The German games industry has its eyes set on growth thanks to increased funding from the federal government.

The companies in the sector are receiving funding from a €125 million annual pot, effective January 2026; for context, the industry received €50 million in 2024 and €88 million in 2025.

Germany’s government first introduced funding for the games industry in 2020 following a pilot program the previous year. This financial support has, according to the MD of the country’s video games trade body, Game, Felix Falk, has slightly reduced the impact of the global macroeconomic situation of the last few years on the German games industry.

This most recent increase to €125 million in funding has, in part, been driven by German’s new federal government – described as “ambitious” by Falk – which came into office in mid-2025.

Germany is the No.1 country in Europe when it comes to consumer spending on games and the fifth biggest around the world.

“We’re a big market. There’s a great situation for junior staff and training up new talent,” Falk explains. “There’s a lot to be positive about in Germany. Our funding framework is now more comparable to other major hubs worldwide, creating a level playing field. We can develop the market here much faster than in other places in the world.”

One person that Falk calls out as being instrumental in the increased support for the German games industry is Dorothee Bär, long-time politician and the current Minister for Research, Technology and Space.

“She has been close to games and our industry for more than 20 years. I’ve known her for two decades when she was a real youngster in the parliament,” Falk says. “She always knew about the potential and the strength of games and always supported the industry and tried to bring it forward and now, to have her as the responsible minister, is great for the industry.”

While Falk and Game are grateful for the substantial increase in funding that the industry has received in 2026, the trade body’s managing director says that this financial support will need to grow further in the long term.

“The potential growth in Germany is much higher than this funding budget would allow,” he explains.

“But that’s a question we have already raised with politicians, and they already know our ambitions and that the funding budget has to keep track with our ambitions to be one of the top game development hubs in the coming years.”

Game’s pitch to the German government is simple: the country’s games industry has a huge amount of potential and can contribute to the country being a “worldwide relevant player”.

“Economy, culture and innovation are the core of our pitch,” Falk explains.

“The political parties and many areas of society and the economy know much more about the potential or advantages of games in these areas.”

Another element of the pitch to the German government has been the real-world examples of countries that have greatly benefited from political support, such as Canada, the UK and France.

For its part, the UK has had Video Games Tax Relief (VGTR) since 2014, an initiative which is set to close in 2027.Video Game Expenditure Credit (VGEC) was introduced in 2024 and will ultimately replace VGTR. That’s on top of other schemes, such as the the £30 million (£10 million per year over three years) Games Growth Package initiative, as well as the UK Games Fund.

“Saudi Arabia is providing billions to play a big role in this future industry,w e shouldn’t wait for others to be even further in the lead”

“We’re also in a situation where Saudi Arabia is providing billions to play a big role in this future industry,” Falk observes. “We shouldn’t wait for others to be even further in the lead; Germany and Europe need to be competitive in this space.”

Another card up Game’s sleeve is research indicating the economic impact of funding on the games industry. For every €1 in government support, an additional €4.80 in additional investment is triggered, on average. That’s on top of €3.40 in tax revenue and social contributions, and €8.70 in gross value added.

“These are numbers which are important; it’s easier to ask for money if you say you get a big return and trigger very positive effects which will result in better financial outcomes for Germany, too,” Falk says.

In the long term, the trade body wants its games industry to be supported by tax breaks in addition to the current funding model.

While tax breaks are common for games industries around the world, they are uncommon in Germany’s financial legislation; the only real example of a sector being supported by tax breaks is research. For what it’s worth, that has gone well, and Falk says that he is hopeful that the games industry could be the second area to receive a tax break model – and the new government has said that it is something it would like to do in the coming years.

“We have been telling politicians for some years now that tax breaks are the standard worldwide”

“We have been telling politicians for some years now that tax breaks are the standard worldwide,” Falk explains. “They give companies more reliability, which is what counts when it comes to opening up studios. It’s not only about organic growth from existing firms, but also about companies from other parts of the world establishing studios in Germany. For that to happen, we need a reliable and well-known structure.”

Towards the end of 2025, Game published research showing that 29% of its members were expecting 2026 to be more positive than the previous year. That’s below a third, but still almost double the 17% of companies that voted this way regarding 2025. Over half (53%) of respondents also said they felt their businesses would perform better in 2026.

“Not everything is bright, it’s still tough, but I think it’s important to see that the mood is good and there’s an expectation that the future will be positive again,” Falk says. “I think that’s because of positive signs we’re seeing from the government. We have some stop-and-go in the last government. Now it’s straightforward.”