Every year I try to take a step back and look at where Australian gaming stands. Not the global trends and international headlines — specifically, what’s happening here, in our market, with our players and our developers. 2026 is shaping up to be an interesting year, with genuine momentum in several areas and persistent challenges in others.

Here’s the state of play.

Game development: cautiously optimistic

The Australian game development industry is in the best shape it’s been in since the early 2010s, before the wave of studio closures that decimated the local scene. The DGTO is putting money back into studios, even if the threshold excludes many small developers. State-level support programs continue to fund projects. And the creative output is exceptional.

The challenge is sustainability. Too many Australian studios are one bad release away from closure. The industry’s dependence on grants and tax offsets means that policy changes — a new government, shifted priorities, budget cuts — could have outsized impact.

What I’d like to see in 2026: more studios developing sustainable business models that don’t depend on government support. More investment from private capital. More Australian games finding commercial success on the global stage.

Esports: growing but fragile

The Australian esports scene is larger, more professional, and more diverse than it’s ever been. VALORANT and Counter-Strike have strong competitive communities. Fighting games are thriving. Prize pools have increased. Dedicated venues exist.

But the economics are still precarious. Most Australian esports organisations aren’t profitable. Player salaries, while improved, are still below what’s needed to prevent talent drain to international teams. Sponsorship revenue is concentrated among a few top teams, with the rest of the scene competing for scraps.

The infrastructure improvements — better venues, better broadcasts, better tournament production — need to be matched by revenue growth. Otherwise, we’re building a scene that looks professional but can’t sustain itself financially.

Hardware and market trends

The PS5 and Xbox Series X are in their mid-cycle, with prices stable and library depth excellent. The Switch 2 will arrive this year and generate significant consumer excitement. PC gaming continues to grow in Australia, driven by component prices that have stabilised after years of GPU inflation.

Mobile gaming remains the largest segment of the Australian gaming market by revenue, though it receives the least attention from enthusiast media. The rise of high-quality mobile ports and mobile-first competitive games is something the Australian market is well-positioned for given our high smartphone penetration.

Cloud gaming remains a niche in Australia, limited by internet infrastructure and latency. This will change, but slowly.

The AI factor

AI is touching every part of the gaming ecosystem. Development tools, testing, localisation, anti-cheat, matchmaking, analytics, NPC behaviour. The pace of adoption among Australian studios is accelerating.

The key question for 2026 isn’t whether AI will be used in gaming — it already is. It’s whether the Australian industry will be a consumer of AI tools built elsewhere or a contributor to the development of gaming-specific AI. Local firms like AI consultants Sydney are already working with studios on gaming-specific AI applications, and given the technical talent in Australian studios and universities, there’s an opportunity to be at the forefront rather than following the US and Asian leaders.

The challenges ahead

Internet infrastructure. Still the biggest structural disadvantage for Australian gamers. NBN upgrades are helping, but the multi-technology mix means millions of Australians still have connections that make online gaming frustrating.

Cost of living pressures. Gaming is entertainment, and entertainment budgets get cut when cost of living rises. $125 games, $23/month subscriptions, and $2,500 PCs are harder to justify when groceries and rent have increased faster than wages.

Regulation gaps. Loot boxes, esports betting, data privacy in online games, and AI-generated content all need regulatory attention that they’re not currently receiving.

Diversity and inclusion. The Australian gaming community and industry are more diverse than they were a decade ago, but there’s work to do. Women remain underrepresented in both competitive gaming and game development. Indigenous Australian perspectives in game design are almost entirely absent. These aren’t just equity issues — they’re creative limitations.

The opportunities

Global audience for Australian content. Australian developers have a distinctive creative voice that international audiences respond to. Games with Australian settings, humour, and perspectives stand out in a market dominated by American and Japanese aesthetics.

Education pipeline. Australian universities produce excellent game development graduates. The challenge is keeping them in Australia rather than losing them to international studios.

Regional gaming growth. Gaming infrastructure in regional Australia is improving. Regional esports communities, particularly in cities like Newcastle, Geelong, and Cairns, are growing. This broadens the base of the Australian gaming community beyond the capital city bubble.

The bottom line

Australian gaming in 2026 is in a good place, with real room for improvement. The creative output is strong. The competitive scene is growing. The community is engaged. What’s needed is sustainability — financial models that don’t depend on a single policy, a single sponsor, or a single game succeeding.

I’ve been covering this industry for a decade, and this is the most exciting period I’ve seen. The potential is enormous. Realising it requires the same thing it always does: smart decisions, hard work, and a willingness to invest in the long term.

Let’s see what the year brings.