Saudi Arabia’s government has placed $38 billion in its potential to be the next video-game hub.
Saudi Arabia’s Public Investment Fund aims to be a major player in the $184 million global gaming market as part of its strategy for diversifying its economy away oil. The fund’s subsidiary, Savvy Gaming Group is now trying to create, publish, and acquire top-tier gaming games, and support a Riyadh gaming industry.
In an interview with News at the Game Developers Conference, Savvy Chief Executive Officer Brian Ward stated that “we are more an esports company” than a games company. “This year, we are focusing more on games publishing and development.”
Savvy’s ambitious plans in a competitive market are exemplary. Longstanding players such as Electronic Arts Inc. are cutting employees. The fund has made multibillion-dollar investments into gaming companies such as Activision Blizzard Inc., Tencent Holdings Ltd., and Nintendo Co.
Ward stated that they would love to make use of the investments to start working with these companies, and to see how we could work together to publish in (the Middle East or North Africa), manage their esports businesses, or develop new IP. In February , the fund increased its stake to Nintendo to 8.3%. This made it the largest outside shareholder.
Saudi Arabia is a small player in the world of game development. Ward, an ex-executive at Electronic Arts Corp., Activision Corp. and Microsoft Corp., moved to Riyadh to lead Savvy. He said that part of his mandate was to assist partners and other companies to come to Saudi Arabia and choose Riyadh to start a publishing or distribution company to serve the region.
According to Niko Partners, there are 21 million gamers in the United States. This is 58% more than the US’s 66%. The market for games in North Africa and the Middle East is expected to increase by 56% to 2.79 billion by 2026.
“It is a smart move for a forward-thinking country to invest at least some of their investment in the sector,” Serkan Toto, CEO and founder of Kantan Games Inc. said.
Savvy made waves in competitive gaming by acquiring ESL (an esports tournament organization) and merging it into gaming platform Faceit as part a $1.5 billion combined deal. ESL Faceit Group purchased Vindex, an esports technology company, for an undisclosed amount in March.
After an esports boom in 2018, which saw a record $4.5B in investment, the industry was faced with a reckoning 2022as investors and sponsorship funds dried up. According to Newzoo, market researcher, many esports companies were shut down or laid off, failing to make a profit from the millions of fans who watch the events online, but don’t spend much money.
Savvy has a division that creates gaming and esports venues. This business is a concern for many esports organizations including Comcast Spectacor Philadelphia Fusion. They fear that players might not be as engaged with digital gaming competitions as they were with other sporting events.
Ward believes that ESL Faceit may not be profitable yet, but he still believes in the industry’s potential to make money from consolidating smaller players. Ward stated that esports engagement is still very low. “It’s fantastic. “It’s just that the engagement doesn’t match the monetization,” he says.
Ward stated that there are unlikely to be any other big esports acquisitions in Savvy’s future. Ward hopes publishers will choose Savvy for their Middle East esports operations. A former employee of Activision, which oversees large-scale esports leagues said that the company has not been in contact with Savvy regarding competitive gaming operations in Riyadh. Riot Games Inc. spokesmen declined to comment.
Savvy now focuses on building resources and influence in publishing and game development. A studio is one of the five companies that it operates. It employs approximately 45 people. Savvy Games Studios was founded about a year ago. They plan to first develop a mobile and then a console gaming experience. Ward believes it will grow to a top-tier studio but admits that it is very difficult to build a studio from scratch.
Director of research and insight at Niko Partners Daniel Ahmad said that there is still a “skill gap” for national talent. It will take time to close that gap as the country must introduce new policies to support education, training, and other aspects of education.
Ward stated that acquiring studios and publishers internationally is a faster way to Savvy’s “ultimate goal” of helping the country become a global entertainment center by 2030. Electronic Arts would not be feasible for them. Savvy has approximately $13 billion to invest into acquiring a publisher of games — but Ward might consider making another public publisher private.
Ward describes Nine66 as the company’s “ecosystem builders” and Savvy signed up through Nine66 to publish eight games. Half of these are now released. Ward stated that he has met with almost every major gaming publisher in the past year, including GDC in San Francisco.
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Due to its association with human rights abuses, Saudi Arabia is still controversial among esports professionals as well as gamers. After a huge backlash from fans, employees, and contractors, Riot Games cut ties with Neom in 2020. “We moved too fast to cement this partnership, and caused rifts within the very community that we seek to grow,” Riot Games’ director for esports said at that time.
Savvy bought a 8% share in Embracer Group AB, a video-game holding company in 2022. This led to an Outcry. Lars Wingefors, CEO, stated that “only a few players” in the world could provide enough capital for the long-term. The global video-game industry saw sales drop by 4.3% in 2022. However, analysts believe that the company will be revived by 2023’s busy release schedule.
Critics have called Savvy’s esports efforts “sportswashing.” Ward stated that the allegation “somewhat baffles” him because it suggests that Savvy would hire an LGBTQ or Jewish person as a leader of a Saudi Arabian game studio. He also said that members of the LGBTQ community and women are part our executive team.
Toto from Kantan Games points out that Tencent’s international expansion strategy has not been affected by China’s controversial government. He claims that the Saudi Fund has invested in popular gaming companies such as Nintendo. “Will Switch gamers really purchase fewer Switch games?”