Why the most profitable sector of the entertainment industry will get handouts from the government.

Gaming makes more money than any other entertainment category. So why is the sector getting government cash?

New Zealand on Air recently announced the recipients of the Game Development Sector Rebate - 32 gaming studios will be able to claim back 20 percent of what they spend creating games.

Some insiders say it could lead to Aotearoa's next "Middle Earth moment".

Despite being the biggest earner in the entertainment sector globally, gaming in Aotearoa has been struggling to keep up with overseas competitors.

Zoe Hobson is chief executive of Runaway Play, a Dunedin-based mobile game developer.

"It's been a bit of a funny few years in the gaming market," she says.

"If you step back a couple of years, the New Zealand gaming industry had been growing really strongly, with very little or not really any significant support. If we look back a few years, it was growing at an average of 26 percent year on year and we'd had growth of 47 percent in 2022."

Then other countries introduced rebates. For instance, in some Australian states, studios were offered up to 45 cents back on every dollar they spent developing a new title.

"So we started seeing a shift," Hobson says.

"Growth in New Zealand started to slow, companies started to see staff moving overseas. A lot of companies here in New Zealand started to feel pressure to consider moving their businesses outside of New Zealand because of the lack of support for the industry.'

"In 2023, I believe that revenue growth was just seven percent here in Aotearoa. Compared to 2022, it's a pretty big slowdown."

Newshub technology reporter Finn Hogan has reported extensively on gaming in New Zealand.

"We just looked over the pond, we saw what was happening, there was lobby from the industry here because we were starting to see people start moving across the Tasman and we were starting to see a bit of a cap on the kind of growth that we could have," he says.

So the Labour government agreed to fund rebates, spending $160 million over four years. National has kept the scheme.

The rebates won't be quite as high as in Australia, but Hogan thinks the cash incentive will be enough.

"I think 20 percent will be enough to stem any bleeding of people going across there," Hogan says.

"You have to have minimum annual expenditure of $250,000 and then it's capped at around $3 million. Whatever you are spending that you can show was directly in game development, that's what you can get the rebate on."…

Go to this episode on rnz.co.nz for more details