Australia
China
India
Indonesia
Japan
Malaysia
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
Stay-at-home directives during lockdowns pushed the popularity of video games across the world, leading to higher revenues for gaming companies. Among the fastest-growing gaming region, the Asia gaming market is pegged to reach $82 bn in 2022, or 55% of the global games markets, as per Niko Partners, a research firm with a focus on video games markets and consumers in Asia.
Asia is home to about 1.5 billion gamers, with China, Japan and South Korea dominating the space. Elsewhere in Southeast Asia, mobile gaming is an up-and-coming source of revenue for game publishers. The six major countries of Southeast Asia — Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam — represent 6% of Asia’s gaming revenues. Niko says that India, Indonesia, Thailand and Vietnam are the fastest-growing gaming markets.
“A staggering amount is spent on the mobile gaming market in China. It is currently worth $35bn, while the global market is valued at $102bn,” says Corinna Lau, Client Portfolio Director at Invesco. “Smartphones have provided easy access to gaming and Asia including Japan, accounts for 55% of global mobile gaming revenue. In the video gaming market, Asia accounts for 30% of the value worldwide.”
China’s share in Asia gaming companies
Game developers, publishers and other stakeholders have a big opportunity in the Asia gaming sector as demand rises along with rising disposable income and improvements to infrastructure. Over the past few quarters, Asian gaming companies have seen several high-profile deals on the back of the rising interest in the metaverse, which has increased the demand of game developers for their CGI skills and ability to craft virtual spaces.
China is the world’s largest online gaming market and has overtaken the US. Invesco says that game revenue in China accounts for 0.43% of total disposable income, in Korea, it’s 0.45%, while the USA only accounts for 0.26% of disposable income.
China’s top gaming companies are Tencent (0700.HK) and NetEase (9999.HK). Tencent, known for games like PUBG Mobile, Brawl Stars and Clash of Clans, reported the full year 2021 games revenue of $32.94 bn, a 9.9% jump over the previous year. The gaming business accounted for nearly 26% of Tencent’s total revenue in 2021, and the company intends to grow this share to 50% in the coming years.
The biggest gaming company in the world by revenue, Tencent is acquiring an interest in gaming firms around the world and has already invested in over 800 companies. Tencent has a 40% stake in Epic Games, the popular US-based game developer and publisher, and has interests in Activision Blizzard, Ubisoft, Krafton, PlatinumGames, and others.
NetEase is the second biggest Chinese gaming company, and reported a profit of $7.3 bn, up 21.6%, for FY2021. Over 70% of the company’s revenues came from mobile games. Some of the popular games owned by NetEase are Cyber Hunter, LifeAfter and Marvel Super War, among others.
The company has also partnered with Blizzard and Mojang AB to operate some of the international games in China. Earlier this year, NetEase launched its first gaming studio in the US, and later bought Star Wars game developer Quantic Dream, marking the company’s first fully owned studio in Europe.
Sales of Chinese gaming companies have been hit this year after China froze the issuance of domestic video game licenses. However, the rules were eased this year in September and game developers in the country are now slowly getting licenses.
Other Asian gaming giants
Sony Interactive Entertainment, the gaming division of Sony Group Corp (6758.T), is known worldwide for its PlayStation gaming consoles. Revenues of Sony’s gaming business were up 12% during the quarter that ended September 2022, but the company is expecting a 12% drop in sales of third-party games for the full year ending March 2023. Sony said that the decline in gaming profits is due to the rise in game development costs, the impact of foreign exchange rates and the recent acquisitions it made.
Earlier this year, Sony acquired ‘Destiny’ and ‘Halo’ creator studio Bungie in a deal valued at $3.6 bn. The company also acquired Finnish studio Housemarque and US-based Bluepoint Games. Sony is vying to become the leader in the global gaming sector with its hardware offering as well as exclusive games. Sony Playstation is now also focusing on releasing games on PC and mobile and is said it will invest in new firms.
Nintendo (7974.T) is another Japanese video game company that develops games and makes video game consoles. The Wii console targets a wider audience for interactive and fun-focused games, unlike Microsoft’s Xbox and Sony’s Playstation which caters only to serious gamers. Establishing itself as a gaming firm in the 1970s, Nintendo has been one of the most influential companies in the industry and has a market capitalization of 7.88 tn yen (~$53 bn).
Some of the popular Nintendo games are Animal Crossing, Super Mario series and the Pokemon series, among others. Nintendo’s revenues have been hit by the semiconductor shortage and the rise in costs of other raw materials. For FY2022, Nintendo reported a 3.6% drop in sales to 1.7 tn yen (~$11.5 bn)
Singapore-based Sea Ltd (Garena) is among the top holdings in Southeast Asian technology funds but has seen its gaming business dwindle due to decreasing popularity of Free Fire. The game was first banned in India, and then a lawsuit was filed against it by South Korea’s Krafton for copying its PUBG Mobile game. The company’s stock has fallen 86.88% in the past year on losses, but the company is striving hard to bring its balance sheet in the green by shutting off businesses and refocusing its attention.
In South Korea, NCSoft Corp (036570.KS), Krafton (25990.KS) and Netmarble (251270.KS) are the top gaming companies. Netmarble is a leader in the mobile gaming sector and has published popular games such as Marvel Future Fight, The Seven Deadly Sins and Seven Knights.
Krafton is the developer of the infamous battle royale game title PUBG, whose mobile version is developed by Tencent. NCSoft is known for games like Guild Wars and Lineage. The company mainly operates in the multiplayer online games industry.
“There is a large, and ever-growing, cadre of game developers in China, South Korea, and the ASEAN countries. What’s more, 60% of the world’s population lives in Asia, and most have leapfrogged straight into the smartphone era,” says Chu Kit Kwa, Equity Analyst at Nikko Asset Management, adding that most Asian countries are yet to leverage high-speed internet for Esports.
