The Middle East is rapidly advancing to shape the future of gaming and esports, with unprecedented government investments. Over $3 billion was invested in the industry by Saudi Arabia’s Public Investment Fund (PIF) in 2022, as part of a much larger $38 billion commitment by PIF to be used by its company Savvy Games Group (SGG). Multiple acquisitions in gaming (Embracer Group, Scopely) and esports (ESL, FACEIT, VSPO) have already been executed. Additionally, Abu Dhabi Gaming has created a dedicated gaming and esports hub with strong incentives.
BCG’s latest gaming report titled ‘Game Changer: Accelerating the Media Industry’s Most Dynamic Sector’, highlights that more than 60% of the population in the Middle East are gaming enthusiasts, resulting in one of the highest shares of gaming mobile app downloads (50% compared to the global average of 40%). This explains why the region has demonstrated a long-term commitment to the gaming sector, with Saudi Arabia recently announcing its gaming and esports strategy, and the UAE creating two gaming centers to attract global companies.
Dr. Alexander Schudey, Managing Director & Partner at BCG, said, “The Middle East is a key player in the global gaming industry, with an impressive penetration rate and a strong commitment from governments to invest in the sector. The region’s focus on gaming and the establishment of dedicated gaming hubs makes it an attractive destination for global gaming companies. The young and digitally savvy population, particularly in Saudi Arabia, where 70% of the population is below the age of 30, combined with higher disposable incomes and a preference for indoor activities due to the hot weather, further contribute to the region’s thriving gaming ecosystem.”
A strong indication of Middle East populations towards gaming is strong growth of game streaming at 24.5% CAGR, which is on path to reach approximately 200 million users in 2025, according to Boston Consulting Group’s latest gaming report. The region’s growth is three times faster compared to China, the current leader, at a compound annual growth rate (CAGR) of 24.5% versus 7.6%.
Pavel Kasperovich, Principal at BCG, commented, “The Middle East’s gaming market is diverse, with both casual and core gamers contributing to its growth. The region’s focus on mobile gaming and the continued popularity of console and PC games demonstrate its adaptability and potential for further expansion. The significant government commitment, such as Saudi Arabia’s $38 billion investment in gaming companies and Abu Dhabi’s attractive incentives for gaming businesses, highlights the region’s dedication to fostering a thriving gaming industry. Furthermore, the potential for gaming and esports to enhance the tourism sector in the UAE and Saudi Arabia presents a unique opportunity to market these experiences to a global audience.”
BCG’s gaming report identifies four major trends that will likely have the largest impact on the industry’s future:
- Audience growth and demographic shifts:Gaming industry growth is broadening demographically. Gen Y, who grew up playing video games, is entering their 30s with average gamer age at 31. However, children and youth still drive audience growth. Gen Z is the first generation to play as much as watch videos, leading gaming to surpass other forms of entertainment in numbers and time spent in the future.
- Innovation from players: In the gaming market, innovation takes a unique path compared to other media segments, with consumer communities playing a significant role in driving change. Today, platforms like Roblox and Minecraft are making it easier for users to generate content and innovate within games, as evidenced by the Squid Game-inspired game on Roblox and advancements in game engine technology by Epic (Unreal) and Unity. Moreover, publishers are quick to adopt and commercialize user-driven innovations, such as incorporating MOBA features into first-person shooter games like Activision-Blizzard’s Overwatch. This trend of consumer-driven innovation is expected to continue, particularly with platforms that facilitate game development and creativity for gamers.
- Mergers & Acquisitions (M&A) activity:The gaming industry is witnessing a surge in consolidation as major publishers, media companies, and technology firms acquire studios and gaming-related assets globally. Over 650 gaming M&A or investment deals were announced or closed in the first half of 2022, with top players controlling more than 70% of the market. These companies pursue two main M&A strategies: consolidation of game development and extension of internal capabilities. Consolidation helps achieve economies of scale, support rising development costs, and facilitate experimentation with new intellectual properties. Meanwhile, extending internal capabilities allows publishers to access cutting-edge technologies in areas like in-game advertising and motion tracking, enhancing the gaming experience and boosting revenue streams.
- New use cases: The gaming industry witnessed the emergence of the metaverse as a groundbreaking concept that is revolutionizing digital experiences. Gaming, as a pioneer in this field, laid the foundations for the metaverse long before its widespread adoption. It introduced key elements that now define this immersive virtual world. Today, gaming not only serves as the core use case to attract people to the metaverse but also plays a vital role as a contributor from a technological perspective. Cutting-edge advancements in game engines, motion tracking, and other technologies have seamlessly integrated with the metaverse, enhancing its capabilities, and pushing the boundaries of what is achievable.
As the Middle East continues to emerge as a gaming powerhouse, the region’s commitment to innovation, investment, and audience engagement will play a significant role in shaping the future of the global gaming industry.
