In a departure from my usual rants, I've decided to take a brief diversion to discuss a topic that was once close to my heart - the games development industry in Australia.
In the last three or four years the industry in Australia has basically halved in size, mostly due to the closure of the biggest developer - Krome.
In another blow to the industry, THQ today announced that they would be shutting both of their studios here in Australia - THQ Studio Australia in Brisbane, and Blue Tongue in Melbourne. Some more details here:
http://au.games.ign.com/articles/118/1187090p1.html
So what's been happening with the Australian games industry of late?
Obviously, it's no single problem, but, in my opinion, as someone who has worked in the industry in Australia and overseas on and off since 1998, the fundamentals were never very good. For anyone who has met or worked with the owners of the companies here, they were, by and large, and not to put too fine a point on it, not exactly "geniuses". They were generally very good at getting government grants of various kinds, or convincing big name publishers to pour money on the fire of their inexperience, but not particularly good at marketing, planning, people management, project management, etc. Many of them assumed that because they liked playing games that they should therefore design them for a living, but with no actual skills of their own, lived their dreams on cheap credit, loans from family and friends, and the aforementioned hapless publishers.
They were also quite good at a manoeuvre known affectionately as "the circle jerk" which anyone who had the misfortune of attending the first years of the AGDC got to see at close range. Not pretty.
This is just one segment of the problem though. Not all the owners were terrible at managing the business side of things. Krome was a company that managed to get its products out and keep clients happy. Sure, it did that by screwing its workers into the ground and demanding their souls, but plenty of less successful companies did this as well and never released anything. Soul-crushing crunching seems to be par for the course in the games industry worldwide, by and large.
The other major fundamental weakness, as I see it, is addressed by the question "why would overseas publishers invest here?" After all, the industry has never been big, there's never been a big talent pool to choose from here, and any companies that wanted to do decent work ended spending a fortune on importing workers. Why? This one's particularly relevant in the light of today's news since THQ falls into this category.
The answer seemed to rely on one simple element - Australia wages were lower, when translated into US dollars, than US wages. In the early 2000s when the industry was really starting to build up, the Aussie dollar bought about 50c to 60c US. And although Australia's property boom had already started, it was really only just starting to go nuts about this same time. So overseas publishers would see *relatively* low wages, a low cost of living (hey, it didn't always cost $8.50 for a sandwich from a local cafe!) and an untapped source of programmers and budding artists, all in an English-speaking country with reasonably low cost-of-business.
Oh, and don't forget the tax incentives.
Ever wondered why most of Australia's industry was in Brisbane and Melbourne? Well, wonder no more. Thanks to the miracle of tax incentives, coupled with the low Australian dollar, Australia (and Brisbane and Melbourne in particular) looked like attractive places to set up business. Not to produce world-class AAA titles. No, those are made where there's already lots of great talent. Overseas publishers needed developers to produce tie-in games (movie and TV series) and cheap sports games. These are generally seen as being more towards the "commodity" end of the production spectrum. Now, I'm not saying they're always easy to produce, or crappy products, but they generally require less "talent" and more grunt. Perfect work for a country with a cheap cost of production.
By the mid-2000s the exchange rate was hovering more around the 70 to 80 US cent mark, and things started to look shaky. Thanks to the mining boom the Australian dollar continued its rapid climb towards parity with the US dollar. The industry here started looking really shaky. The first big shock of the GFC (sometimes also called "The Great Recession") gave Australian games companies a short reprieve with international currency speculators panic selling the Australian dollar back below 70 US cents at the end of 2008/start of 2009, but the climb towards parity (and now beyond) resumed. Along with the mining boom, we also have the US Fed to thank for this - printing several tonnes of money (aka quantitative easing) was, after all, designed to devalue the US dollar.
For a country that was sold to corporate management as a source of cheap labour for easy-money tie-in games, this was all a slow death. Add to that the Australian house price bubble and mining boom savaging Australia's "low cost of living" in less than a decade, and this situation seems almost inevitable.
If you sell yourself as cheap labour, you'd better always stay cheap. Unless governments keep increasing the incentives for these companies to stay, there is just no reason why their money should keep flowing here. These guys have no loyalty - even 10 years of tax incentives would mean nothing to these people. If the money doesn't add up they will just pack up shop and leave. It's that simple. In fact, they'd probably be opening themselves to a lawsuit from their shareholders if they did anything else!
Who will survive these turbulent times in the Australian games industry? A few truly home grown companies who have loyalty to the country, and can produce decent quality titles, or are small enough to sustain themselves off mostly home-grown sales in Australian specific sports. We're probably still reasonably cheap in relation to the UK, so perhaps those with UK parent companies are somewhat safer. Perhaps one day the industry will bloom again, and we can hope that next time, somehow, it will have better fundamentals...
Good luck to all the developers over at THQ! At least there's work in mining...
