Video games have steadily risen in popularity for years. ith people looking for new ways to socialize and stay entertained during the pandemic, the trend has only accelerated.
The result? Gaming is now a bigger industry than movies and sports combined.
China is the market leader, with the Asian region and the U.S. being the next largest in terms of scale.
But from a growth perspective, Southeast Asia has taken centre stage, with both mobile and PC gaming witnessing explosive user growth. Gaming revenues were over US$5.0 billion in 2020, expected to grow over 20% in the next few years.
hat has contributed to the rise of this industry in Southeast Asia?
The right ingredients
When we look at China’s journey, the boom in the gaming sector coincided with the increasing adoption of smartphones. During this era, Chinese companies like Tencent and Alibaba witnessed unprecedented growth. First PC, then mobile games, became household names in the country.
South East Asia is now at a similar inflection point, particularly in terms of online penetration, smartphone usage, and faster internet speeds. A Google survey revealed that at least one in three smartphone owners in Southeast Asian markets played mobile games once in last seven days.
Over 82% of Southeast Asia’s urban online population are gamers and mobile gaming leads by a significant margin over PC and console.
This has resulted in an expanding market for all Southeast Asian countries, as seen below. In terms of scale, the usual suspect Indonesia takes top spot, with US$1.7 billion. In 2020, an average Indonesian player increased the number of online games played each month by 26% compared to 2019.
Other markets are not too far behind though, with all from Malaysia to Singapore experiencing double digit growth.
The ones producing these games that have led to this growth paint an even more interesting story.
The leader of the pack, followed by some new kids
Multiple gaming companies have evolved in South East Asia in the last few years, but there are few companies that have made notable progress.
Undoubtedly, the leader of the pack is Sea Limited. While it has now morphed into a multi-product conglomerate, more than 40% of its revenue comes from its gaming division Garena. More specifically, most of the revenue comes from a single game called Free Fire.
Free Fire is a battle royal game involving strategy to be the last person standing. It may sound like a concept done to death but Free Fire clearly got it right. Why? t officially became the most downloaded mobile game in 2019.
The broader strategy or battle arena genre is undoubtedly the most popular, with 44% of gamers in the region taking to this genre.
However, there are several new models of gaming that have emerged in recent times. One of them is the play to earn model, one which has coincided with the rise of the blockchain-based gaming and the metaverse.
One which has truly been a sensation in the gaming arena since its launch is Vietnam-based company Sky Mavis’
Sky Mavis has developed the internationally popular blockchain game Axie Infinity, which allows players to earn income through non-fungible tokens (NFTs) and cryptocurrencies by breeding, battling, and trading digital pets called Axies.
The company not only has grown its player base exponentially, but it has gained the attention of venture capital firms.
Just five months after raising a US$7.5 million round of Series A funding, it has raised an additional US$152 million Series B round. The company is now reportedly valued at a whopping US$3 billion.
Yield Guild Games, is a blockchain-based play-to-earn gaming platform from the Philippines. YGG has a partnership with games such as the SandBox and Guild of Guardians. It makes money by selling or renting non-fungible tokens (NFTs) assets in the virtual gaming world. NFTs represent and validate digital assets.
The startup raised about $12.5 million USD recently by conducting a sale for 25 million YGG tokens. In doing so, the company can establish a decentralized autonomous corporation (DAO), where the members can use the tokens for public trading or in digital settings.
There are few other notable players like Tier One Entertainment, EVOS Sports, Playvegas88 which has raised millions of dollars combined and are on track to make a dent in this space
A bright future
Mobile usage in the region is at its peak and showing no signs of slowing down, as it continues to add approximately 3.5 million users per month, a lead indicator of gaming users growth in the region.
Besides this, Southeast Asian Companies now have a proven track record to build for the world. In the case of Axie, more than 30% of users are Non-South East Asian residents.
As more business models come to market, the potential of gaming only rises in the region. It is hard to say whether all these tailwinds will continue to sustain.
However, until anything proves otherwise, it is all fun and games for the industry in Southeast Asia.