Plugging The Gaps: The Government's Role In Reviving The Australian Games Industry

Canada, with its multiple tax breaks and incentives, is often painted as a mecca for game development, a space where the money always flows and the growth is always facilitated by government investment. But what is our local government doing to stimulate growth in an Australian industry decimated by a series of crushing closures? The answer is simple — a lot more than you think.

"What is the government's role in all of this?" asks Morgan Jaffit, the director of Defiant Development.

"Well, the government’s role is to move quickly to fill in the gaps that appear,” he says.

“A studio closes, and the next day the government should be in a position to start giving those people a new framework to accelerate those who have some degree of success and need to traction to focus."

Morgan Jaffit speaks from experience. As the Director of Defiant Development, a studio rising from the ashes of Pandemic's closure, his is a company founded on combination of experience, grit and — yes — a small amount of government funding.

"In our case the government has given us some real support that has enabled us to double down. If you look at the government money that has gone through Defiant, we’ve probably gone through about 10 times more than we’ve been given on paying people to work. So it’s been a good government investment in Defiant’s case. And hopefully it’ll be a good investment down the line."

Over the past few years the narrative surrounding Australia’s local development scene has been overwhelmingly bleak: closures, brain drain, the loss of overseas investment, the list goes on.

‘The Australian government must do more’: this has been the standard line, and while there maybe be some truth in that, the contribution the government has made, particularly over the last few years, has been significant. Many of our biggest studios owe a literal and figurative debt to the multiple funding streams provided by the Australian government.

If you know where to look, and you know how to apply, funding is available. Morgan Jaffit is proof of that. As is Firemint, Iron Monkey, Tin Man Games and almost every other success story you care to name. These studios have become leading lights, at least in part, as a result of government funding.

Supporting the Industry Since 1995

When it comes to investment in the local games industry, Victoria, via the Film Victoria scheme, has led the way — and it shows. Brisbane is typically seen as the unofficial capital of games development in this country, but Melbourne now houses two of Australia's biggest local development studios in Firemint and Iron Monkey — studios who have reaped the rewards Film Victoria funding.

"Film Victoria has some real success stories in its past," says Chris Wright, the founder of the indie marketing startup, Surprise Attack.

"People like Firemint and Iron Monkey, those guys had about eight applications funded between them, and they're some of the leading businesses that we have here in Australia.

"In the short term it's about being able to get a project up, but in the long term it's about building up to bigger projects. So you can see here in Melbourne how Film Victoria has really helped build up these businesses. It's increasingly tough now, because there is no real foreign investment coming in for games, but these kind of schemes really help build local business."

Chris Wright’s business is devoted to providing support for indie game developers. Over the past two years he has been involved with Film Victoria, providing recommendations. Along with a group of industry volunteers, he helps decide which projects received funding, and how much funding they receive.

"If you apply for funding from Film Victoria, you put in your application and then it goes to an assessor, who is usually a Film Victoria member of staff. They vet it and write a report and a recommendation," says Chris.

"Then there's another panel. There are usually four external people there and we get together in a room for half a day and go through all the products. That's the group I'm part of. We discuss recommendations, discuss whether we agree, and then we make a final recommendation. Twice a year we'd read about 25 submissions, hammer out which ones should get the money and then divide up the available pot."

Stirring the Pot

The pot may not be enough to replace the millions of dollars foreign investment once brought to the table, but it’s a starting point.

“I don't know the exact amount,” begins Chris, “but Film Victoria has about one to one and a half million dollars to spend a year.

“Each project can receive up to one hundred thousand dollars, and up to half the project cost. Those are the costs that go forward. You can't come in with something that's half done and ask for money in retrospect. Film Victoria will also fund marketing expenses — which is increasingly important for indie developers, because they have time but they don't always have money.”

According to Jenni Tosi, the CEO of Film Victoria, the criteria for funding is specifically designed to help grow the local games industry, not just support it.

“All our criteria are designed to ensure we’re assisting local games developers to create original Intellectual Property, attracting further investment, reaching a targeted audience and ultimately strengthening Victoria's screen industry,” she says.

Screening for Film Victoria funding is strict, but fair. Knowledge of development, of course, is mandatory — and you must be in possession of the licenses, approvals and development kits necessary to bring a project to market. Ultimately, Film Victoria must be confident in the team’s ability to finish the project they are pitching.

In addition, it’s important to note that Film Victoria’s funding isn’t a hand out — it’s a loan.

“Our support for games is not a grant, but rather an investment,” claims Jenni. “This means Film Victoria is an investor in the project and will hold a key interest in the project until the investment has been repaid.”

Hidden Benefits

Morgan Jaffit believes the terms of Film Victoria’s loans are more than fair.

“With Film Victoria,” says Jaffit, “the loan terms are exceptionally generous and you only have to repay when you make money.

“So that’s the world’s best sort of loan! And it’s hard to be resentful when you pay the money back!”

Chris Wright believes that the Film Victoria’s loan concept has some hidden benefits for local industry.

“Because it’s a loan there is a lot more focus on the commercial,” says Chris, “on building games that are going to be commercially successful. With Film Victoria there has to be a strong business plan because the goal, ultimately, is to build up the Australian industry.

“It's pointless supporting games that no one wants, because ultimately that company isn't going to go anywhere afterwards and they'll be wasting their own investment.”

According to Jenni Tosi, successful applicants have to satisfy a number of key criteria to succeed.

“When assessing applications, an expert panel comprising of industry professionals will consider the quality and originality of the project and the ability of the team to deliver the project,” says Jenni.

Also of prime importance is the ability to market and sell the product to an existing audience. Film Victoria’s funding is a loan after all and, eventually, they would like their money back.

Chris Wright and a panel of experts are responsible for providing recommendations to Film Victoria. They analyse each application in a way most gamers will relate to: they score them out of ten.

“The three main criteria are originality, commercial viability and quality. And we literally score them out of ten,” laughs Chris. “It's not like the ratings determine what gets chosen, but it's just a useful tool.

“Basically we go through, we put up the scores, discuss each one and when it gets to the end there are 15-20 projects ranked by score and we start making some recommendations. As we get to the end and we only have X amount of money to put in, we have to start making some decisions about the ones we like so the scores help you get a handle on that. But it's not an absolute thing.

“The idea has to be original and interesting. The budget has to be such that we think we're going to get the money back. Because when Film Victoria gets its money back from a developer that money goes back into the pool. So it allows them to fund more projects. If it didn't work like that there would be less money."

Meanwhile, In Sydney

New South Wales hasn't been as consistent in its support for the local games industry, but with the Interactive Media Fund, NSW is looking to invest three million dollars across multiple different projects over the next couple of years — amongst those projects is funding for Halfbrick's new Sydney Studio and Nnooo's latest unnamed project.

For Sue McCreadie, a Senior Manager at NSW Trade and Investment, the Interactive Media Fund is an attempt to harness the creative energy present in independent development in this country.

"The emergence of many smaller independent developers and the increasing convergence of games and film are two trends which present opportunities for growth in the NSW interactive entertainment area," says Sue.

According to her, investing in video games, as a rapidly growing industry, was a complete no-brainer.

Colin Cardwell — at 3rdSense, the creators of Swords and Sandals — was one of those that took advantage of the NSW Government’s increasing interest in digital development. Unlike the Film Victoria scheme, the Interactive Media Fund isn't a loan, but Colin still treats the money as an investment in his company and the local industry as a whole.

"It's kind of a grant I suppose, but it's really an investment," claims Colin, "but without really asking for any financial return. New South Wales basically has a fund which they set up and the history of that is recognition of the fact that the games industry has historically had very little governmental support, compared to other states."

Despite the fact that the Interactive Media Fund is a grant, the goals are similar to Film Victoria’s, as is the criteria.

“We look at the track record of the team, marketplace support and the viability of the project, including whether the budget and schedule are feasible,” says Sue. “We are looking for projects which are innovative, involve a high level of creative and technical skill and can market the State's digital capabilities internationally.”

Colin believes a huge part of the reason why 3rdSense received support is the international nature of digital gaming. Products that can be easily sold overseas can easily attract overseas dollars.

“What attracted them to us was not just the investment in NSW but the fact that a large amount of the revenue will come from overseas,” claims Colin. “Gaming is a good export business. It's not just about making stuff and selling locally, the US and Western Europe are the big markets for us. That's good business, getting foreign money into the state. I think that makes a difference as well.”

Well... What Can I Apply For?

But Colin Cardwell’s and 3rdSense’s experience with the Interactive Media Fund highlighted a few flaws with Government funding in NSW, and across the country.

Simply put: it’s extremely difficult to find grants, and once you’ve found them, it can be difficult to ascertain precisely what you or your company is eligible for.

“The Interactive Media Fund wasn't really well-publicised to begin with,” says Colin. “We stumbled across it and went, 'Oh, that's what we do!' So we put an application in. To begin with I wasn't too sure if we had a chance.”

Morgan Jaffit believes this may be one of the biggest issues with government funding in all its forms. Quite often developers aren’t aware funding exists and, if they are, it’s difficult to know precisely where to begin.

“One thing that I think is missing at the moment which is there is no real clearing house for a small developer who doesn’t necessarily know their way around the traps, just so they can say, ‘Well, what can I apply for?’” Says Morgan.

“Maybe they’re building a platform and a technology as well as a game so there’s R&D tax credits or there’s a state government fund or federal funds. It would be really great if there was a game focused thing where you could call up and say, look, I am a game developer, this is what I’m doing, where can I apply? I find most people just don’t know where to start. They don’t know what to apply for or how to go about it.”

Despite the fact that many in the local industry bemoan the lack of government support, Jaffit claims that some Government grants actually go unclaimed.

“I heard about a grant where they were unable to give out all eight grants because they didn’t have eight applications,” says Morgan. “These were smaller amounts of money, maybe ten grand or so, but there is this broad spectrum of support for arts culture in business in Australia that is government provided and businesses can draw upon. Indie developers don’t always know who to turn to.”

Step by Step

No amount of Government funding could realistically come close to replacing the funding overseas dollars used to provide, but what it can do is help create a foundation upon which a grass roots industry can form.

“Increasingly we need this kind of government investment,” begins Chris Wright, “because almost all of the foreign investment is gone — and we're talking about tens of millions of dollars here. Government money is a small fraction of that, but we need something to keep the investment coming in. It's definitely a good thing and I'd like to see more of it.

“The way I feel about the local industry is that we're in this dark but opportunistic place. It's potentially a fantastic place to be. The industry is going digital, and we're in this transitional phase with the diversification of platforms. Australia is trying to move forward into this new world because we have no other choice.

“And that's the difference this investment can make — how rapidly can we move forward? How do we move from making these $50,000 games into $200,000-$300,000 games? That's what we need to do, so we have a bigger diversity of scale in our games.“

It’s easy to criticise the government for a slow response to the collapse of the Australian games industry, but it’s not in any governments nature to respond quickly — ultimately it’s about making moves in a positive direction.

“I think there is some truth to the claim that government is not there to move quickly,” says Morgan Jaffit. “We had some major studios all vanish within a day, and people wonder where the government is in all this. But what they are doing is growing step by step.

“Defiant owes a lot to having had support behind the scenes in the early days, and we’ve managed to provide a multiplier on that support. We’ve not pulled down a huge amount of money, but that money has given us flexibility and the confidence to move forward.

“In two or three years time we’ll start to see companies, and by that I mean studios that employ 20 or so people, that have arisen from this effort. Maybe we’ll look back and say that the Australian Government was really quite bold!

“Because I’m extraordinarily enthusiastic about the Australian games industry. I think the degree of talent we have here and the way it’s starting to mobilise is really super exciting.”


Comments

    This is a great article Mark, and a lot better than the Luke Plunkett abridged version which read something like:

    "There's a government in Australia and they give a lot of money to game developers but the developers are still closing down, I'm not sure why so here's a video of a cat doing amusing things."

    Is it fair to say that the 'Australian Government' has done anything at all here, given that the success stories are all about state government initiatives?

      It's just semantics I guess, but I don't think Australian government has to necessarily mean 'Federal Government'. Just me. But I see your point.

      I spoke specifically about Film Victoria and the Interactive Media fund -- but there is also Screen Australia, which is a federal initiative which also provides funding.

        I lack your enthusiasm mark.

        After 2 redundancies in 13 months i have given up on games in aus.

        Sure i have mates i am stoked with that left the company with 6 months leave and stretched that out to 12 months to get their iOS game out. and it is going well for them... really well! But then i have other mates who also gave those a crack and made next to nothing....

          Did you think that maybe iOS isn't the best way to market a product?
          Most new developers these days seem to have the notion that a crappy $1 iPhone app will bring them in a few million and if indie developers have shown anything that all it takes is a good idea not EA funding you to make a good game.
          I personally think government funding is a bit ridiculous, I've been making games for a while but i do it in my own time because it's not exactly hard work (those people which spend days on end coding are making hard work for themselves) and I focus on my other jobs.
          I think most of these new developers would be better at adjusting to those in the game industry, meeting other minded developers and just accumulating ideas.
          Government funding for arts seems counter to the art culture unless you're paying for a savant to paint in Bethlam and these programs just seem more like an investment with expectation of profit than to create art.

    Great article Mark! Investment is needed and it's great the Gov is getting involved, to support this amazing industry.

      You shouldn't need to 'support' an industry. If it can't stand on it's own two legs, then there is something wrong.

      Australian films are largely a joke and an example of a promise of an Australian Hollywood that will never come.

      In the end it's always similar to the statement 'more government money will fix it'... greedy bastards.

        Wonderful capitalism right here.

        Government money is better than no money, and yes I agree that the Australian Film industry would need to get in better shape to be any indication that our games industry could do the same.

        But your attitude is terrible. I mean in terms of international film and games development lets all just join the ranks of India and China right?

          Why should we give money to a gaming industry? And if we should to them, then why not other fields?

            I agree, let's give more money to monkey diamond mines.

            I'm sorry HH, I don't think you know much about the industry and the struggles people within it are facing. To get a better understanding of the situation, which isn't just in Australia, you should read this article:

            http://www.guardian.co.uk/technology/2009/dec/02/britain-games-industry-tax-breaks

            Sure, that was a couple of years ago, but it's clear Australia is not alone in facing tough competition from overseas gaming industries. Many of the major overseas markets get big tax breaks from their Government, that basically ALLOW them to rise up and stand on their own two feet - as you so nicely - in fact so high do they stand that they tower over people like us.

            Read up on what's happening right now, here in the land of OZ;

            http://www.smartcompany.com.au/tax/20111125-game-industry-welcomes-push-to-extend-tax-breaks-for-films-to-video-games.html

              Ahh~ but tax breaks are fundamentally different. I for one would love to see all industries get ;)

            As far as I understood the point was that these were loans. The money *isn't* being gifted, what is happening is capital is being injected into the industry. If the funding body is careful with its choices it could actually *make* money. This is basic capitalism.

              But it's not hard to find the flaw in that.

              If a lot of companies were succeeding with government grants. You could considered it to be a good thing, but if this was true then it would have been privately funded in the first place.

              So we can only logical assume (with the way Australian Films are) that a lot of start up developers are a risky investment. If this is the case, then you would be able to see how much the Australian government "gifted" by bad investments. Seeing as those game developers don't need to pay back the money.

        Right now our industry relies too much on overseas money, that why when the GFC hit the US publishers pulled out one by one and left the industry in the mess it is in now.

        Obviously we can't make games for free, but it's going to take time to create a proper financial base for our industry so right now the Gov't offering a helping hand sounds like a great idea to me.

          Let's trade one bad habit for another, eh?

            hh, you make it sound like protectionism is a new thing.

            And since when did a purely free market ever work?

              When hasn't it work? I wouldn't want a totally free market. We all should pay our taxes for keeping the peace,roads and basic government duties.

              But whenever a country moves closer to a free market. Their economy flourishes.

              Take for example Ireland, who used to be a tax heavy country and are now a lot lighter.

                Are you seriously suggesting that the Irish economy is flourishing?? Are you even suggesting that Australia got anything out of the Free Trade Agreement with the US?

                  http://markhumphrys.com/irish.economy.html

                  check it out, Ireland has been on the up and up ever since. ( i did a quick search, im sure you can follow the rabbit whole).

                I have three letters for you, hh: "GFC" A poorly regulated financial sector in the US has led directly to the partial or total collapse of economies all around the world. Where have you been the last four years? If you think this is a good situation, or its somehow the market 'balancing itself out' the way it should you are a jackass and completely without basic human compassion.

                  Poorly regulated? You mean the banks who were backed by government? The banks who knew they could take stupid risks because they knew someone would cover their ass? Seems kinda stupid like loans you don't have to pay back if you fail =)

                  Regulations keep small business' down and lift large corporations higher. Because of regulations America's economy is far from being free as it formerly was.

              oh and i would like to also add.

              The Gaming industry doesn't need to be 'protected'. It's a resource that will always be available as long as there is demand.

    Great article Mark, gives me hope for the local industry's future :)

    I'll be honest, Mark.

    I'm loving your articles a hell of a lot and this one especially has caught my attention, as I'll hopefully soon be starting a Game Programming course at AIE (Cert 3 & hopefully onto a diploma soon after!) and this definitely helps raise my confidence levels dramatically and restores some hope for the video games industry in Australia.

    Great article Mark. Did you ever get the chance to speak to any Canadian developers about this kind of stuff? I asked a couple of questions while I was over there but since it was more of a press event I didn't get anything too major in response.

    Maybe they should send representatives to Australian developer events like FreePlay since most indies would be there?

    Really interesting article, thanks Mark.

    Awesome post, full of ideas and hope which is just what the industry needs!

    It's great that the government is making these sorts of grants available and kick starting some many awesome companies :-)

    Too little too late imo, at least for Brisbane. Queensland used to have premier gaming companies, there are hardly any left now.

    There are number of reasons for this, to blame it all on the government is a bit of a stretch, but they certainly didn't help. In fact they removed the gaming industry from a number of film grants that were available a few years ago.

    Oh just lovely... "surprise" government funding you, now you indies need to pay for marketing... Here's an awesome company that just approved your funding... Yoink! It's a nice money laundering operation lol

      Sounds like a conflict of interest but with an industry that can barely stand on its feet there will always be someone trying to reap the benefits anyway they can, are you really that surprised?

      Does FilmVic screen whom will be part of the panel? People involved with marketing and developing games shouldn't be part of the panel, it's definitely a conflict of interest, they get to see everyones hard work and game designs :(

    There's an argument that subsidising film making provides a benefit to the nation in terms of showing the rest of the world some of our culture and our beautiful country. Does Aussie game making need to be a bit more "Australian" to fully attract government support? Otherwise it's just another industry struggling to compete with similar product made cheaper in other countries.

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