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Key Platforms and Emerging Business Models Driving the Gaming Industry: Frost & Sullivan

It only took 40 years for the evolution of gaming to progress from 4 bit to more immersive virtual reality (VR)-based video gaming. It was majorly supported by a continued shift in demographics, improvements in internet and mobile penetrations, and the increased availability of gaming infrastructure. The popular video game formats include multiplayer online battle arena (MOBA), first-person shooter (FPS), battle royale games, real-time strategy (RTS), etc. eSports and gaming are frequently used interchangeably.

However, eSports is a sub-segment of the broader gaming market. It refers to competitive video game tournaments where individuals or teams comprising of professional gamers participate for a prize pool. Some of the premier eSports events include the League of Legends World Championship, Dota 2’s The International and Intel Extreme Masters.

Key Market Drivers & Opportunities:

  • With about half of the world’s population younger than 30, and internet access expected to reach about 90% of the world’s population by 2030, this industry will continue to grow significantly.
  • In the eSports segment, continuous advancements in the areas of cloud gaming, design and development, physical venues, merchandizing and social media are paving new growth opportunities.

Overall, mobile gaming is the most common and penetrated platform. PC is a dominant platform for competitive gaming, and the console platform is mainly for casual gamers.

Facts & Figures:

  • About 46% of global gaming revenue was generated through the mobile platform and the remaining from consoles and PC in 2019.
  • The mobile gaming platform will continue to dominate this space, with its share expected to reach 60% by 2020.
  • The browser PC market (2% of the global gaming market) continued its decline. Growing demand for competitive play will continue to drive the downloaded/ boxed PC games market, which generated $33.5 billion in revenues globally in 2019.
  • The shift toward the games-as-a-service business model drove console game revenues to $45.6 billion by the end of 2019

The GCC region has a significant gaming population with about 60% of its population younger than 30. The number of gamers actively participating in various regional and global tournaments by forming pro-gaming teams has grown over the past few years. Going forward, with the rapid rise in smartphone penetration and the fact that mobile games have a higher penetration than PC and console games, the number of gamers is expected to surge significantly in the region. With Saudi Arabia and UAE gradually emerging as the regional hub for gaming and eSports, Frost & Sullivan expects the entire GCC region to account for about 1.5% of the global market revenue by 2025.

Saudi Arabia – Facts & Figures:

  • Saudi Arabia is the 19th largest gaming market in the world in terms of revenue as of 2019.
  • The Saudi Arabia gaming market was estimated at $837 million in 2019 and is expected to grow at a 22.5% CAGR over 2019-2025.
  • The disposable income of Saudi Arabian youth is above average, which is supporting gaming market growth in the Kingdom.
  • On average, Saudi gamers tend to spend more than American and European gamers.
  • The Saudi Arabian Federation for Electronic and Intellectual Sports (SAFEIS) along with the General Sports Authority is committed to developing the eSports ecosystem.

UAE – Facts & Figures:

  • UAE is the 35th largest gaming market in the world in terms of revenue as of 2019.
  • Gamers in UAE spend an average of 30 minutes per day on mobile games, which demonstrates the potential within the country.
  • UAE governments are taking a lead in promoting eSports. The Dubai Future Foundation is planning to build the region’s first eSports-dedicated arena–X-Stadium.

Impact of COVID-19
The novel COVID-19 coronavirus is continuing its spread and has hit the pandemic level. Almost every country across the world has reported COVID-19 infection cases. In efforts to limit the spread of the disease, governments around the world announced near or total shutdown, forcing citizens to stay home. This crisis, however, is leading to a significant surge in demand for online gaming across all platforms. Online gaming is proving to be a welcoming change for people coping with movement restrictions to engage with friends and family.

Meanwhile, major online gaming companies are dealing with a sudden surge in demand by focusing on keeping their servers up and running. However, it will be challenging for online gaming companies to add new in-game activities or features to keep players glued to their consoles.

In the eSports space, several event organizers are transitioning to online play or have decided to shut down or postpone their tournaments. ESports companies must figure out ways to keep up fan engagement until the world can recover from the crisis. Next-generation console launches are most likely to be delayed or will be made available with limited stock as a majority of the console-based gaming companies rely on manufacturers from China. Along with consoles, other gaming hardware and VR headsets will also be affected due to the supply chain disruption.

The gaming industry has been around for several decades. The global gaming industry surpassed the size of the music and film industries in 2003 and later doubled the combined size of the music and film industries in 2017. It continues to evolve and grow on the back of demographic shifts, rising consumer demand, and persistent advancements in technology. The GCC region is one of the fastest-growing gaming and eSports markets with its share expected to reach 1.5% of the global market in terms of revenue by 2025.

UAE and Saudi Arabian markets will continue to be the largest gaming markets in the region, with Oman and Kuwait to follow. The proliferation of affordable and powerful smartphones and tablets with longer battery life is helping mobile to maintain its leadership position amongst other platforms. Meanwhile, industry players are gradually evolving from traditional premium business models to subscription- and freemium-based business models, which enable micro-transactions like additional lives, cosmetics, power-ups, premium in-game currency, and so on.

Subscription and freemium business models are allowing developers to generate a continuous flow of revenue, which is not possible in the premium model as it collects only one-time fees. Moreover, to seize new revenue streams, industry players are also focusing on popularizing eSports. Growing advertising, sponsorship, and merchandise sales are expected to support the monetization for teams and organizations in the eSports space going forward.

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Chris Fernando

Chris N. Fernando is an experienced media professional with over two decades of journalistic experience. He is the Editor of Arabian Reseller magazine, the authoritative guide to the regional IT industry. Follow him on Twitter (@chris508) and Instagram (@chris2508).

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