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Gaming Market in the Middle East - Part2: Key trends in the Middle East gaming market

Date : 04/03/2018
Author:  Marmore MENA Intelligence




As part of the gaming sector study in the GCC region we were able to find out some prominent trends in the GCC region that we have chronicled below. Some of the trends were not quite obvious before venturing into this blog. For example, piracy has been a primary reason behind the gaming culture in the region and even within the Middle East region there are significant differences in product distribution networks. Mobile gaming has been an important revenue generator in the region thanks to the high concentration of gaming whales in the region.

Censorship and strict rules does not diminish appeal of games
Some games were banned in the region on various grounds ranging from negative portrayal of the Middle East to usage of extreme violence. Games such as Battlefield 3, God of War, and Call of Duty 4: Modern Warfare and Grand Theft Auto (Series) have been banned but surprisingly their ban has only increased their popularity. These game titles have wide spread followers in the region despite the negative portrayal of the Middle East region, albeit in a highly fictionalized environment. The popularity of games such as Battlefield and Call of Duty 4: Modern Warfare seems to stem from their plot, which revolve around the military forces taking on the terrorists in the region. Youngsters from the region claim that the existence of such video games lends them a safe avenue for letting their frustration out on terrorists; some gamers equate this to a cathartic experience. Patchy enforcement of the ban owing to very little communication among the relevant bodies result in prohibited games being available through other channels.

The irony of piracy – Once here, now on the way out
While it might be easy to generalize the trends across the countries - the cultural, regional and economical differences have played a key role in the development of gaming culture within their borders. For example, in the UAE, malls have been the major contributor to the popularity of video games. Specialist video game parlors, hypermarkets and even bookstores boast of offering latest games and consoles to their patrons. Contrast this with Iran and Egypt, which still depend on distributor, wholesaler and retailer model. The differences however has not diminished the popularity of gaming culture; for instance, Iran boasts of 25 Mn online gamers among which 2.5Mn are expert gamers. Unfortunately, piracy still dominates in the PC games market in the country and the only way to make money from Iran is through sale of gaming consoles, accessories and other gaming hardware.

Despite its negative effects, piracy has played a big role in gaming becoming a favorite activity in the region. While solid number are difficult to come by, estimates point out that over 99% of the games for PS2 were pirated in the region. The problem of piracy was exacerbated by the lack of unified and global release dates, which also encouraged the grey market. CDs and DVDs of games were imported from the US and the Europe and were sold in the Middle East market at a premium price.

Piracy has died down recently due to three factors - distributors and sellers in the region have made conscious efforts to curb piracy, harder to pirate games on consoles such as Sony’s PS4 and the growth of mobile gaming. However, piracy’s role in popularizing the gaming culture in the region cannot be understated.

In recent times, there has been a visible shift towards mobile games and this is rapidly eating into the share of gaming consoles. An advantage that mobile games have over the consoles is the ability to monetize the usage in a more efficient manner through micro transactions. Mobile games usually use the freemium approach, a user has a waiting period when he crosses a particular level, and the user can either pay a small fee to play the next level immediately or wait for the cool off period to continue the next level. Micro transactions have been the order of the day, the basic game is provided for free but people have to spend more on getting sophisticated weaponry, level up quickly, boost their damage recovery etc. These games also come from controlled channels such as the Google Play Store or Apple’s App store, which are harder to pirate, as game servers are quick to recognize such attempts, and blocks them. Game developers also feel that selling the games as a piecemeal instead of a whole package bring constant stream of revenues.

Game development initiatives- from obscurity to mainstream
The development of gaming convention in the region points to some an important change in the region – Gaming industry is now being increasingly seen as a viable career instead of a favorite past time. Jordan’s Game Zanga holds contest for developing games within affixed time on an agreed theme, the prizes for these events range from cash prizes to lucrative contracts for game development. Over 300 developers in its recent iteration have attended this event organized by game development studio GameTako and over 50 games are created each year.

In addition to these events and convention, governments and private initiatives in the region are promoting the industry. The Saudi National Creative Initiative hosts an application and gaming week that aims at teaching design theories and how to transform an idea from concept to a complete live project. Turkey has a StartersHUB that organizes gaming convention each year in Istanbul. In Beirut, Arab Arcade organizes regular gaming sessions for gamers, developers, designers, artists to create new games within a certain period similar to Game Zanga.

Localization is starting to gain traction
The massively multiplier online (MMO) games were the first to embrace localization in the form of translating English text to Arabic. However, success of the first game MMO game, Travian came with heavy cost of increased advertisement spending. Sony was the first major developer to release “This is Football“ in Arabic for the PS2 platform. For some years, Sony was the only console producer with Arabic content. Despite the initial reluctance and the difficulties that they experienced in the region, global studios such as Valve and Ubisoft have invested handsomely in the region. Valve activated dedicated Middle Eastern servers live for games such as Dota 2, team Fortress 2 and Counter Strike: Global Offensive in 2014. Ubisoft has a game development center in the region and works closely with Tadreeb, the training arm of the Abu Dhabi government media company twofour54 providing training course in gaming. The growth of mobile games were a key reason behind the entry to Ubisoft into the market. Activision Blizzard another large game developer have made tried entering the Middle East market through a series of acquisitions by buying well-managed and profitable local companies.

One example of the locally developed game is Unearthed: Trail of Ibn Battuta, a multi-platform game that allows the players to retrace the steps of legendary Arab explorer in a contemporary setting. Another example of local content that has witnessed great levels of success is from Lebanese developer Game Cooks who have two hits – Birdy Nam Nam (1.7 Mn downloads) and Run for Peace (1.6Mn downloads).

Two broad trends are emerging when it comes to localization in the region - the international game developers will look into translating their international releases into Arabic, FIFA released a version in Arabic featuring local Arabic soccer stars. Another major trend is the emergence of regional developers who are expected to come out with more contents for the local region. Jordan’s Maysalward, Lebanon’s Wixel Studios are good examples of regional developers who on few occasions have tasted success internationally as well.

Smartphone adoption has been a major force behind the increasing gaming revenues
Saudi Arabia and the UAE are increasingly important for the game developers of the world; youthful demography of the region is only partially responsible for it. The appeal for major gaming studios is the spending power that this younger generation possess. Cash-rich governments, ample social benefits and zero personal income tax results in higher disposable income, which these people can spend on areas of their liking. With other entertainment options limited in these countries, mobile game developers are capitalizing on this.

This strategy seems to be paying off so far. Saudi Arabia has a population of 30Mn, but that population generates approximately USD 350 million per year in revenues for mobile games. Most of that comes from a class of mega spending men and women (commonly called “whales”) that do not care if a game is localized as long as it’s trendy. To summarize the magnitude of the spending - A whopping 42 percent of total Saudi gamers pay for in-app purchases. Two-thirds pay less than $10 per month, which is what most other markets also witness, but there stops the similarity. The rest of gaming distribution is where most of the revenues comes from. Among them 22 percent pay $10 to $50 and 11 percent pay $50 to $100 per month. The second most valuable category among them roughly make up four percent pay $100 to $500. The most valuable category of gamers form one percent pay up to $1000 per month and are fondly called “Killer Whales” by the game developers.

MENA (Middle East and North Africa) region surprisingly has turned into an important market for global game developers, publishers and distributors. However, despite all the prospects there are teething challenges that remain and that needs to be addressed.

This article is published in "Marmore Blog"

Tags:  East, Games, Gaming, in, Market, Middle

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Gaming Market in the Middle East - Part 1: A Cathartic Experience

Date : 01/03/2018
Author:  Marmore MENA Intelligence




Not many people would conjure up the image of the Middle East region when talking about video games and their growth in general. Wars and internal conflicts often overshadow the vibrant and growing market for video games in the region. Video game culture has been an offshoot of such conflicts – many youngsters find it a cathartic experience to win against the forces that have been responsible for wide spread conflicts in the region and admit that it is one of the most preferred form of entertainment for them.

Popularity of video games was driven in the region in large parts by Sony; its PlayStation platform has been instrumental in establishing the popularity of video games in the region. Teenagers and youngsters, especially from the GCC region, took their affection for games to higher levels with the introduction of Sony’s Playstation2 (PS2) in the year 2000. The popularity of the platform is still unfazed, it remains as the bestselling console in the Middle East region clocking overall sales of 5.2million units followed by the play station portable (PSP) at 1.5million units.

Another factor that has fuelled the growth of gaming culture has been the regional government’s censorship policies and strict religious views; both of these restrict the content that would be available through conventional channels such as TV, movies and theatre. Some of these restrictions have been in place to curb the growing Western influences in the region. While video games are also subjected to the same censorship rules, the implementation remains sketchy as there are conflicts related to the implementation of the ban. Certain video game titles are banned or censored if they are too visibly violating the region’s sensitivities towards religion, politics, geo-politics etc. Some of the gaming titles that were banned includes - Battlefield III, God of War, and Call of Duty 4: Modern Warfare and Grand Theft Auto (Series)

Youngsters in the GCC region also have higher purchasing power owing to generous government policies. As a result, lot of them have access to the latest technological gadgets including, mobile phones, tablets, gaming consoles and other high-end gaming accessories. They also spend more time on mediums like YouTube and Facebook and are constantly exposed to the latest news and developments surrounding games released in the Western markets. Studying Saudi Arabia’s YouTube viewership patterns provides taste of the regional preferences in these alternative channels. Saudi Arabia is the leader in the region for most video playbacks followed by Egypt, Morocco and finally UAE. There are 167 million video views every day only from the MENA region; Saudi Arabia alone generates 90 Million daily views making it one of the most lucrative markets for YouTube. The heightened viewership from Middle East results in free-flow of ideas on latest fashion trends, gaming lifestyle and western pop culture. Comic con festivals, a staple among the western movies, comics and gaming aficionados came to Dubai in 2012; a sign of large-scale convergence of tastes and preferences among the younger generation.

What is the size of the Middle East video game market?
Currently, there are over 587million online gamers in the Middle East region and the amount of time spent online is definitely starting to affect the gaming sector’s revenues from the region. Globally the video games market is a huge business, with estimated revenues of USD 109billion as of 2017 growing by 7.8% YoY. Middle East region alone accounts for 3.2% of that market generating close to USD 4bn in revenues and growing by 25% on a YoY basis. Turkey, Saudi Arabia, Iran and UAE are the top four countries generating revenues to the tune of USD 774million, USD 647mn, USD 431mn and USD 281mn respectively.

Middle East Gaming Market – By revenues (USD Mn)






Source: Newzoo

Revenue growth from MENA region is well ahead of markets such as Latin America (13.9%) and APAC (Asia Pacific, 9.2%); it also contrasts with larger markets where growth is stagnating - such as North America (just 4%) and Western Europe (4.8%). Most of growth has been fuelled by the Egypt, the UAE and Saudi Arabia. Growth, especially in Egypt and Saudi Arabia, is largely fuelled by the growth in smartphones. Both these countries have some of the highest smartphone penetration in the world at 80.6% and 65.2% respectively. With such high penetration levels, this region itself has put itself on the radars’ of most game developers.

Government and private initiatives fuelling video-game development ecosystem
A cultural ecosystem surrounding gaming development is emerging in the Middle East, which is helping the growth of gaming in the region. Conventions, comic-cons and eSports are now common across the Middle East and they have been very instrumental in promoting the gaming culture in the region. Localization initiatives have also helped the market largely. Big gaming studios such as Sony, Valve and Ubisoft have been the most notable ones to have significant presence in the region.

Gaming events
The last few years has seen a boom of gaming and pop culture events around the Middle East. The events keep getting bigger and more lavish each time, attracting popular artists and celebrities from gaming, movies and TV shows, and are also becoming a hub for some of the biggest eSports tournaments in the region. In recent times, the region has hosted three major events – GAMES Middle East, Dubai World Game Expo and IGN convention Abu Dhabi

GAMES Middle East
GAMES is an alliance between Sony PlayStation Middle East, Microsoft Gulf, Red Entertainment and Pluto Games that provides fans and gamers access to upcoming games and technology, while hosting various tournaments, events and eSports competitions. It's the E3 (Electronic Entertainment Expo) of the Middle East.

Dubai World Game Expo
Dubai World Game Expo (DWGE) is a platform for meeting with interactive entertainment developers, publishers, distributors, service providers, platform providers, localization providers, payment providers, multimedia, telecom operators, investors, government officials, and retailers in the MENA region. DWGE serves as an ideal venue to introduce a wide variety of video games, online games, mobile games, edutainment & infotainment software, game related hardware, and next-generation platforms.

IGN Convention Abu Dhabi
IGN convention is the region’s biggest film, video games, technology, and comic’s convention that features game enthusiasts and international celebrities. Fans will also get to interact with regional artists in Q&A sessions. This is all in addition to comic book and film events, including a cosplay competition, gaming announcements, discussion panels on movies and games, trivia quizzes, comic book stalls and a video game tournament.

In part two of the series, we would look at the key trends that are emerging in the Middle East region.

This article is published in "Marmore Blog"

Tags:  East, Games, Gaming, in, Market, Middle

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Should GCC banks be wary of Fintech entry?

Date : 27/09/2016
Author:  Marmore MENA

Should-GCC-Banks-be-wary-of-Fintech-entry.jpg

Since the time internet revolutionized global communication, information technology (IT) has been disruptive, and has changed the business model of almost every industry known to mankind. Early adopters of technology enjoyed competitive advantage, while laggards lost customers. In the same vein, Financial Technology aka Fintech, is the next big change brought about by IT.

The western countries, especially the US, have adopted technology at a much faster pace than the rest of the world. At present, almost 80% of Fintech investment happens in the US, followed by the UK. Developed markets in the Asia Pacific have also been investing and implementing Fintech solutions in recent times. However, adoption in the GCC is still in its infancy. But with growing awareness, Fintech is slowly breaking ground in the region.

Should-GCC-banks-be-wary-of-Fintech-entry-fig1.jpg

Digital-only banking


Digital-only banking is the new wave that is expected to change the way the banking industry works. In a survey conducted by EY, almost 78% of GCC customers indicated that they would be willing to switch banks for better digital banking experience, and 64% would feel comfortable switching to a digital-first bank. Unlike traditional banking, which is more branch-centric, digital-only banks would avail them more independence in utilizing the services offered by the bank.

Should-GCC-banks-be-wary-of-Fintech-entry-fig2.jpg

The cost-per-customer-visit for traditional branch-based banking is multi-fold, compared to digital-only banking. Traditional banks spend an estimated 40-60% of the total operating costs in the maintenance of branch networks, which the digital-only banks eliminate. Fintech firms are a threat to traditional banks that offer similar services at a much higher cost. These firms have already begun cannibalizing on the traditional banks’ customer base, thereby pressurizing the margins of the latter.

Should-GCC-banks-be-wary-of-Fintech-entry-fig3.jpg

Remittance

Global remittance industry was estimated to be worth close to $650bn, at the end of 2015, and is growing at a CAGR of 3.75%. Saudi Arabia and UAE occupy the second and third spot in global remittance send volume, accounting for a combined USD 74bn, majority of which goes to India (USD 23bn), followed by Pakistan (USD 9bn) and Philippines (USD 7bn). According to the World Bank, the cost of sending money home to diaspora averages 7.7% globally.  But Fintech players are emerging in the horizon, leveraging on online and mobile platforms, and have increased the pressure on banks by charging an average fee of 0.9%; much less than the average for banks (global average). In 2015, the cost of sending remittances to the MENA region decreased 95bps from 8.37% to 7.42%.
 
Should-GCC-banks-be-wary-of-Fintech-entry-fig4.jpg

P2P Lending
Beehive, a Dubai-based sharia compliant P2P lender, is the UAE’s first online platform for lenders and borrowers. It provides low cost finance to SMEs, while providing a direct access to alternative asset classes that can potentially generate higher returns to investors. According to Beehive, people just invest 5% of their net wealth on such platforms, but witness returns of 15%-20%, on an average. This has encouraged more than 2,000 investors to register with the platform in the UAE, which has successfully completed 100 deals since inception. P2P lending could change the way lenders and borrowers interact in the future, in both the retail and commercial banking spaces, as it offers attractive returns for lenders and cost efficiency for the borrowers. Platforms such as Beehive can serve as a funding source for the Small and medium enterprises (SMEs), though they might not be able to replace banks in funding big ticket corporate credit.

Islamic Finance
According to Marmore’s report on ‘Fintech in GCC’, one of the biggest potential impacts of Fintech will be on Islamic finance. Fintech could potentially increase the reach of Islamic financial services, and provide more choices that suit individual needs at competitive cost. SMEs that find it hard to obtain sharia-compliant bank funding from Islamic Financial Institutions (IFIs) could look to Fintech firms to fill that gap. Fintech’s penetration into Islamic finance is expected to intensify competition among traditional IFIs.  Some of the Islamic finance players that have ventured into Fintech include Abu Dhabi Islamic Bank (ADIB), Dubai Islamic Bank (DIB), and National Bonds, a shariah-compliant savings and investment firm. ADIB has teamed up with IBM to build a digital studio that will work on digital innovation projects across the bank. Conventional Islamic banks seek to expand their presence in the Fintech space by adopting technology in their service offerings.

Crowdfunding
Fintech firms have created platforms for lenders and borrowers to meet, without the need for a middleman, which in many cases are traditional banks. Crowdfunding and Peer-to-Peer (P2P) lending are the new buzzwords among borrowers in recent years. In 2015, the global crowdsourcing market was expected to have grown by an estimated 112%, to reach a value of $34.4bn. The GCC region has also witnessed the emergence and the growth of the crowd funding concept, and experts opine that crowd funding would continue to grow due to dearth of venture capital and public offerings for entrepreneurs. For instance, a UAE-based platform, Eureeca, calls itself a crowd-investing arena, as it allows interested investors to view profiles of available projects to invest in. In return, the investors will gain shares in the businesses, in which they make their investments. Investors might divert more money into these crowd funding platforms for better returns and borrowers will have an alternative avenue apart from the traditional banks. Crowdfunding might impact private equity firms in GCC, as start-ups might find it as an easy alternative to raise capital.

Conclusion
Fintech firms have already made their presence felt across the globe, with innovations such as digital remittances, robo-advisory, algorithmic trading, and P2P insurance and lending platforms. Surprisingly Banking and Financial Services Industry (BFSI), the biggest and most prominent sector in the GCC, is yet prepare for the entry of Fintech in the region, as potential competition. In the coming years, the demand from consumers is expected to give rise to faster adoption of these technologies across various verticals in BFSI. Traditional banking and financial service players will have to improve their operational efficiency by cutting down on needless expenditure, adopt technology, where possible, and improve their asset quality, if they wish to compete with their digital cousins.

The article originally appeared in Wealth Monitor.

Tags:  BANKING, CROWDFUDING, DIGITAL, FINTECH, GCC, IN, ISLAMIC FINANCE, REMITTANCE

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