This is the first episode in our Emerging Markets mini-series, co-hosted with Tom Wijman, Senior Games Market Analyst at Newzoo. Founded in 2007, Newzoo is an intelligence provider for the games and eSports industries, providing data across both global and local markets.
Our guest this first episode, which is all about the gaming market in Southeast Asia, is Rahul Ravindranath, Monetization Specialist at Amanotes, a music gaming company located in Vietnam. Listen to the podcast below or skim the edited highlights.
Breaking down the region
8:00 - Tom: “There are six markets that are the most prominent in Southeast Asia: Indonesia, Thailand, Malaysia, Philippines, Vietnam and Singapore. In terms of revenue, Indonesia is the largest market followed by Thailand and Malaysia. However, there are multiple ways to look at it. Singapore is very important for the region as well, being a country where many people speak Chinese and also culturally close to China - which is the world’s largest game market. If we’re looking specifically at eSports, Vietnam rises in importance.”
9:09 - Rahul: “These are the six key markets we look at as well. I think they make up around 90% of the users within Southeast Asia. There’s a lot of minute differences within these markets that contribute to how we can change our approach to each market.”
Diving into growth rate
9:55 - Tom: “When we’re talking about growth rates, it’s very similar but there are minute differences. We do expect the Philippines to slightly outgrow Indonesia, which is currently leading in market revenue. But we’re talking about 21% growth in the next 3 years, vs. 17%. It’s a small difference. When we’re looking at the size of the market as a whole, it doesn’t mean that the Philippines are going to be the number one market in terms of revenue anytime soon. That’ll still be Indonesia, and that’s because of the sheer number of players in that country.”
The history of the Southeast Asian gaming market
11:10 - Tom: “I’d say Southeast Asia is a mobile first market, because the growth rate that gets a lot of companies excited is due to the mobile internet and mobile device revolution. Of course, there were traditional video games - and there Singapore is an important market. But even in other countries, people that had access to the internet had access to PCs and they’d play these games. But it’s a niche activity, simply because the accessibility of these devices weren’t that high and are still not that high. Now due to mobile internet and the affordability of the cheaper devices we’ve seen enter the market in the last 5-6 years, that combined makes it so that Southeast Asia is the fastest growing mobile games market in the world.”
12:21 - Rahul: “To the point of traditional gaming PC and console, the culture is slightly different because of the popular gaming cafe scene. Rather than just having individual PCs and consoles within every household, it’s more of something that’s done socially. Due to the high cost to get these devices, the gaming scene was really in cafes. A lot of people go to these common places and play together.”
13:06 - Tom: “That’s actually a very good point. And it ties into the story of mobile, making this market so interesting. One of the things of PC is that options for spending are more limited. It’s also due to how you spend on certain items in games. Say there’s a popular online game you pay on Paypal and credit card - these payment options weren’t necessarily available in Southeast Asia. Now with mobile and just paying through the app store, that’s also become easier. It’s not just devices and the internet - it’s all the opportunity to spend.”
The main growth factors
14:29 - Tom: “Looking at the next couple of years in terms of what’s going to contribute to growth, is 5G networks. That’ll make it easier to play games and also more complex games through the internet. Possibly, not definitely, but also the rise of technologies like cloud gaming will make core games more accessible to people with strong internet. But maybe not the latest devices to play games on. So I’m talking about technologies like Google Stadia, Microsoft Project XCloud, GeForce Now. And on that topic, we see more core and midcore games with more game mechanics enter the market in the past years. These are the games that drive in-game spend. Those games are really popular in Southeast Asia and we expect that to drive growth as well.
23:08 - Rahul: “There’s a lot of potential with 5G impacting this industry. And also we have countries like Cambodia, Singapore and Vietnam taking initiatives to really build that infrastructure. But I think the time frame might be a little longer than what’s expected, for the infrastructure to be in place and the parties to embrace this technology.
The biggest players in the region
16:06 - Rahul: “There are really big players in this market like Garena and VNG, and a lot of smaller gaming publishers popping up as well. The mobile market has a really low barrier to entry. This always makes it more accessible for newer and smaller developers to expand and increase the numbers of games in the market. It’s a vicious cycle, where we have more games out there providing a variety of choices and then the users are able to join this ecosystem - so a large number of gamers come in. This really expedites the growth process.”
17:53 - Rahul: “What’s very interesting about the Southeast Asian market for us, is that even though the companies we already mentioned - Garena and VNG - capture their fair share of the market, they’re not so dominant that there’s no room for others. So we see a lot of interest from foreign companies in the market as well, combined with the fact that it’s such a promising market in terms of growth. We’ve seen Chinese companies very eager to enter the market, and also US based and western companies, which makes the market rather unique, in the sense that it’s an open playground between the Chinese based companies, the US based companies, and the local players. And there’s the factor that some of the local players got their market share from licensing other companies’ games for launch.”
A deeper look at eSports
19:36 - Rahul: “If we look at Southeast Asia, it contributes to 51% of global eSport enthusiasts. I think it goes back to the culture and general competitive spirit within the region. We even see that on mobile, battle royales are doing really well - and we have localized versions of those games in the region too. We also see eSport academies springing up in Singapore and Malaysia.”
The indie scene
22:17 - Rahul: “The indie scene is really strong in Southeast Asia. It’s rapidly expanding and growing. Even from our publishing team, we see that growth in the number of developers who want to put out games and enter the market. Google has seen this too and they have an indie accelerator program specifically designed for Southeast Asian developers.”
The app store wars
25:46 - Rahul: “There is a small presence of third-party app stores - but compared to China where third-party stores are really important, it’s not as impactful in Southeast Asia. As Tom mentioned, the dominance is still in Android. In general, Android devices are much cheaper and there’s a lot of brands in each of these countries that are exclusively making Android phones with low prices, empowers users to buy more Android phones. But iOS is picking up in volume and also in numbers of users, and if we’re looking at in-app spending, iOS users are way easier to monetize, whereas Android is still on more of the ad-based model. It also depends - Indonesia is 90% on Android devices, whereas Philippines is only 40% on Android devices. So we have these small differences among each of the countries in Southeast Asia.”
The breakdown of ads and in-app purchases
27:35 - Rahul: “Ad-based games are still more prevalent in Southeast Asia, even though the ARPDAU is lower compared to other regions. This is mostly due to the high volume and high inventory. In this region, the average time spent on the phone is almost double the US, so it really adds to the ad-based model. The in-game spending is quite low at the moment and I don’t expect a massive change there in the future.”
28:18 - Tom: “We’re seeing the same thing on the data side. It also depends on the type of game. For midcore games, we expect in-game spending to be higher than advertising, whereas advertising is more dominant for casual oriented games.”
How to make it big in Southeast Asia
29:40 - Tom: “Supercell was an early success, but not an exception to the rule in terms of succeeding in Southeast Asia. But it is more difficult for western companies to enter the market because culturally speaking the divide is a bit bigger compared to Chinese and Japanese based companies. Some of the main challenges from our perspective is treating Southeast Asia as one region, when it’s really six different markets with unique player preferences, spending behavior, and even economic situations. To enter this market as one market as a whole is a common mistake to make.
30:51 - Rahul: “Especially for us, since we’re doing more hyper-casual games, the differences might not be that impactful. But midcore and hardcore games need to look at each country separately and really try to engage with the community.