Gaming is an activity that is fascinatingly antithetical to the stereotypical Asian culture of pragmatism, hard work, and a focus on academics. Ironically, Asia has an outsized contribution to the global gaming market, which has arguably reached escape velocity in recent years, accelerated by COVID-19-induced movement restriction requirements. Most recently, with the return to normalcy, the growth of the gaming industry has tapered or even declined. According to a report by Temasek, Google, and Bain, the decline in time spent on gaming was more pronounced among lower-income gamers, especially suburban users, who embraced gaming during the pandemic.
Niko Partners, an Asia gaming-focused research firm, estimates that the total mobile and PC game industry in Asia will reach $82b in 2022, or 55% of the global market, with at least 1.47b gamers in the region, largely dominated by China, Japan, and South Korea. They also estimate that the Southeast Asian gaming market is $5b, growing at a compound annual growth rate (CAGR) of 8.6% between 2022 and 2025, and with 270m gamers, is one of the fastest-growing regions in the world.
Similar to the overall global trend, this growth is driven by the increasing popularity of mobile gaming, the proliferation of gaming platforms and avenues to build a community (e.g. Twitch), and the increase in the entertainment value of esports. Underpinning this are socio-economic changes and technological advances that have made mobile phones and high-speed internet more affordable and ubiquitous, and a youthful market that has embraced gaming as entertainment and an avenue to discover and demonstrate individualism as well as to create communities with shared interests. Many game developers have also found success in the region by creating games that are tailored to the local market and cultural preferences of Southeast Asian gamers (for example, Mobile Legends Bang Bang (MLBB), and Genshin Impact.
To understand the gaming industry in Southeast Asia, it is helpful to touch on a few key aspects:
- A brief history of the gaming industry in Asia and considerations for Southeast Asia
- Gaming studios
A brief history of the gaming industry in Asia and considerations for Southeast Asia
China is the country with the largest gaming market by revenue, according to Newzoo, with an estimated $45.8b of revenue in 2022 and 742.2m players. The U.S. ranks a close second with an estimated $45.0b of revenue, and both of these countries are more than twice the size of third-placed Japan, with c. $20.0b of revenue.
Although gaming consoles were already abundant in the 1990s, the relatively high price point as compared to domestic earnings per capita meant that people preferred either visiting arcades or pirating computer games and consoles, which was enabled due to the lack of industry regulation at the time. Piracy was rife to the extent it was the norm rather than the exception to be playing a bootleg game.
The shift in gaming medium and monetization from console-and-cartridge to mobile and freemium coincided with the economy’s growth, especially in the 2000s. From 2000 until 2015, the Chinese government banned gaming consoles (nonetheless, there were still grey areas in the law which allowed Sony to launch the PlayStation 2 in Shanghai and Guangzhou, in 2004), when there was an outcry that children were spending too much time on gaming. Rather than preventing people from playing games, it arguably encouraged the founding of domestic gaming businesses such as Tencent Games (2003), which published and licensed games, the launch of iQue (JV between Chinese entrepreneur Wei Yen and Nintendo, in 2002) to release a video game console, the iQue player, and in addition, with NetEase publishing its first game in 2001, spurred the growth and popularity of gaming in China. At the time, internet cafes were extremely popular, due to their relative affordability and additional social experience, compared to playing on a personal computer.
Even after the ban on selling gaming consoles was lifted in 2015, regulation remained stiff. For example, games were selectively made available in the market. One notable example is a ban on Battlefield 4, due to China’s portrayal as an antagonist and “realistic” maps of the country in the game. On the consumer end, in 2005, China introduced an “anti-online game addiction system” to address gaming addiction by reducing in-game incentives with gaming time, and most recently, in 2019, implemented a real-name identification system, as well as limiting gaming time of minors below 18 years old, for mobile games, in addition to PC games for both cases. It also froze game approvals in July 2021 and only began allowing new names in April 2022, potentially signally a slightly more accommodative view toward gaming.
Beyond adjustments made to adhere to regulatory requirements, localization in the Chinese market comes in two forms. First, games are built with an emphasis on being mobile-first. Locally developed games such as “Fantasy Westward Journey”, “Perfect World,” and “Peacekeeper Elite” gained immense popularity after being adapted for mobile from PC. Second, developers incorporated elements from popular Chinese history. In particular, games based on the Three Kingdoms era are well received due to the overall appreciation of the topic across the country, although its vastness also means that there is a diverse range of cultural norms even across regions..
Japan ranks third in the countries with the largest gaming industry, with an estimated $20.0b of revenue in 2022 and 78.1m of players, which is not surprising given its leadership in technology for at least the last few decades and relatively accommodative regulatory stance towards gaming. The largest gaming companies in the world include Japanese firms Nintendo (Super Mario, Pokemon, Zelda, Game Boy, GameCube, etc.), Square Enix (Final Fantasy, Dragon Quest, Kingdom Hearts), Sega (Sonic, Frogger, Saturn), Bandai (Digimon, Tekken, Gundam) and Konami (Dance Dance Revolution, Metal Gear Solid, Winning Eleven, Yu-Gi-Oh!, Castlevania).
The Japanese gaming industry dates back to the ’50s. Still, it was not until the ’70s, with the release of the first home consoles, such as the Atari 2600 and the Nintendo Entertainment System (NES), that Japan became a major force in the gaming industry. One of the critical factors in the success of the video game industry in Japan was the country’s strong culture of technology and innovation. Japanese developers have been known for their attention to detail and focus on creating high-quality and engaging games. This helped to establish Japan as a hub for the video game industry. The golden years of the gaming industry in Japan were the 1980s and 1990s when large Japanese gaming companies were birthed. They exported the culture of anime and manga and timeless games such as Super Mario and Streetfighter.
At present, while they still remain a significant player in the industry, they have ceded ground to the likes of China and the U.S., due to market saturation and the reliance on localization, such as language translation for both exporting and importing of games, due to it being a very homogeneous country.
In terms of gaming preferences, Japanese video game players have a reputation for being demanding when it comes to the games they play, both on the technical quality of it and the content. They have an inclination towards games that have rich storylines and deep character development, and require strategic thinking. The result of this is their preference towards role-playing games (RPG), where a player takes control of an in-game character and navigates the game, as well as action and strategy games. Ironically, while anime and manga are prominent exports of Japan globally, the Japanese are indifferent toward game art styles, according to Newzoo. They tend to be highly passionate about their games, and this bleeds into adjacent areas such as anime and cosplay.
In general, Japan has an accommodative regulatory stance towards gaming and there are relatively few restrictions on video games content. One exception is the passing of the “Internet Game Addiction Ordinance,” bill in 2020 by the government of Kagawa Prefecture, which limits the time children under the age of 18 can spend playing games, to curb game addiction. Even in this instance, there was retaliation in the form of a high school student suing the government. Further, similar to the U.S., Japan also has a rating system for games, with games being rated by the level of appropriateness for different age groups. Nonetheless, the general approach towards gaming has been relaxed and which contributed to the development of the industry in Japan.
Considerations for Southeast Asia
Incorporating local elements into games, for example, in the case of China and Japan (also India, although not discussed here), can be useful in garnering interest in games. However, Southeast Asian countries have disparate cultural norms that make this challenging. An alternative approach is to have the unifying theme come from adopted cultures and interests, such as in Japanese anime and Japanese or Korean pop culture, which are ubiquitous in the region. An example of this is Genshin Impact, which is popular in Southeast Asia, and has characters that are designed like anime characters.
An extension of this is the building of communities around games. Some games, for example, Dota, have extremely fervent supporter bases. Dota alone has more than a million people on its subreddit, who frequently go into intensive debates and voice their opinion on changes in the game and fan-organized or official events. A popular Animal Crossing community, The Bell Tree Forums, allows players to interact and share game experiences. The love for games creates a shared identity that can be almost cult-like. In the local context, communities that are formed may serve as an indicator for the success of the game, and can also be the foundation on which further gamer engagement is built, such as the organization of get-togethers, collaborations, and events, such as esports, more of which is discussed later.
Mobile is the predominant medium for gaming in Southeast Asia, as mobile penetration is higher than PC, for affordability reasons, similar to in China. This means that games will likely have fewer challenges in adoption with respect to the type of device if they choose to be mobile-first. Still, even within mobile phones, there is a wide range of specifications and supportability that game developers need to be conscious of. Garena’s popular Free Fire differentiated itself from other battle royal games, such as Fortnight and PUBG, by being relatively lightweight regarding technical specifications requirements.
A prominent trend recently is the incorporation of new technologies into games. Augmented reality (AR) is adopted in games like Pokemon Go and Harry Potter Wizards United, and virtual reality (VR) in games such as Beat Saber on the Oculus Rift and Playstation VR and Catan VR (A VR version of the popular boardgame Settlers of Catan) on the Oculus Rift. Another example is the use of blockchain, in games such as Axis Infinity and Gods Unchained. Despite the downturn in the blockchain sector, the development of blockchain games continues to trudge along, with Square Enix affirming its push into blockchain gaming in early 2023 despite early skepticism even among its fans. The vibrant blockchain scene in Southeast Asia, with early successes such as Axis Infinity, GuildFi, and Atlas, are early shoots of a potentially transformational shift in the industry that can be led by the region.
Lastly, creativity should be supported with strong intellectual property protection. As with industries such as technology and healthcare, innovators are spurred on by the confidence that effort can be translated into rewards that can be rightfully distributed. Successful gaming companies globally have built their businesses on creativity and innovation. Southeast Asian countries should look to develop and maintain a rule of law that respects and protects intellectual property, to allow innovation and the gaming industry to flourish.
The region has become a hub for e-sports, as it moves from being a fringe event to kill time to a full-days carnival and competitive event. E-sports has undergone tremendous development in the last decade, from being held with limited fanfare and publicity at local internet cafes, to being featured at the 2018 Asian Games as a demonstration sport (medals are not counted to the overall medal tally), then the 2021 Southeast Asian Games as a medal event sanctioned by the International Olympic Committee, and subsequently the IESF World Esports Championship, Free Fire World Series in Bangkok, and Dota 2 tournament in Singapore, in 2022.
Similar reasons are behind the successful development of esports in the region. The sizable and expanding group of young gamers in the region seek acceptance and recognition, and the gaming community is one avenue that can provide that. Further, the rising accessibility and affordability of high-quality internet connectivity. This has made it simpler for players to communicate and compete online and has contributed to the expansion of online leagues and tournaments. Another factor is the growing acceptance of gaming by the general public. E-sports has evolved from a specialized hobby to a popular form of entertainment in many Southeast Asian nations, with professional teams and competitions aired on television and streaming services.
The region is home to several popular e-sports organizations and teams, including the Indonesian group EVOS Esports, and the Thai group Talon Esports, which have contributed to the industry’s growth and mainstreaming. Recognizing the growing popularity of e-sports, especially among youths, and associating themselves with e-sports will allow them to reach their target audience, brands are making the effort to enter into partnerships with them. For example, in early 2021, Yamaha Motor signed a sponsorship deal with EVOS, while in mid 2022, energy drink Gbeat became the official drink partner of the Arena of Valor team of Talon Esports, and earlier in the year, KFC bought naming rights to Talon Esports.
While the e-sports market is still in its infancy, it is growing quickly and has the potential to play a significant role in the future of the region’s entertainment scene.
A huge part of the success of the gaming industry is predicated on a high level of innovation and creativity, especially with the increasing demands of gamers for quality and content, due to rising affluence and the advancement in and affordability of technology. Understanding the landscape of gaming studios provide a lens for which the development of the gaming industry can be analyzed.
Before the twenty first century, game development was dominated by large companies in the U.S. and Japan, such as Electronic Arts, Activision, Vivendi Games (before merging with Activision to form Activision Blizzard), Microsoft, Sony and Nintendo. The vast amount of resources and credibility that these companies have mean that game developing talent was attracted to them, and their ability to experiment and stomach failure in a predominantly hit-driven industry is high.
In recent years, in some likelihood due to the shift in gamers’ taste and willingness to spend time on non-AAA or ‘indie’ games, as well as the reduction in the cost of game development due to computing costs reduction and the availability of game development software such as Unity or Unreal, smaller players have managed to gain a foothold in the global markets. The access to the internet through the democratization of mobile phones also spurred the creation of markets such as Google Play or App Store, which allows smaller teams to market their ideas without being overly dependent on a complicated distribution system (The fairness of the revenue model is another topic for discussion). Examples of success are Flappy Bird in 2014 Flappy Bird, a mobile game developed by the Vietnamese video game artist and programmer Dong Nguyen, under his game development company .Gears, as well as Undertale in 2015, developed by Toby Fox and crowdfunded through Kickstarter.
In Southeast Asia, some gaming studios have found success not just regionally, but globally as well, such as:
- Indonesia: Anantarupa Studios (Lokapala), Digital Happiness (DreadOut), Toge Productions (Coffee Talk), Touchten Games (Pou, Dream League Soccer)
- Malaysia: Mason Games (Math Cat Boxing, Scoopy), which was acquired for $1m by Iglobsys Technology in 2022, Passion Republic Games (GigaBash)
- Philippines: ODD Games (Trucks Off Road), Maccima Games (Ruinarch)
- Singapore: Cargo Studio (Rumble Jungle), Mighty Bear Games (Butter Royale, Disney Melee Mania), Boomzap Entertainment (Faircroft, Awakening Series), Refract (XR and VR products)
- Thailand: Corecell Technology (Aeternoblade), 7 Raven Studios (Dyna Bomb)
- Vietnam: Amanotes (Magic Tiles), Hiker Games (Caravan War), Sky Mavis (Axie Infinity)
Nonetheless, these studios still face challenges when competing against global studios, including:
- Access to funding: There are few gaming-dedicated funds in the region. Play Ventures, for example, is a global fund that has a presence in Singapore, and gaming hardware company Razer also makes investments in games. Still, there is at present no fund that focuses its attention on identifying and backing games that are Southeast Asian-grown. An exception is the relatively accommodative regulatory stance towards web3 in this region that has birthed web3 companies and funds that also invest in web3 games.
- Access to advisors: Largely because the gaming industry has historically been dominated by the U.S., Japan, and Europe, budding gaming developers and industry professionals in Southeast Asia lack access to industry veterans who can serve as mentors. This, however, is rapidly changing, as global gaming companies set up regional or local offices and, as regional companies, for example, Garena, establish themselves on the global stage, their employees gain valuable experience in growing a gaming business.
- Difficulty in monetization: While this is related to the difference in the level of affluence of Southeast Asian as compared to other countries, the willingness to pay might also be different, and it is largely due to cultural influence that gaming, as compared to other forms of entertainment, is less ‘worth’ to be spending money on. This, however, is changing as well.
- Limited talent pool: Unfortunately, this is part of Catch-22 situation. Talent is attracted to successful companies, or at least signs that a company can be successful, and companies become successful because of talent. Fortunately, the availability of funding, government support, a breakthrough by even one company in the region, can jumpstart the cycle, which we are already experiencing.
Without touching too heavily on the nascent but important adoption of blockchain technology into gaming that could herald a shift in paradigm for gaming, it is worth noting that web3 gaming has been touted by its most ardent supporters to potentially upend the traditional model of gaming. In web3 gaming, there is a strong emphasis on the ability for gamers to break gaming companies’ iron grip on in-game items and the development of a game (e.g. how the game’s lore develops). This is done by affording gamers the digital ownership of items, through non-fungible tokens (NFTs) on an immutable blockchain, allowing them to transfer items between games and conduct trading through NFT marketplaces. This unlocks value that gamers can derive from gaming and further incentivizes them to increase their engagement.
In the context of the metaverse, gaming activities have become representative of the virtual life in which contemporary social relations, online communities, and media engagement take place, emulating human life in a parallel dimension.
Companies such as Mighty Bear Games (Mighty Action Heroes), and Ethlas are Southeast Asia companies that have spearheaded the adoption of blockchain gaming. Nonetheless, blockchain gaming is still a relatively new and evolving technology, and it faces the typical challenges of scalability, security, and adoption. Looking beyond the headlines, for example, that of the hype-driven growth of Axie Infinity in 2021, the technology is largely still in the early stages of development, and it will take time for it to mature and reach mainstream adoption.
The Southeast Asian gaming industry has evolved significantly in recent years. The convergence of rising affluence, a shift in consumers’ perception of gaming, government support as well as the success of regional companies and an increasing talent pool has kickstarted a virtuous cycle that is the foundation on which long-term success for the industry can be built on.
With the continued joint support of the public and private sectors, the Southeast Asian gaming industry has the potential to excel even at the global stage. It is an exciting time to be part of this development and we can expect to see some groundbreaking games and experiences coming out of the region in the near future.
- Niko Partners – Southeast Asia’s Games Market
- Mashable Southeast Asia – The world’s largest internet gamers: 4 Southeast Asian nations dominate top spots
- Multilingual – Video game industry meets booming demand for localization in Southeast Asia
- IGN Southeast Asia – Asia Will Have More Than A Billion Gamers By 2026
- Nikkei – Southeast Asia’s red-hot esports scene draws global brands as sponsors
- DealStreetAsia – SE Asia’s gaming startups record funding surge, but can they sustain the momentum?
- Think with Google – For the win: Breaking down the preferences of Asia’s mobile gamers
- Affable.ai – Esports Influencers: The New Heroes Of Video Game Marketing In Southeast Asia
- Asia Sports Tech – What makes Asia an Esports Powerhouse