Digital frontier takes Australian gaming to the next level

The gaming industry has undergone a shift as consumers change the way they spend money on games and the Australian developers behind these titles face the threat of a climbing dollar and a cut to funding.

According to PwC's Australian Entertainment and Media 2014-2018 Outlook, sales of digital console games are expected to more than double to AU$807 million by 2018, far outstripping all other forms of gaming sales.

While Australians will be spending less money on physical games, digital revenue for other formats are also expected to grow by 2018, up significantly on 2013 figures. Digital PC game revenue will grow (up from $180 million in 2013 to $220 million in 2018), as will online games (from $189 million to $273 million) and mobile games (from $216 million to $321 million).

Speaking about the growth in the latter categories, Outlook editor Megan Brownlow said the mobile gaming market has grown, changing the way consumers pay for games.

"The casual and mobile gaming market is developing very separately, and we expect in the future that that will flow through to how it's funded -- it will be much more likely to be ad funded," she said.

"It's going to become a critical part of the model that they provide choices for consumers, and we're starting to see that already. The gaming industry...essentially created freemium. So if you don't want the ads, pay a couple of bucks and you'll get them removed."

However, according to the report, "converting casual gamers who happily play for free into paying customers remains an imprecise art" and the market remains competitive because a many titles are released each year and "developers have a brief window to capture their audience's attention".

A Developing Landscape for Developers

Just like consumer buying habits in Australia, Brownlow said the local landscape for developers was shifting as well.

"Historically, before the dollar was strong, Australia was seen as a really high-quality sweatshop for games, and we had quite a lot of the games market made up of developers who were essentially guns for hire," she said.

"When the dollar got stronger, that market moved off to Asia and other markets. And that's when we saw quite a few games shops shut down, because they were relying on work from the big US publishers.

"What I think we've seen over the last few years is the growth in some independent publishers that are Australian. Some of them have been bought by the American companies...but the others have had huge success and still remain independent."

In the midst of this tough climate for developers, the Federal Government recently proposed to cut the $20 million Australian Interactive Games Fund. However, Brownlow doubts this will be a death knell for the industry.

"I know people are feeling bad about that but it hadn't been around for very long and I'm not sure it had been around long enough to have much impact," she said of the Fund. "I think some other supportive mechanisms like R&D tax breaks are quite common and quite useful, and they're not going."

She also called out the importance of education and State Government investment in keeping the local game development scene alive.

"We've got some very strong tertiary institutions that are teaching really sophisticated games creation... RMIT is a great example," she said. "In terms of government support, where there's a supportive State Government, that's where games shops have tended to flourish.

"We need to make sure it is sustained at the supply level, at the university level, where kids are actually getting trained in those techniques. And whether or not they end up working for an ad agency, developing games or apps, or a traditional games development house, it doesn't really matter. As long as we've got the talent that's the important thing."