Navigating Insulation and Isolation: Charting a Future for Australia’s Gaming Landscape

Australia’s emergence as one of the world’s most creatively vibrant gaming clusters has been a compelling story throughout the global industry. The country has rebounded from near collapse following the 2008 economic crisis to establish itself as an outstanding creative center, producing hits like Hollow Knight, Unpacking, The Artful Escape and Untitled Goose Game at an almost enviable rate compared to various gaming clusters around the world.

Last year, Game Developer participated in Melbourne International Games Week to explore the factors behind the industry’s flourishing creative output. A year later, the overall picture of the Australian industry remains largely unchanged. The overall consumer market in Australia has slightly increased, rising by 5 percent to reach $4.4 billion AUD ($2.89B). Industry contribution to the economy also saw a modest rise in FY 2023, climbing to $345.5 million AUD ($226.9M) according to data from the Australian industry body The Interactive Games and Entertainment Association.

That resilience is important when juxtaposed with the rest of the globe. While Australia has felt the impacts that have shaken the global gaming sector, it has effectively navigated through much of the turmoil over the past year—positioning itself favorably for the upcoming year. How has it achieved such a feat? During a three-week trip to Melbourne and Sydney for Melbourne International Games Week and SXSW Sydney, I discovered that this stability stems from the local sector adopting a ‘never again’ mindset in the aftermath of the 2008 financial crisis.

By prioritizing prevention, the nation substituted extensive integration with the global game development supply chain for homegrown autonomy supported by a strong community ethos, forging close ties with cultural institutions and fostering productive relationships with state and federal governments. This approach has provided the local industry with valuable protection from some of the tumult. However, as the industry begins to hit a ceiling imposed by self-sufficiency, the sector is starting to question what lies ahead and whether this protection might risk becoming isolation in the long run.

Insulation nation

The past few years have been harsh for the global gaming industry, and the Australian sector has endured its fair share of challenges during this period. In June 2023, EA’s Firemonkeys Studio—the creators of the Real Racing franchise—saw its workforce reduced by two-thirds after development work on the game was relocated overseas. A year later, League of Geeks, a renowned local studio known for Armello, entered an indefinite ‘hibernation’ in June 2024 after their latest game Solium Infernum failed to succeed.

The loss of a symbolically significant local firm—whose final game, rather surprisingly, did not make the shortlist for the Australian Game Developer Awards—contributed to a rather gloomy atmosphere on the exhibitor floor of Games Connect Asia Pacific (GCAP). Several developers I spoke to over the three days reported difficulties in securing funding for their projects, with both the quantity and availability of publishing money throughout the local scene dwindling as the global crisis continued.

Furthermore, job opportunities have also proven harder to find, with Colin MacDonald—the founder of UK industry Game Jobs Live— reporting that the number of available roles in the territory decreased from approximately 300 last September to about 150 a year later. This is not exactly a rosy picture, you might agree. However, when we look at the Australian scene in comparison to international counterparts, a more positive perspective emerges.

Consider the job statistics, for instance. As MacDonald noted, job vacancies across the local sector halved year-on-year. But in the UK—an unquestionably larger gaming cluster with more companies, more job positions, and theoretically, less vulnerability to a significant percentage swing—job openings fell by two-thirds over the same reporting period. While funding for new projects has undoubtedly become more challenging to obtain, the Australian industry’s diverse array of smaller development studios—with seventy-nine percent of companies in the local sector employing fewer than 20 individuals— has made it more cautious and less ‘fragile’ than its competitors by distributing risk across a variety of studios instead of centralizing it within a few large companies.

Ron Curry, the CEO of the Australian trade organization the Interactive Games & Entertainment Association (IGEA), stated that the local industry has not “faced challenges as severe as other regions” during the past two years. Curry attributed a significant factor of the resilience of the current industry to the harsh consequences of the 2008 global financial collapse, which nearly decimated the local gaming sector when international partners retreated while the American and Australian currencies reached parity. This obliterated the cost-saving advantages of outsourcing game development assignments, including licensed intellectual property titles, severely impacting the sector.

“Prior to the global financial crisis (commonly referred to as the GFC by developers), Australia had many publishers,” Curry explained. “Whenever there is a downturn in the economy, companies retract: they revert everything back to the top office, bring everything home. Consequently, we observed that nearly all of the major game development employers in Australia exited the market….and there was a significant void of unemployed [game] developers.”

This left an extraordinary pool of talent within the ecosystem without employment; however, it also provided them with options for their future. According to Paul Callaghan, Head of Games and Interactive at VicScreen, many opted to pursue independent ventures on their own terms. “I believe somehow it was individuals figuring out how to remain in gaming and realizing, ‘if we want to stay in this field, we must create what we desire’,” he said. “There was always a demand to develop more unique projects even back then, before the GFC. So when studios struggled during the GFC period, people were thinking, ‘that’s the moment when we must take it into our own hands’.”

Even today, that independent spirit thrives among some of the most prominent figures across the local landscape. “Throughout our history, the Australian Games Industry has encountered phases where we simply faced setbacks. […] because we find ourselves on the opposite side of the globe,” remarked Clara Reeves, CEO of Hipster Whale—developers of the popular free-to-play mobile game Crossy Road. “Thus, we had to adopt an attitude of, well, we’ll create our own thing and make it successful.”

Fortunately, that drive to innovate post-global financial crisis coincided with broader trends within the industry. The democratization of game development through the expansion of Unity and Unreal provided emerging independent developers with the tools they needed to create games on their own terms. At the same time, the rise of Steam and mobile app stores in the early 2010s diminished barriers to market entry for Australian developers: particularly significant for those whose geographical location means they are at least a four-hour flight away from making headway in foreign markets. Crucially, these trends were bolstered by the growth of a close-knit community surrounding the local industry, which witnessed game developers, educational institutions, and even cultural organizations like ACMI—Australia’s museum of screen culture and self-identified ‘home of video games’—coming together to support the industry.

For Curry, this resulted in the development of an extraordinary collaborative culture within the Australian industry, characterized by companies celebrating each other’s achievements, connecting one another with financial resources, and referring talented individuals: establishing a sustainable framework beneath it. “We witnessed a genuinely collegial community of game developers unite,” he said. “Even though they might be competitors in the broader market, they perceived themselves as partners. Thus, we ended up with a truly robust culture of excellent game developers who assist each other.”

The positive repercussions of this have significantly benefited the Australian industry. Between FY 2016 and FY 2023, the number of full-time employees in Australia has nearly tripled from 842 to 2,458, while the number of firms has almost doubled from 63 to 111. Importantly, a significant portion of this growth has proven sustainable, as the shadows of the global financial crisis have encouraged companies to approach growth more thoughtfully. At an individual company level, this has led organizations nationwide to adopt more conservative, yet sustainable, strategies for growth to stay on the right track.

Playside Studios is emerging as one of Australia’s leading brands, employing nearly 400 people across studios in the country. Ryan McMahon, General Manager of the PC and Console Division at Playside Studios, explained how its growth—initially propelled by the viral mobile game sensation Deadly Ways to Die—now relies on a clever combination of accessing local finance and undertaking a variety of development projects to ensure sustainability. “Playside is a publicly listed company on the Australian Stock Exchange, so we have different access to funding compared to the typical studio,” stated McMahon. “We also have a contract work segment that brings in substantial revenue to support our IP development.”

At a broader cultural level, the Australian industry has cultivated an inherent caution that has prevented over-extension. This includes being less susceptible to the short-term excitement of pandemic funding sprees, which positioned the global industry for a significant downturn a couple of years later. “During Covid, we saw that businesses [globally] were kind of growing exponentially,” Curry added. “I believe we took a slightly slower approach here and remained somewhat more reserved.”

The Australian video games industry has been better shielded from adversity than its global counterparts because its creative achievements have been supported by a cautious, self-sustaining philosophy that has allowed its stakeholders to steadily develop businesses capable of enduring challenges. Additionally, it has also been bolstered in the past 15 years by the development of local and federal government funding for video games, which has both sustained the sector during turbulent times and provided it with a distinctive identity.

States of Play

Government funding for video games is common worldwide but it is crucial for the Australian video games development sector. According to IGEA research, 49 percent of Australian game developers…

assemble governmental financing in some capacity or generate, with 51 percent of developers intending to utilize the nation’s Digital Games Tax Offset—a 30 percent rebate on projects exceeding $500,000 AUD. While it’s challenging to find like-for-like comparisons globally—mainly due to different industry bodies lacking comparable data—the fact that nearly half of developers operating in the country have received some form of state support is significant.

Importantly, this support has surfaced from a combination of individual states and the federal government. This indicates that developers have multiple avenues available to them to secure funding for their initiatives—creating a more stable creative foundation for the industry. “What government funding does is create a space for experimentation, encourages creative risk-taking, and provides individuals with time to develop their concepts,” remarked Callaghan while discussing VicScreen’s efforts to bolster its local sector. This work has, in many respects, transformed Victoria into a leading example for both the Australian gaming industry and the benefits of supporting game studios from the ground up.

Over the last decade, the state has become the epicenter of Australia’s video game development landscape—attracting 29 percent of the nation’s studios and 41 percent of its workforce. A key factor behind this success is the breadth of business support it offers to developers. Creators in Victoria can qualify for small-scale prototype funding of $50,000 AUD to get a project off the ground, along with the Victorian production fund which can allocate between $300,000 and $500,000 AUD to eligible games (without requiring recoupment or ownership of IP), and a 10 percent rebate on projects—which can be claimed together with the 30 percent tax offset.

In addition, local government has also established a program of initiatives and support aimed at building broader industry and cultural benefits for the sector. Within VicScreen, this has taken the form of initiatives such as the Play Now games marketplace, which connects local development talent with relevant publishers and investors to explore potential partnerships. It is also running programs aimed at improving skills across the territory, assisting firms as they develop. Meanwhile, Creative Victoria—the State of Victoria’s body for creative industries—has been responsible for supporting Melbourne’s World Games Week for over a decade: bringing in international visitors, launching a new Training Symposium this year to link industry professionals with the creative sector, and celebrating the cultural impact of video games through events such as its free to attend Big Games Night Out in Federation Square.

The goal of all these efforts, according to Callaghan, is to ensure there is adequate support for game studios of all sizes in the region—lifting all boats as the tide rises. “These are interventions that benefit many people, rather than just serving as a tactical intervention for one studio or project,” he articulated. The outcome has been substantial assistance for developers based in, or choosing to relocate to, Victoria. However, the state’s achievements have also ignited healthy competition among other states, prompting the emergence of similar funding initiatives in various regions: fostering a sustainable race to the top in the process.

This is particularly evident in Queensland. The state is another prominent cluster in Australia, hosting 20 percent of the country’s studios and 25 percent of its workforce. It was once the center of the Australian industry, with state capital Brisbane being a favored location for international publishers who supported the scene. But as Jed Dawson, Head of Games at Screen Queensland, explained to me, its status was largely a result of the unsustainable international trends that disrupted the Australian video game industry. “Brisbane used to be the hub of game development two decades ago and it collapsed almost overnight due to a shift in industry dynamics,” Dawson noted. “So that’s not really a sound industry structure.”

However, it did retain some key developers including Gameloft Brisbane, which is one of the largest employers in the country. Over the past five years, inspired by Victoria’s success, Queensland has introduced its own digital games incentive of 15 percent (outpacing its neighbor to the south) along with grant funding for game projects and a prototype funding pool that reflects the support structure seen elsewhere.

“We want to assist studios [with the prototype funding pool] reach a stage where they can say, ‘Hey, we’re seeking funding or we’re ready for a publisher’s backing. We’ve got a company, we have a team ready to go, and we just need the remaining funds,’” Dawson continued. “And then the digital games incentive is aimed at companies that are a bit more established, so they might be considering their five- or six-year strategic plan and are looking for investment. A 15 percent incentive goes a very long way and can help them validate their business case. So yes, both programs are designed to complement each other…[to act as] a seamless conveyor belt, which is beneficial.”

The results have been impressive. According to Dawson, employment in Queensland has increased by 600 individuals over the past two years: defying the trend of layoffs seen across the rest of the globe. And while Victoria has developed a reputation as the creator of cultural hits like Untitled Goose Game, Queensland has been quietly attracting major players like Rockstar to its shores—encouraging companies to stack state incentives on top of the federal offset. It is also where a video game titled Unpacking originated. You may have come across that one. “Queensland, with our 15 percent [incentive] stacking on top of the 30 percent [from the Digital Games Tax Offset], means a total of 45% incentive, which is globally competitive,” Dawson explained.

The efforts of Australia’s two largest game development states to advance video game funding have motivated various governing bodies across the country to court the industry. While incentives vary from state to state, nearly every region from Western Australia to Tasmania offers prototype or grant funding at a minimum to allow them to compete with rivals—ensuring developers in all areas of the country have access to at least some funding to support their projects. This has also created the conditions for the industry to withstand the reduction or elimination of subsidies too.

In September 2023, the government of New South Wales—the home of Sydney—reversed a decision to cut funding for the creative industries, including its local sector’s digital games incentive and grant funding systems, following public outcry from the broader screen industries. However, overall, the significance of this state funding ha