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🔑Key Learnings in this Piece

• Singapore is a gaming hub in South East Asia, that although may be lagging behind its peer markets in YoY growth, is doing so because of how small its population is and how much its economy has already developed.

• Singapore’s role in the global games industry is a facilitator that can connect global interests to create success in the fastest-growing gaming geography in the world. Its political parties are supporting its growth in gaming. Singapore is also ranked highly as an easy place to do business.

• Mobile has been, and likely will be, the gaming platform of choice, with Console and PC being more sensitive to market shocks like COVID or supply chain challenges.

• Although massive game development efforts don’t occur in Singapore as much as Shenzhen or Silicon Valley, top- tier gaming companies like Google, Apple, Tencent, and Ubisoft have sizable presences in Singapore.

• PC and Mobile Esports are huge in Singapore with Garena’s Free Fire being an excellent example of global popularity and esports activity stemming from one of the many Singapore based studios.

• COVID creates uncertainty around how growth will look, but growth nonetheless is assured for the region at this point.

• We can also expect more popular console/PC games to become “mobile” and to enter the SEA market. Additionally we should see fewer acquisitions of Singapore games companies by Chinese companies but can still large equity purchases nonetheless.

Introduction

I've been fascinated by Singapore for quite some while and hope to spend meaningful time there one day. The fact that a nation that’s only 12 Manhattan’s large can serve as such a nexus for transnational commerce, not just for Asia but for the whole world, is deeply fascinating.

It also plays a curiously similar role in the games industry. It may not have the raw game publishing or developer horsepower of the US' Silicon Valley or China's Guangzhou or Shenzhen. Nor may it might not have the esports hustle and bustle of Korea's Seoul or Brazil's Rio de Janeiro.

What it does have, however, is a subtle yet profoundly important role as a facilitator. It is a bridge builder, a translator, a connector of gaming companies around the world that allow the game publishers, developers and esports forces of the world to be as pronounced as they are today.

Singapore Games Market

Singapore at a Glance (2019)

Total Population: 5.6m

Gaming Population: 2.9m

Paying Gamers: 1.2m

Annual Gaming Revenue: US$318m

Average Spending Per Year: US$258

Southeast Asia is arguably the fastest growing market in gaming with a ~21% Compounded Annual Growth Rate (CAGR) for the next few years. However, you might see Singapore’s 6.5% CAGR above and panic. Ring the alarm! Singapore has less than half of the region’s CAGR and is being overtaken by more populous regions in SEA - not to mention their growth is declining! This perspective doesn’t give Singapore nearly enough credit.

Singapore’s CAGR is lagging behind SEA’s for 3 key reasons.

• Singapore is a much more mature market. Smartphone penetration is incredibly high for one. According to the Department of Statistics Singapore, there are 8.39 million 3G and 4G mobile internet subscribers in just 2018 or 148.7% of the Singaporean population (thanks to multiple accounts per person). Additionally, this may mean that many of those curious about gaming have already established their play habits, unlike other markets where people are being introduced to gaming for the first time.

• Singapore boasts strong telecommunications infrastructure with companies like Singtel consistently ranking in the top 10 of average broadband speeds globally. Compare this to the Philippines where broadband connectivity is not the best but improving and giving access to online games at a much quicker rate.

• Singapore has a small population of 5.7M people. Compared to Indonesia’s 270M or the Philippines’ 108M and you have a market that can only contribute a very small amount to the region’s total player counts.

Newzoo’s Global Games Report shows mobile gaming as the dominant platform in Singapore and certainly the largest growth driver.

We may expect further console market share growth given how developed the Singapore games market is.

But that assumes that the crippling supply chain issue caused by global semiconductors shortage is relieved. Without that, Sony or Microsoft will be unable to deploy consoles to Singapore at scale.

PC remains a strong platform in Singapore specifically compared to the rest of SEA. Namely because it is the only platform for certain PC based esports titles like League of Legends, DOTA 2 or Counter-Strike

Google & Apple Presence

Singapore isn't home to sprawling campuses that you would find in Shenzhen, Silicon Valley or Seoul filled with global gaming players like Nintendo, Tencent, or Microsoft. But there are offices there and they are far from drab. But more importantly, Singapore houses sizable representation from the two largest mobile app storefronts, Google (Google Play Store) and Apple (App Store).

What this means is that if that you want your latest mobile game to succeed in South East Asia, one of (if not the) fastest growing gaming geographies on the planet, you'll have to work with folks at 70 Pasir Panjang Rd (Google) and 7 Ang Mo Kio (Apple). When these companies are taking a hefty cut of all your mobile gaming revenues it helps to be on the right side of things with them. Singapore specifically may not be the market that you want your game to cater to, just given how small the market is, but Singapore certainly holds the keys to you accessing the market you really want.

Singapore ESports

I don't want to discredit's Singapore's participation in esports. They do have strong talent with teams like Impunity competing in League of Legends PCS league . They also have Scythe Gaming which competes in DOTA. They do have representation on-stage and in-game. However, I think Singapore’s role in esports is more facilitative and less participatory. The Singapore Games Association (SSGA) tracks esports organizations operating in the region and arrived at this finding.

A majority of the 50 esports related companies are under the broad category of “service provider”. These may be producers, event organizers or something else entirely. The events being produced or organized may occur in Singapore proper, but not necessarily. The talent that 31.3% of organizations represent in agencies may not even be from or play in Singapore. Singapore’s relationship to not only SEA esports but even much more mature markets like Korea or China is referential. They exist in part to facilitate, improve, or just otherwise support the esports business of foreign companies.

What does this look like in practice? A brilliant example of a company that flexes the many roles above is Sea Ltd. - let’s learn more.

SEA Ltd.

SEA (NYSE: SE) is a Singapore based technology company that has 3 distinct arms. An e-commerce arm called Shopee, a fintech arm called seaMoney and a gaming arm called Garena (short for global arena). In this post, we’ll focus on Garena.

Garena is an online game developer and publisher of free games. The company distributes game titles on Garena+ in various countries across Southeast and East Asia, including the multiplayer online battle arena (MOBA) games League of Legends and Heroes of Newerth, the online soccer game FIFA Online 3, the first-person shooter game Point Blank, the mobile MOBA game Arena of Valor and the mobile racing game Speed Drifters.

Their most popular game though is a mobile MOBA called FreeFire, an uber successful title that has found a die-hard fanbase in LATAM (Brazil specifically). On the surface, the game hits the same beats to its comparables like Tencent’s Players Unknown: Battlegrounds (PUBG) or Epic’s Fortnite but regardless, it seems to have scratched the same itch for certain markets.

When PUBG was banned in India last year because of geo-political tensions with China over data privacy, there was a huge surge in Indian demand for the title.

Despite being a very mobile-first market, esports has still a firm presence in Southeast Asia. Below is a table of some of Garena’s most popular Free Fire tournaments. We see from this that Garena’s value to the Singapore market isn’t strictly in making a highly popular game - but in large esports organization, that brings global ad dollars and exposure to a relatively small market.

The world is still reeling from COVID-19 in many countries, and although Singapore is no exception, its relationship to in-person events in the region may be beginning to change. Alexander Champlin, the director of esports research for Niko Partners, said to GamesBeat that the company assumes in-person events will continue in China, but the rest of the region will be slower to return to esports stadiums.

I personally feel it’s tough to say with certainty how much of a role in-person esports events will play in the near future. COVID has proved that a remote-only world only slightly gimps esports’ growth trajectory. But until SEA countries like Indonesia (who as of writing are facing meteoric case counts) “return to normal” time will tell.

Champlin speaks to this point by saying:

Other Game Company Presence

The Singapore Games Association (SSGA) keeps a running list of Singapore based games companies that has ballooned in recent years. They claim that Singapore is home to over 130 active game-related companies, institutions & individuals.

It truly is a melting pot of opportunities not just for game creators and publishers but also investors. Some of these are global gaming powerhouses like Facebook EA, Tencent, Ubisoft, and Take 2 Interactive.

Singapore may not have the high growth rates of smartphone adoption or a huge population, but when large cap gaming firms come to play in Asia, Singapore is a top pick for sure. Singapore consistently ranks quite on the World Banks’ “ease of doing business” index - where currently it sits as the second-best place to conduct business (second to New Zealand).

Regulatory Tailwinds

The presence of high-quality games industry firms isn’t magic. It’s facilitated by a gaming-forward political landscape.

For example, the Singaporean government launched the Startup SG initiative to help startups in the digital gaming industry, citing the success stories of Garena, Razer, and Secretlab. The Singaporean government’s Infocomm Media Development Authority’s (IMDA) is also actively working with the Economic Development Board to attract internationally-renowned studios to help local studios, such as in the case of Unity’s support to Singaporean small gaming companies.

The Singaporean Tourism Board (STB) and Enterprise Singapore (ESG) are also continuously supporting local game companies. Moreover, albeit not part of the ruling government, the opposition Singapore’s Reform Party (RP) held their first-ever online “Meet-the-People” session via a World of Warcraft game stream in Facebook Live in June 2020 (it didn’t work well…).

Other Trends

COVID-19 Recovery

COVID-19 has been a huge boon to the growth of global gaming due to lockdowns. The big challenge for many game companies, whether they be developers, publishers or esports organizations is to retain as much of your new COVID player base as possible. That may mean that game consumption looks a little bit different. New console players may shift to mobile gaming as they start to get out and about. Mobile players introduced to the game for the first time may want to play the more “hard-core” PC version. As mentioned above, Esports in Singapore may shift from in-person events to online for a while, not for safety sake but for ease of logistics and accessibility.

In certain SEA markets like Malaysia or the Philippines, growth was stunted a bit by the closure of PC Cafe’s (either due to covid or state enforced curfews), but all in all - SEA (Singapore included) is heading in the right direction.

Console Titles “going mobile”

Mobile is here to stay in SEA. An often dismissed platform in the eyes of westerners, the mobile games market will only get more developed in robust in SEA as internet and smartphone penetration continue to climb.

Large publishers like Tencent EA and Activision understand that deeply and have been creating mobile versions of their popular games.

• Epics’ Fortnite came to mobile in July 2017

• Activision’s Call of Duty Mobile launched in October 1 2019

• Riot Games League of Legends Wild Rift launched in October 2020

• EA is launching Apex Legends on mobile in 2022

Westerners often dismiss mobile ports of console or PC titles as being diluted or watered down. Weaker versions that lack the same tactical depth of their PC versions. This may be true, but when doing that unlocks a market of 393,000,000 new gamers growing at 20% every 12 months, the economics are clear.

Asia Based Foreign Investment

I spoke a lot about the Mergers & Acquisitions occurring in the global games industry in my last post - check it out here!

One thing I didn’t touch on is the global decline in Chinese firms buying out other companies in full compared to a growing trend of smaller equity purchases of target companies. A piece from The Economist I read recently speaks to this at length and I think we will see it in Singapore and SEA.

Completed outbound acquisitions by Chinese firms shrank from $200Bn in 2016 to $26Bn in 2020, an 87% decrease helped by national security and data privacy fears. On the flip side, partial equity transactions by Chinese firms have ballooned. Chinese gaming company Tencent is the master of this where it made 85 cross border investments since 2019. Many of these deals are small stakes taken as part of a larger consortium of investors that include prominent non-Chinese private equity groups.

What this means is that we may see fewer all out 100% equity acquisitions of games companies tied to Singapore, but the capitalization tables of Singapore based firms will look murkier as more foreign investors grab slices of the SEA gaming pie.