Game On: Southeast Asia's Growing Mobile Gaming Industry

With revenues surpassing USD 1 billion in 2014 and expected to reach USD 7 billion in 2019, Southeast Asia’s mobile gaming industry is currently the fastest growing in the world. This growth has been attributed to an increase in broadband users, smart devices, and social media. Furthermore, with a population of 630 million across 11 countries, 200 million internet users, and 700 million mobile subscriptions, Southeast Asia is quickly becoming the next frontier for mobile games. Indeed, “games” is the highest-ranking app category in Southeast Asia, showing impressive download and revenue growth year-on-year, particularly in Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. 

A number of factors have driven this growth. Firstly, though feature phones are still the most popular in many Southeast Asian countries, mainly because they are cost-effective, many users have switched to smartphones. Between 2013 and 2014, smartphone penetration grew from 13.8 to 21.3 percent in Indonesia alone. This switch has been spurred on by continued improvements in the region’s telecommunications infrastructure that play a vital role in making mobile devices, such as smartphones and tablets, more accessible. Moreover, where such infrastructure is lacking, low-cost smartphones and tablets are more transformative in emerging Southeast Asian markets as they make connectivity to cyberspace accessible to low-income users who do not have access to landline networks.

The region’s mobile gaming market has also been driven by its young population that invests time and money into mobile and online games. Serious gamers are more likely to purchase games as opposed to playing free games, as the content is considered to be more enjoyable and interesting, and; secondly, unlocking levels in games often requires that money be spent. Mobile games also provide a platform for virtual interaction with other gamers, allowing users to compete with each other. This helps to create a mobile gamer community, similar to Friendster, Southeast Asia’s largest online gaming platform and social network with a registered 100 million users.  

A third factor that has contributed to the growth in mobiles games relates to regional dynamics. With many East Asian gaming companies struggling to gain a foothold in Western markets, some have turned their attention to Southeast Asia, a region that is geographically closer and culturally similar. Moreover, some Western companies themselves have also opted to set up shop in Southeast Asia since its markets are relatively easier to enter than the more mature Asian markets, namely the Big Three: China, Japan, and South Korea. Unlike in China, English is widely spoken in the region and the use of Western distribution platforms such as Google Play and iOS make Southeast Asia attractive for Western mobile publishers. 

Despite these opportunities and impressive growth statistics, app store revenues in these markets are still in their early stages of growth. In December 2014, for example, the amount of combined revenue accumulated by mobile games in Southeast Asian countries barely exceeded 25 percent of the revenues generated in South Korea. One reason for this discrepancy relates to payment methods, as credit card usage is extremely low. Across all countries in the region, excluding Singapore and Malaysia, credit card penetration is less than 10 percent, making it difficult for most gamers to purchase virtual goods. Furthermore, prepaid distribution outlets for Apple and Google vouchers are not available on a large scale in most Southeast Asian countries.

In addition to revenue hurdles, language, and cultural barriers have also hindered some market entrants. Though English is widely spoken throughout the region, especially in the Philippines and Singapore, game developers targeting Southeast Asian markets should not assume that English-language games will be well received in all countries. Southeast Asia is extremely diverse, and there are substantial differences in gamer demographics, genre preferences, and spending trends. As such, by considering the regional taste of gamers and localising content accordingly, Western game developers are likely to be better received.

Nevertheless, Southeast Asia’s demand for mobile games is set to continue as (mobile) internet connectivity develops and continues to grow in the region. With mobile games forecast to account for 57 percent of Southeast Asia’s games market by 2017, there are vast opportunities for developers in the region. By focusing primarily on the Big Three (China, Japan, and South Korea), industry pundits assert that game developers are missing attractive opportunities to establish themselves in the Southeast Asian market before it becomes saturated with many global gaming companies competing for a stake.