The Gulf presents a significant growth opportunity for the global gaming industry due to its young and tech-savvy population, extensive government support, and continued investment in tourism, hospitality and entertainment. According to the 2022 census, 63% of Saudi Arabia’s population is under the age of 30, with the median age being 29; the average disposable income for Saudi nationals is also relatively high by global standards. Moreover, the country’s hot climate means that people tend to spend more time indoors, making gaming a popular recreational activity. With its market worth an estimated $1.8bn, the Kingdom represents 45% of the MENA gaming industry and is positioned to play a leading role in its continued growth.
As a specific segment of the gaming industry, the global e-sports market was valued at more than $1.4bn in 2022, according to US-based research firm Cognitive Market Research. The sector is projected to continue to expand, with projections putting it at nearly $4.5bn by 2030, with a compound annual growth rate of 17.8% from 2023 to 2030. The Gulf is expected to contribute to this expansion, with the number of e-sports enthusiasts in the MENA region projected to hit 318m by 2025.
Strategy & Key Players
Launched in September 2022, Saudi Arabia’s National Gaming and E-sports Strategy aims to develop the entirety of the related value chain to create 40,000 jobs and have 30 games be within the top-300 by 2030, with the segment’s contribution to GDP anticipated to reach SR50 ($13.3bn) by the same year. Specifically for the e-sports segment, Saudi Arabia plans to become the world’s leading e-sports host by organising the most viewed e-sports games, as well as being among the top-three countries in terms of e-sports athletes per capita. To achieve these goals, the following strategic lines have been identified: achieving global leadership in e-sports events by organising the most viewed global events; creating, facilitating and exporting intellectual property related to e-sports; developing a grassroots ecosystem to pave the way for local talent and enable them to become globally recognised figures; and assuming a more significant role in international e-sports federations. The strategy calls for financial support for the e-sports ecosystem; the development of a specific regulatory framework; the establishment of innovative arenas, cafes and adjacent gaming-related venues; the provision of facilities for e-sports companies; talent localisation; and the creation of e-sports academies.
Savvy Games Group is one of the main entities driving this strategy forwards. In September 2022 the Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth entity, allocated $38bn to Savvy to invest in gaming and e-sports across the full value chain. About a third of the announced amount is set to be spent on purchasing a major game publisher, while half is expected to be used to acquire minority stakes in other gaming companies. Savvy’s moves have included the acquisitions of German e-sports organiser ESL and UK e-sports platform FACEIT for a combined $1.5bn in January 2022; a $265m investment in VSPO, a Chinese e-sports-focused agency that houses multiple e-sports teams, in March 2023, making Savvy its single largest equity holder; and the acquisition of Scopely, a US mobile-first video game developer and distributor, for $4.9bn in a deal concluded in July 2023.
Another important entity is the Saudi E-Sports Federation (SEF). Since its establishment in October 2017, the SEF has occupied leading roles in international federations to support the growth and regulation of e-sports, including the International E-sports Federation, Global E-sports Federation and the Asian Electronic Sports Federation. The SEF has been instrumental in organising e-sports events, such as Gamers8, a large-scale e-sports festival held in Riyadh in July-September 2023.
Opportunities
Telecommunications and physical venues are vital infrastructure for developing the e-sports industry. Strong bandwidth and 5G capabilities are essential to support e-sports, with some telecommunications operators localising servers to reduce latency. Leading e-sports countries are also bringing gaming out of people’s homes and into public spaces. This includes local gaming centres for communities to advance their skills, as well as arenas or stadiums for hosting large-scale e-sports events.
Saudi Arabia is moving forwards in both telecommunications and venues. The SEF and the telecommunications firm stc announced a strategic partnership with stc Group to provide technical support and high-speed internet services for a number of events in the SEF calendar. In terms of venues, in June 2023 the government announced a $500m project to develop a city-within-acity to host e-sports in Riyadh. The project is scheduled to be completed in 2024, and the venue is expected to have a capacity of 20,000 spectators.
The expanding Saudi footprint in the gaming and e-sports value chain is expected to present opportunities for international businesses. In February 2023 the PIF raised its stake in Japan-based video game company Nintendo from 7.08% to 8.26%, becoming its largest outside shareholder. The PIF also has stakes in other Japanese companies in the sector, including Nexon, Capcom and Koei Tecmo. In addition, the sovereign wealth fund has stakes in US gaming companies, holding $2.9bn worth of stock in Activision Blizzard, $1.7bn in Electronic Arts and $1.2bn in Take-Two Interactive, according to data from the US Nasdaq Stock Market.
The potential opportunities extend beyond acquisitions and equity investment to cover distinct segments that could enable the domestic growth of the e-sports segment. In April 2023 Saudi Arabia’s Ministry of Investment and Wemade, the South Korean firm behind the global blockchain gaming platform Wemix, signed a memorandum of understanding that should give the Kingdom’s e-sports industry a major boost. As part of the partnership, Wemade will expand its presence to boost the Kingdom’s gaming and blockchain segments.
Challenges
Despite the progress made, talent attraction – especially to the e-sports segment – faces several structural and societal barriers. As of December 2021 Saudi Arabia had approximately 100 professional e-sports players, or 0.0005% of the Kingdom’s gamers. In contrast, the proportion of professionals to amateurs in the US and France is six times higher, and eight times higher in South Korea. Aspiring Saudi competitors have noted a lack of funding to compete full-time, a scarcity of local competition, no clear pathway for gamers to become professional and a social stigma associated with those who choose to pursue a career in e-sports.
Building the right local skill sets and actively attracting talent are critical to building national strength in the gaming industry. To achieve this, leading countries have adopted measures to improve their workforce and attract more talent. One measure is offering a wide range of courses and degrees that have a focus on the practical application of gaming concepts. These courses cover various fields such as engineering, arts and graphic design, management and others. By providing such courses, students are equipped with a range of technological and artistic capabilities that are necessary to succeed in the gaming industry.
To further enhance their workforce, these countries foster partnerships with traditional universities and institutes for student exchanges and academic research. They also offer gaming internships and training programmes to provide hands-on experience to students. Another strategy is to promote and destigmatise gaming and e-sports careers. This is done by developing and nurturing grassroots ecosystems through e-sports training facilities that feature world-class coaches and robust instruction programmes. These facilities can help teams train with the best and also attract global events, which further grows the gaming industry. In some contexts, a focus on diversity and inclusion is also a talent and growth enabler. By fostering a diverse and inclusive culture, individuals from different backgrounds are encouraged to join the gaming industry, bringing new perspectives and ideas. Overall, these measures help leading countries in the industry cultivate a highly skilled workforce with a range of technological and artistic capabilities, which is critical to building national strength in the gaming industry.
Prospects
Saudi Arabia has demonstrated a strong commitment to developing its e-sports industry. With its young and tech-savvy population, ambitious goals and strategic vision to become a global centre for e-sports, the Kingdom has the potential to become a significant player in the global e-sports market.
However, there are still structural and societal barriers that the country needs to address in order to attract and develop local talent. One way that Saudi Arabia can address these potential issues is by actively cultivating a highly skilled workforce that has a diverse range of technological and artistic capabilities. This can be achieved by investing in education and training programmes, and fostering a grassroots ecosystem that encourages innovation and creativity. By developing national strength in the sector and playing host to large global events, Saudi Arabia could become a major international player in both gaming and e-sports.
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