The rise, fall, and resurgence of Australian game development

The Australian games industry has been on a real roller-coaster ride over the past couple of decades. The country had built up some big studios like Pandemic, Krome, Blue Tongue, 2K Australia, and Team Bondi, but after the 2008 global financial crash, around 60% of Australia’s game development sector disappeared over the course of four years.

“The entire industry was wiped out,” recalls Sanatana Mishra, co-founder of Unpacking maker Witch Beam, who saw many talented developers leave the industry entirely. “My design mentor who taught me everything I know went back to being a sparky [electrician]. Most of my coworkers who were excellent at what they did left for America and joined companies like Blizzard. We saw a brain drain on a level that was unimaginable.”

“A lot of the larger companies in Australia were essentially satellite offices,” explains Ron Curry, CEO of the Interactive Games and Entertainment Association (IGEA), an industry body representing Australia and New Zealand. “And through the global financial crisis, everyone withdrew as soon as things got tight, everything went back to head office. So what we saw was pretty much a closure and a destruction of the whole Australian industry. But what came from that was the burgeoning of an indie development scene in Australia.”

Experienced developers who had been let go from big companies began forming their own studios. “And suddenly if you have a lot of them at the same time, and the right funding, of course, they’re going to create ideas and maybe a bit [of an] ecosystem,” says Manea Castet, head of studio at Gameloft Brisbane.

The resulting Australian indie scene has become a powerhouse over the past decade, producing global hits like Untitled Goose Game from House House, Cult of the Lamb from Massive Monster, and of course Hollow Knight and its sequel Silksong from Team Cherry. And both the state and federal governments have been doing everything they can to nurture and encourage this growth by introducing some generous funding and tax incentives.

Government help

The headline incentive is the federal-level Digital Games Tax Offset (DGTO), a 30% tax rebate that was passed into law in 2023, but backdated to June 2022. Crucially, the qualifying expenditure rules for the DGTO are fairly broad, applying to new games, ports, and live ops, and taking in both Australian companies and foreign companies with an office in Australia.

That 30% rate might not be quite as generous as, say, the 34% rebate offered by Video Games Expenditure Credits (VGEC) in the UK, but the latter comes with the stipulation that a game must be “certified as British” – and importantly, the DGTO can be stacked on top of other incentives offered at the state level.

“If you add that 30% to, say, Queensland, who offer a 15% rebate, all of a sudden it’s a 45% rebate, which is huge,” says Curry.

In addition, there are various grants and funds to draw on across the different Australian states; Serge Zebian of Playwright Consulting has put together a handy cheat sheet for all the tax rebates and funds available. “I think the program has made Australia a genuinely attractive destination to bring work to,” says Zebian. “Especially for co-development and longer-term strategic partnerships with Australian studios, where we’re seeing a lot of uptake.”

“As Ron said, with the incentive stack, that’s putting us ahead of most countries. And so when Australian studios are pitching, the proposals are rising to the top of the queue, because the rebate improves the economics.”

It’s not a perfect system. Ian MacLarty of Shape Shop, developer of Mars First Logistics, says that the government grants in particular involve a lot of paperwork. And Curry thinks there’s still room for improvement on the DGTO. “It’s up for reviewing next year, and certainly there’s a number of tweaking points we’d like to make to it,” he says. Even so, he thinks it’s working as intended. “In the main we’ve been very happy with how it was constructed.”

“What it’s done so far is allowed companies to grow,” he continues. “We’ve got companies like PlaySide and Big Ant Studios who have actually expanded their operations in Australia, opened their second or third studio.”

Castet says the government initiatives have “really accelerated everything” at Gameloft Brisbane. “We were able to grow from a 50–55 person studio to 120–125. We were able to go from one video game team to two video game teams.”

For the indie sector, meanwhile, the general consensus is that although initiatives like the DGTO might not necessarily have sparked the creation of new games – the passionate developers involved would probably have made them anyway – the government help has certainly made life a lot easier.

“It de-risks us,” says Elizabeth Blythe, managing director of Slipstitch Games. “It gives us a lot of capability that we wouldn’t otherwise have. And I think that it’s a way that our studio has managed to thrive thus far – without that funding, it would be a much harder road.”

“The funding from the government was very crucial for our first game, Copycat,” adds Kostia Liakjov, founder of Spoonful of Wonder. “That helped bring the game to life in a way that wouldn’t be possible otherwise.”

Mishra says that Witch Beam secured grant support from the local government during the development of Unpacking, which had a “small, but meaningful impact on something where you’re already skating dangerously close to burning away all your cash.”

He adds that Witch Beam has received government support in some form across the entirety of the studio’s existence, and although this hasn’t come close to “funding the entirety of the game or really changing the trajectory of what you’re intending to do with the project,” it has been very helpful for alleviating “pain points,” like securing licenses for Unity.

MacLarty, meanwhile, says that government funds allowed him to work with a musician on Mars First Logistics. “So I think it did help. I would have still made the game … but it might not have been done as well.”

Big shift

Castet points out that there’s a big shift going on in the games industry at the moment, where AA and indie games “are resonating and creating revenue as almost as large as any AAA game.” In addition, there’s been a marked geographical shift, with employee numbers declining in places like the United Kingdom and United States.

“The original big areas where video game [development] was shining are struggling a bit. And in all that, you have Australia, which is saying, ‘You know what? We’re going to become mathematically the best place to invest in video games, because 30% plus 15% equals 45%, which is the highest [tax rebate] in the world’.” (To nitpick here, a handful of exceedingly tax-friendly jurisdictions, such as Cyprus, might just about take the crown for tax-efficient game development, but it’s undeniable that Australia is in the top echelons.)

Yet there are pros and cons to developing games in Australia. One big plus is that as an English-speaking country, collaborations between Australian studios and those in places like the United States, Canada, and the UK can be easier. But there’s also a big time difference with the US and Europe.

Blythe says this can actually be an advantage. “We have half a day that crosses over with the US,” she points out. “And what I have found is that when we have people that we’re working with internationally, we come back and work is done overnight, and then we have the ability to test and work with that. So I haven’t really experienced too much downside from it.”

The relatively small pool of talent to draw on can make things slightly trickier, however. A recent survey by IGEA found that there were just 2,443 full-time employees working in the Australian games industry. For comparison, the UK has just over 27,000 employees (although the UK’s population is bigger at roughly 69 million compared with roughly 27 million for Australia).

Castet says that this can make it difficult to fill senior roles. Although he also says there’s less competition for employees from other, rival companies, and overall it allows them to be a big fish in a small pond. “Gameloft can play a bigger role for the scene here than Gameloft in Montreal, for example.”

Return to work

The gradual reestablishment of Australia’s games industry, especially with the arrival of bigger companies like Rockstar and Sledgehammer Games, is helping to reverse the brain drain, says Curry. “If you’re someone who left Australia, you’ve established yourself in the career, you’ve learned your craft, and you wanted to come back to Australia, it was a huge risk, because there may have only been one or two studios that could absorb someone of your experience and salary expectations. But as we’ve seen studios growing and we’ve got Gameloft and Riot, and a number of others, it’s now safer to come back.”

He sees the Australian game dev ecosystem as balancing itself, after being tipped towards indie development for a long while. “We’ve got a nice amount of big studios,” he says. “It’d be great to have a few more. And we’ve got a very healthy amount of studios in the middle that might have 10 to 50 people, and a really exuberant indie pool of developers. So I don’t think it’s a move in any one direction. I think it’s a move in all directions.”

Even so, Australia is not immune to the shocks that have been reverberating through the global games industry over the past few years. Total revenue has grown sharply, up from AUD$339.1 million (USD$211.9 million) in 2024 to AUD$608.5 million in 2025, but the number of people employed in the industry has remained almost unchanged over the past three years. This is clearly a better situation than the widespread layoffs seen in places like the United States, but neither is the number of jobs growing.

Dave Lloyd of Powerhoof, the studio behind The Drifter, which took home Game of the Year at the Australian Game Developer Awards 2025, says that it’s been “really dire the last couple of years” for getting funding from publishers, a problem that the industry is facing worldwide.

He worries that there are echoes of the 2008 financial crash, when many Australian game companies were dependent on US contracts that suddenly disappeared. And he’s concerned there might be a similar dependence on US companies now – companies that might be at risk of downsizing or closure.

But he also has a sense of hope when talking to his colleagues in the Australian games industry. “People are realising, OK, we’ve got to do this on our own again. We can’t just depend on US money to be able to make games.”

“We do have the opportunities with funding and stuff that a lot of other countries don’t”

Dave Lloyd, Powerhoof

Ultimately, he thinks it’s fuelling a drive towards Australian studios becoming more sustainable and self-sufficient. “What’s good about Australia is that when we do that, we do have the opportunities with funding and stuff that a lot of other countries don’t. And so it is possible to get a leg up and start something, and build the industry.”

Mishra agrees that in terms of non-government funding, “the money spigots got turned off” around two years ago, which has caused a crisis for studios that expanded in the years prior. But he thinks the Australian industry as a whole is much better placed to weather the storm when compared with the crisis of 2008. “This time, I think things are different, because of the fact that we have a very resilient industry now.”

He points out that Witch Beam, Powerhoof, and many of the other Australian studios mentioned in this article own their own, self-developed games rather than working on titles owned by others elsewhere. “So when things get tough, we don’t just leave and go somewhere else,” he says, the way that big companies like EA and Sega did after 2008.

Those homegrown games have given Australia more resilience with which to face this fresh crisis, he argues. “I think it hasn’t been as bad as it could have been, given the nature of the rest of the industry outside of Australia is actually suffering a lot more than we are with the money spigots being turned off.”