New reality: Gaming industry attracts record investments

The Saudi government will allocate $38 billion to turn the country into a global video-game hub. Looking for a replacement for oil, which is the mainstay of the Middle Eastern leader's economy, Riyadh chose games. The Saudi Arabian Public Investment Fund has announced its ambition to become a leader in the global gaming market worth $184 billion.

Previously, the Fund invested in the esports industry, which is currently going through hard times. Now, it is focused on the development and publishing of global bestselling games, as well as the development of gaming infrastructure in Riyadh. Despite the fact that the market for game producers is oversaturated, the fund brought Brian Ward, a former head of Electronic Arts, Activision, and Microsoft Corp, to Saudi Arabia and made multibillion-dollar investments in gaming companies such as Nintendo Co., Tencent Holdings Ltd. and Activision Blizzard Inc.

In the past, Saudi Arabia hardly participated in global game development. But the rapid growth in the number of gamers has attracted the government's attention. According to Niko Partners analysts, there are approximately 21 million players in the country, i.e about 58% of the population, compared to 66% in the United States.

Will gaming really become a new magnet for investors?

The gaming market in the Middle East and North Africa is expected to grow by 56% to $2.79 billion by 2026.

2.9 billion people play games that is slightly more than one in three people on the planet. In 2021, industry revenues crossed the $193 billion mark, and before that, the market grew by an average of 15% per year.

Thus, in 2020, the global gambling market was already worth $203.12 billion, and in 2021 - $229.16 billion.

In 2028, according to analysts, the total revenues of the industry will reach $545.98 billion with an average annual growth rate of 13.20% in 2021-2028.

Markers of growth

In the early 90s, during its infancy, the video game industry grew at a staggering rate. Since 2016, one of the main drivers of the global spread of games has been the growth of an affordable and wide range of new gadgets and platforms that people in all parts of the world can play.

During the Covid-19 pandemic, the industry, like others, experienced a shock. However, it recovered quickly. Pandemic restrictions forced people to stay indoors for days, which led to a surge in the games' popularity. The market grew by a record 38.24% in 2020.

However, in 2022, the growth rate of global gaming revenue slowed down. The market was oversaturated. The industry continued to suffer from the lack of chips, as their shortage slows down the supply of gaming devices. And people have finally freed themselves from pandemic restrictions and began to spend less time playing games.

However, the market decline is a temporary phenomenon, experts say. After all, all the main growth drivers remained unchanged.

Processors are becoming faster, graphics are more spectacular, and the gaming experience is more lively and interactive. Console manufacturers are offering new hardware with better features and exclusive, exciting games.

In addition, the global availability of the Internet, particularly in the 5G standard, is increasing, allowing more and more people across the globe to play games online.

Products that offer simultaneous play to a large number of users are expected to continue to grow.

In addition, 5G technology, offering faster network speeds and lower delays, gives game developers more creative freedom without being limited by hardware platforms. Players, on the other hand, get the opportunity to live a new and immersive gaming experience that is not tied to stationary devices. Indeed, in addition to the development of cloud gaming, 5G allows gamers to use virtual and augmented reality (VR) devices on the move, providing a unique mobile experience.

Favorable demographic drivers have not disappeared either: in addition to standard users, children and the elderly are increasingly choosing gaming as entertainment. In addition, more and more women gamers are becoming active.

However, there is something that can further accelerate the development of the gaming industry. Today, video games are on the verge of major transformational shifts, according to E&Y analysts. The reason is the emergence of meta-space: "a shared, persistent, three-dimensional (3D) virtual space where users interact with objects, the environment, and each other through digital images of themselves or avatars."

The meta-space factor

Once upon a time, science fiction writers imagined a world where people used avatars to interact with each other in metaphysical and virtual dimensions. Today, the concept inherent in dystopian science fiction novels is becoming a reality. Gaming companies are actively experimenting with their presence in the metaverse, while others are incorporating it into their development strategies. How broad will the economic opportunities of the metasphere be? According to one of the estimates provided by E&Y in its report, by 2025, the global meta-network market will reach $280 billion and become one of the fastest growing.

And here's why:

None of the classic games that will continue to compete with each other will be able to compare to the meta space. After all, "each game is only one of many 'spheres' of the metasphere, which has a seemingly infinite number of directions and activities. This can lead to significant changes in the business models of gaming companies, the way they develop their products, the required skill sets of employees, and even the structure of these companies.

As it evolves, the meta-space will continue to incorporate more and more different technologies, such as VR, AR and 3D functionality. In the future, the Metaspace will span multiple platforms, as well as digital and physical realms. Combined with the decentralized concept of Web 3.0, which many see as the next stage in the Internet's evolution, Metaspace will create completely new ways of interaction and cause a jump in the profitability of gaming companies.

It is worth adding that a number of companies, including Facebook, have already tested the idea of the metaverse and even provoked discussions about its unviability. It was caused by Mark Zuckerberg's decision to abandon the Metaverse project after years of work, billions of dollars of investments, and even rebranding the company when Facebook was renamed Meta. And while some experts argue that the idea of a virtual world where people can communicate, live and, most importantly, buy, has not passed the test of reality, other analysts are steadfast in their predictions, considering failed launches to be just inevitable obstacles on the way to the inevitable development of this technology.

In January 2020 alone, Americans spent $25.2 billion on home entertainment systems. 

A large number of people around the world tend to use games as one of the main sources of entertainment. Playing video games helps to relieve stress, moreover, it provides experience of teamwork and helps players to live the feeling of shared joy and victory. The positive emotional experience that a player receives encourages them to try again.

Developers claim that games can calm down hyperactive children and entertain older people who have more free time. 

Perhaps this is exactly what the Saudi government is counting on, as it has decided to throw down the gauntlet to the biggest players in the industry - China and the United States. 

"Saudi Arabia is acting with a sense of urgency and wants to make as many significant deals as possible, ahead of other countries that may join the process later," says Serkan Toto, CEO of Kantan Games Inc. consulting group. – Apparently, they understand why they are in a hurry.