By: Laura Parker, GameSpot AU - Posted on February 5, 2010

Job cuts, studio closures, and loss of revenue made 2009 one of the toughest years for Australia’s game development industry. But with the worst seemingly now over and the global economy slowly gaining confidence, how will the Aussie game development industry perform in 2010? In this GameSpot AU feature, we talk to some local experts and game development studios to gauge what this year has in store for the Australian industry.

When it comes to sales, Australia’s local games market held its own during a tough 2010. In January last year, GfK Australia reported that local games and hardware sales had grown by 47 percent during 2008 from the previous year, generating A$1.96 billion in sales over the course of 12 months. This positive trend continued into 2010, with sales figures released earlier this month showing a growth of 4 percent in the local video game industry in 2009 compared to 2008. But while the market appeared to have endured the economic hardship of the last year without too much damage, prosperity was nowhere to be found in the local video game development industry.

The first studio to run into trouble was Melbourne-based Transmission Games, which was forced to lay off 28 staff members in early October 2009 following a failure to secure publisher support for one of the studio's three unannounced projects. At the time of the layoffs CEO of Transmission Mike Fegan told GameSpot AU that the economic climate had made securing new projects more difficult, despite well-received releases such as Ashes Cricket 2009 and Heroes Over Europe. However, by the end of the same month Transmission had permanently shut its doors, going into receivership and laying off the remainder of its staff.

Transmission Games closed down in late 2009, despite well-received releases like Heroes Over Europe.

The next studio to fall victim to the struggling economy was Krome Studios, Australia’s largest video game developer and one of the biggest independent studios in the world. In November 2009, Krome announced that it would be laying off an undisclosed number of employees across its three locations in Brisbane, Adelaide, and Melbourne. With more than 400 full-time employees and titles such as Star Wars: The Force Unleashed and Ty the Tasmanian Tiger under its belt, the studio’s layoffs came as a surprise to many. Krome CEO Robert Walsh told GameSpot at the time: "With declining game sales, the industry is really feeling the effects of the struggling economy. In spite of industry-wide cutbacks and Krome’s need to reduce costs, we’ve worked really hard to minimise the impact on our staff. These cuts, while incredibly difficult as they affect the coworkers we consider friends, are necessary as we position Krome for the future."

Finally, in December 2009, Brisbane-based Fuzzyeyes Studios revealed that it too would be laying off an undisclosed number of employees and simultaneously shifting the development of its upcoming title, Edge of Twilight, to overseas studios. In a statement to press at the time of the layoffs, Fuzzyeyes CEO Wei-Yao Lu revealed that all onsite development was suspended and that a deal to sell off portions of the company to an undisclosed third party had already been made.

With the world economy slowly gaining strength once more, will 2010 prove to be a better year for the Aussie game development industry? Does it have the talent and support it needs to get back on its feet?

Developers Have Their Say

With 2007 and 2008 emerging as strong years for the Australian development industry, analysts and developers were hopeful the trend would continue in 2009. But Australia’s reliance on US-based publishers meant this didn't happen. The global financial crisis saw US publishers take a massive share price hit, forcing them to restructure their business and put less money into overseas development. As a result, Australian dev studios began to receive less and less work, eventually leading to staff cuts and studio closures throughout the industry.

Australian developers rely heavily on US publishers, meaning the global financial crisis had a big impact locally.

President of the Game Developers Association of Australia (GDAA) and Tantalus studio CEO Tom Crago has kept a close eye on the local development industry and the changing economic landscape of the past year. He believes that while the games industry in Australia continues to remain volatile, there is hope ahead.

"I certainly hope things don’t get much worse," Crago said. "All we can do is wait for the industry globally to rebound, while focusing on the titles we do have in development, and thinking our way through new business models that may provide opportunities for growth.

"While I don’t expect that to change all that much in 2010, I’m confident we’ll see a string of quality, Australian developed games released this year. New gaming platforms like the iPhone certainly present an opportunity for startups and indie developers, and I’m really hoping that this will be the silver lining to 2009’s cloud. The prospect of a bunch of new companies forming to take advantage of this rapidly changing market is something that is very exciting. There’s no doubt we have the talent here in Australia; we just need the entrepreneurial spirit and business acumen to make a go of it."

Crago doesn’t think it’s healthy to focus on the lowlights of 2009, but rather celebrate the good moments in the game development industry. For him, that means award winners at the annual GDAA awards; the Game Connet: Asia Pacific conference; and indie games like Flight Control. He’s also confident there are more positive moments to come in 2010.

"My top five things that the Australian game development industry can look forward to are quality releases from the established companies; new releases from at least three solid startups; a thriving indie scene, producing multiple titles for digital distribution platforms; increased collaboration within the local industry, amongst both big companies and small; and at least one surprise hit (maybe another Flight Control?)."

Indie titles like Flight Control could take off in the current economic climate.

But achieving these goals won’t come easy for Australia, particularly in light of the ever-present challenges that the development industry already faces: the exchange rate that continues to hurt us, our geography and the size of our market, and the quality of work we produce with the budget we have. Crago believes that in spite of all this, overseas publishers will continue to hire Aussie developers in 2010.

"We have, for the most part, weathered the storm, and the quality of our work remains high," Crago said. "The publishers who have downsized their own internal development studios--and that’s most of them--will be looking increasingly to hubs like Australia, when the market rebounds."

And what about Crago’s own studio, Tantalus?

"We’ll continue our efforts on the DS, PSP, and Wii. We’re also bracing ourselves for the next generation of handhelds and are doing what we can to get ready for those. The games we’ll be shipping in 2010 have not been announced yet," he said. Click on the Next Page link to see the rest of the feature!