A West Auckland studio that gives away its core product for free just turned over more than half a billion dollars. Grinding Gear Games posted revenue of $526 million for the 15 months to December 2025, with $192 million in net profit. That is roughly five times the $105.2 million revenue it reported for the prior year. The result landed the same week New Zealand’s entire video game sector crossed $1 billion in annual revenue for the year to March 2026, two years ahead of its own target.
This is a genuinely rare thing in New Zealand economic life: a globally scaled, digitally exported, high-margin product built from scratch on local talent. The question is why it remains so rare, and whether the policy settings exist to produce another one.
A free game that prints money
The engine behind the result is Path of Exile 2, which hit number one on Steam’s global top sellers list with over 850,000 simultaneous players at its December 2024 launch. The game is free to download. Revenue comes from cosmetic microtransactions and supporter packs, sold to a player base that keeps returning because the studio keeps shipping content.
Managing Director Jonathan Rogers told Newstalk ZB in January 2025 that the studio had “probably nailed their formula”. That formula, a live-service model built for continuous updates over years, is what separates a one-off hit from a compounding revenue machine. The studio now employs over 240 staff and continues to hire.
One asterisk: Grinding Gear is 100% owned by Tencent, the Chinese tech giant. The jobs, tax, and IP creation remain onshore, but the profits ultimately flow to a foreign balance sheet. That does not invalidate the economic contribution, but anyone calling this a pure New Zealand success story should note the fine print.
The rebate that actually pays for itself
The Game Development Sector Rebate, introduced in 2023, offers a 20% rebate on eligible development expenses capped at $3 million per firm per year. In 2024/2025, NZ On Air paid out $22.4 million to 40 studios. Those same companies returned more than $115 million to Crown coffers through income tax and PAYE, a $4.74 direct return for every dollar invested.
The industry claimed just over half of the $40 million available for the year. The scheme is not being gamed or exhausted. Sector revenue has grown from $19.6 million in 2012 to over $1 billion in 2026, and the IGEA/NZGDA joint policy platform puts revenue per full-time equivalent at roughly $706,000, more than double the national productivity average.
NZGDA executive director Joy Keene says the $1 billion figure “includes at least $200m from new games”, meaning the growth is not just one studio scaling up but a broader pipeline maturing. Total sector employment rose 29% to 1,418 staff.
Australia is offering a better deal
Here is the problem. Australia offers a 30% refundable tax offset for game developers, with some states adding a further 10%. New Zealand sits at 20% with a $3 million cap. Then-NZGDA chair Chelsea Rapp warned earlier this year that “some New Zealand studios are already looking at expanding into Australia instead of expanding locally”.
Labour has pledged to lift the rebate to 25% and raise the cap to $4.5 million. The current government has responded more modestly, with Minister Reti announcing Code’s annual funding increased by $2.75 million to $5 million. MBIE has committed the GDSR will remain beyond 2027, which provides certainty, but does not close the gap with Australia’s headline rate.
The next studio is the one that matters
Grinding Gear’s result is spectacular, but it is also, in some respects, already banked. The company is Tencent-owned, the IP is established, the revenue model is proven. The real test of New Zealand’s game development policy is whether the next studio with a breakout title scales up in Henderson or relocates to Brisbane.
A sector generating $706,000 per employee and returning nearly five dollars to the Crown for every one it receives is not asking for a handout. It is asking for competitive parity with the country next door. The GDSR is that vanishingly rare thing in Wellington’s policy toolkit: an industry subsidy that demonstrably works. The case for matching Australia’s rate is not ideological. It is arithmetic.
Sources
- NZ Herald: West Auckland’s Grinding Gear Games, maker of Path of Exile, reports $105m revenue, CEO leaves for new venture (2025-01-15)
- NZ Herald: Why NZ’s video game industry hit its $1 billion revenue target two years early (2026-06-15)
- NZ Herald: Video game industry reveals another boom year, Reti delivers 2 of 4 items on its wishlist (2026-06-15)
- Newstalk ZB: Jonathan Rogers on Grinding Gear Games’ success (2025-01)
- NZ On Air: Game Development Sector Rebate – Year In Review 2024-2025 (2025-10-01)
- NZ On Air: GDSR Update – 16 December 2025 (2025-12-16)
- IGEA: 2026 New Zealand Video Games Industry Policy Platformer (2026-06-10)
- Bill Bennett: Why New Zealand’s export games industry needs help (2026-02-18)
- NZ Herald: Labour pledges bigger video game development rebate to boost studios (2026-06)