise Attack have established themselves in the industry and already have contacts with Nintendo, Sony and Microsoft to get games onto their consoles.

Another option is early access programs such as Steam Early Access or Game Preview on Xbox One. Early access programs act as a way for developers to gain additional funds for their games while they are in development, and also as a way of obtaining community feedback during the design process. Games like Ark: Survival Evolved, Rust, The Culling and Hurt World from Australian developer Bankroll Studios are examples of games that have become quite popular despite still being in development. Surprise Attack is currently publishing a few games through Steam Early Access, such as Rogue Continuum, Super Mutant Alien Assault and Dungeon League. Wright does admit, however, that Early Access does not work for every game, and most Early Access games “are not really generating a lot of income”. Even the indie hit Minecraft existed in a buy-able alpha and beta form before launching as a complete game.

Crowdfunding is another option for independent developers, asking the gaming community to donate funds for the game to be developed. Notable crowdfunded games include Mighty No. 9 ($3.84 million), Broken Age ($3.33 million) and Yooka-Laylee (£2.09 million). If you have an idea for a project that enough people want to see made, then you can get a lot of funding this way. I asked Nic Watt about crowdfunding, and he said they hadn’t yet done it for two reasons: at the time when Kickstarter became popular, Watt was working on a project already, and he also sees it as a big commitment to run a successful Kickstarter campaign.

“The thing with Kickstarter is that it has to be the right project and you have to be able to spend the time behind the scenes building up support for it and getting people’s attention for the product before you go down Kickstarter. But if you do it successfully and you’ve got the right IP or idea or concept, you can generate an awful amount of buzz,” says Watt. He points to Shovel Knight as an example of a Kickstarter campaign that he believes was executed really well.

All in all, development success in Australia is not impossible. With AAA development in Australia currently too expensive for publishers, smaller independent development teams are relied on to penetrate a global market. However, it’s very difficult without any extra assistance. Any government assistance would go a long way to making Australia a major player in the video game industry, but it’s largely limited to one State at the moment. Thankfully, globalisation and the digital economy now provide a multitude of alternative methods for funding, and the industry is slowing working out how to best fund projects and become financially viable.

Editor’s Note (12:12pm AEST 7 June): A previous version of this article incorrectly identified Film Victoria as Screen Victoria, an amendment has been.


Nathan Manning is an Xbox Editor for AnalogAddiction. You can find him on Twitter @Nathan_M96 and follow @AnalogAddiction.

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4 replies »

  1. Excellent read. Gaming is an important industry and one I will always support through my life. I hope Australia can become a major player in the industry and truly showcase the breadth of unique ideas local developers have to a worldwide audience.

    Like

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