Temperature-dependent photoluminescence characteristics of non-polar m-plane ZnO and ZnMgO alloy films grown by metal organic chemical vapor deposition have been studied. The enhancement in emission intensity caused by localized excitons in m-plane ZnMgO alloy films was directly observed and it can be further improved after annealing in nitrogen. The concentration of Zn vacancies in the films was increased by alloying with Mg, which was detected by positron annihilation spectroscopy. This result is very important to directly explain why undoped Zn1-xMgxO thin films can show p-type conduction by controlling Mg content, as discussed by Li [Appl. Phys. Lett. 91, 232115 (2007)].