UPDATED: Failed foreign-owned Gameloft Auckland received $2.9m from Callaghan

UPDATE 2.30pm: French-headquartered gaming company Gameloft, which is understood to be closing subsidiary Gameloft Auckland, at the cost of 160 Kiwi jobs, received R&D funding from Callaghan Innovation, the government organisation has revealed today.

According to spokesman Iain Butler, that $2.9 million of funding is subject to clawback.

The confirmation follows claims from the Taxpayers’ Union that Gameloft enjoyed “more than $15 million in corporate welfare grants from Callaghan Innovation since 2014,” making it yet another failed example of “these kind of reckless spend-and-hope subsidies.”

According to Mr Butler, that’s not the case.

“Without wishing to engage in any media debate with the Taxpayers’ Union, the $15 million figure is the maximum possible payout for a Growth Grant over three years. Gameloft was only two years into its grant so mathematically couldn’t have achieved any more than $10m.”

Further, the funding is only paid out by Callaghan on receipt of audited accounts showing actual R&D spend, which is monitored by Callaghan to ensure the expenditure is legitimate.

Foreign companies are eligible for Callaghan funding if they have one New Zealand-based director, and meet one of the following criteria:

• are incorporated in New Zealand;
• have a centre of management in New Zealand; and
• have a head office in New Zealand.

Except in very limited circumstances, R&D undertaken outside New Zealand is not eligible, so the R&D facility being funded must also be in New Zealand.

EARLIER: New Zealand’s largest game development studio, Gameloft Auckland, has shut its doors, causing the loss of approximately 160 jobs.

It’s a big blow to the infant New Zealand industry, which employs just 568 people according to a recent survey.

The French-headquartered company has not commented on the reasons behind the move but a statement on PR newswire says it is continuing its “ambitious cost optimisation plan” initiated in December 2014.

“All in all, the company closed 10 development studios from December 2014 to the end of January 2016, generating annualised gross savings of around €35 million and enabling the worldwide workforce to decrease by more than 10%,” the statement said.

NZ Game Developers Association chairman Stephen Knightly believes the Auckland closure is a cost-cutting exercise as French media company Vivdendi increases its stake in Gameloft. Vivendi has previously not ruled out a takeover.

“To me it seems that the decision was driven by the offshore head office rather than being a reflection on the quality of the New Zealand team or their work,” Mr Knightly says.

He says it’s “sad news” because the studio was a valuable training ground that gave many Kiwi game developers skills and expertise to launch their own careers and own studios.

Gameloft shut down seven of its outposts last year, including Tokyo, New York City, and Seattle. A new office in Nigeria was set up last week.

Gameloft Auckland was set up six years ago and primarily made mobile app games. Its most notable products are Country Friends, Zoo Rescue, My Little Pony, Littlest Pet Shop, Silent Ops and Playful Minds Math.

Gameloft NZ’s latest financial statements say it had revenue of $14.8 million and made a profit of $647,733 for the year ended 31 December, 2014, according records on the Companies Office.

Mr Knightly says NZGDA is coordinating job opportunities for Gameloft employees at its monthly industry meetup next week.

“The overall New Zealand game development industry is in good health and continues to grow,” he says.

“The majority of studios are New Zealand-owned and produce their own original games, so have more control over their futures and retain more of the profits locally.  However, there is still a strong case for international studios to set up here, mirroring New Zealand's success in attracting major film productions.”

The local industry earns most of its revenue from exports, with more than 82% of revenue coming from offshore because of digital distribution platforms. NZGDA says this fell from $69.4 million in the 2014 financial year to $65.1 million in 2015. However, 134 extra people were hired in the same period.

Gameloft NZ has been contacted for comment.