Daniel Ahmad, Senior Analyst at Niko Partners, talks to Lewis Silkin’s JJ Shaw about the Asia games market and how the East is leading the way in retail innovation when it comes to video games.
JS: Daniel, it’s been a while! Could you give us an overview of what Niko Partners does as a company and what your primary focus is working as a Senior Analyst?
DA: Niko Partners is a market intelligence firm covering the video game market in Asia - the company has actually been researching and analysing the China market since 2002, but we’ve expanded since then to cover Southeast Asia, East Asia and South Asia. I joined the company as an analyst back in 2016 and was promoted to Senior Analyst in 2019. My main responsibilities include collecting, aggregating and analysing data on the markets we cover to produce syndicated research and insights subscriptions for our clients.
JS: In a snapshot then – how would you describe the size and scale of the Asia games market?
DA: Asia is by far the largest region for gaming in the world – the $80 billion it has generated in revenue represents almost half of global gaming revenue. It is probably also the most diverse region, which means it represents a major opportunity for game developers, publishers, brands and investors alike. High consumer demand for games, esports, tournaments and streaming - coupled with growing disposable income, improvements in infrastructure, and investment by multinational companies and country governments - have set the stage for strong continued growth. However, it’s worth bearing in mind that each country’s different culture, gamer preferences, and spending behaviours means there is no one size fits all approach to the region!
JS: What are the most popular games in the Asia market when it comes to playtime and streaming hours? How does this differ from the EU and the US?
DA: Asia is a unique market where multiple games in multiple genres across multiple devices can thrive. Top games in China include games such as Honor of Kings, a 5v5 MOBA for smartphones that has over 100 million daily active users. In South Asia, a mobile battle royale game called Free Fire from Garena consistently tops the charts. Japan also has a thriving mobile game market but consoles play a large role too, with Nintendo games being the most popular. In Korea, MMOs such as Lineage are played both on PC and mobile. Mobile gaming is actually much more popular in the East than in the West in general, and “free to play” is a much more accepted business model. That being said, some of the top franchises from Western developers such as League of Legends, FIFA and Call of Duty are popular in Asia too.
JS: What does the breakdown of Asia’s ‘gamer’ demographic look like then?
DA: Asia has over 1.5 billion gamers in total, of which more than 40% are female. Taking China as an example (as the largest games market within Asia) – it has 720 million players. Among those who are aged 18-35 years old, more than 90% play video games at least 60 minutes per month, 18% play more than 30 hours of games each week and 80% of gamers watch recorded or live game video in their spare time… so you start to realise quite how popular gaming is amongst that particular age group.
JS: Hugely! So what attracts so many people within the Asia market to games? What motivates them?
DA: It’s fair to say that Chinese gamers are mostly driven by completion and competition, and gamers in Southeast Asia are primarily motivated by competition, completion, community and challenge. These also happen to be the most essential values of competitive games, which is one reason why esports is so successful in Asia.
JS: To touch on esports then, where has the rise of esports come from and what opportunities does esports present for brands seeking to access the Asia market?
DA: Firstly, Asia is home to the largest audience of esports players and fans in the world. There are over 500 million esports fans in the region and esports revenue in the region is around half of the global total (according to our most recent Niko Partners’ Esports in Asia report). More generally, I think the explosive popularity of esports essentially came from the intersection of competition and community. Esports give players ways to engage with games more deeply and more meaningfully, and to share this experience with friends. Brands are recognising that there is value for them in this relationship too. For brands, affiliations with top teams or top titles brings in a new audience or helps to signal new affinities. There are obvious benefits to endemic brands but we are seeing more and more ‘non-gaming’ brands get into this space as well, because the data tells us that esports fans are often young, passionate and educated, with above average social and economic mobility.
JS: I often read that China has led the way in almost every aspect when it comes to “retail innovation” around games. Is this true and in what sense?
DA: Well, games have become a key space for brands to invest marketing funds in, allowing them to reach both new and existing customers in a re-imagined way. Luxury brands such as Louis Vuitton have benefited from this, as have technology focused brands such as Tesla. As an example, Tencent collaborated with Tesla to add the Model 3 and Model X vehicles to its popular battle royale game, and the collaboration led to an increase in Tesla’s awareness in China and growth in positive brand sentiment.
JS: And does it work as a strategy?
DA: More and more brands have been working with Chinese game developers in this way to raise their profile among mostly young gamers. While it may not instantly convert players into buyers (especially for luxury brands), it is a long-term play that can strengthen the brand in China. More immediate collaborations, such as the one between MOBA game Honor of Kings and M.A.C., play on in-game customization to promote their own products. When M.A.C determined that a high number of female players would spend time customising the lipstick color of in game characters, they capitalised on this by collaborating with the game to release lipstick shades based on the characters.
JS: In-app purchases and monetisation are naturally hot topics when it comes to analysing the future of the games industry. What does the global market have to learn from Asia on these issues? Are these regulated in Asia?
DA: Asia is ahead of the curve when it comes to business models and distribution models utilised in video games. Free-to-Play has been a popular and prevalent distribution model in Asia for almost two decades and the huge, fast growing audience of mobile gamers has been fertile ground for developers to experiment with monetisation models within that framework - such as in-app purchases and ‘gacha’ mechanics. While some aspects of gacha and loot boxes are indeed regulated in the region, games such as Genshin Impact have been able to show how these monetisation models can also succeed in the West.
JS: What do you think is behind this shift?
DA: Audiences, especially those that play games casually, have become averse to pay to win mechanics, which is why games that focus on play to win are able to do better. Paying for cosmetic upgrades or shareable items is much more accepted by gamers both in Asia and the West because it doesn’t falsely give an advantage to those who choose to spend more to level up. One of the reasons why Genshin Impact was so popular on the global stage is because it provided a AAA console-like experience that could be played for hours on end on any platform, without needing to pay. Players that do spend in the game do so because they want to get more out of an already enjoyable experience.
JS: What advice would you give to brands seeking to ‘crack’ the Asia Games market in 2021?
DA: The key to success in Asia is to ensure that you understand the audience you are trying to reach. There are many different subcultures among gamers in Asia and multiple ways to reach and work with them. Our China gamers report notes that gamers are more likely to trust Key Opinion Leaders (aka influencers) on the best products to buy, rather than relying on traditional ads or salespeople. Utilising the right platforms in each country is also key to reaching gamers in Asia. Brands have had success with mini programs and games in WeChat, either through standalone applications or through branding deals that see brands integrated into popular games.
That being said, we see a ton of opportunity for brands and companies to leverage gaming as a way to increase their presence in Asia. While gaming tie ups traditionally involve fast food or energy drink companies in the West, we are seeing more acceptability for other types of brands within games in Asia. From luxury brands to car brands, these partnerships and tie ups are a good way to increase positive sentiment among young gamers in the country and convert them into fans and buyers over the long term.
JS: And on the flip side, what do you think are the biggest challenges for brands or game developers seeking to access the Asia games market?
DA: I would say that regulations are certainly one of the biggest challenges, especially in China where games require government approval for content prior to launch. Vietnam also has a strict regulatory environment. Understanding the regulatory environment of these markets is key to success and we recently released Niko’s 2021 China Regulations and Business Report that provides a complete overview. Since it is so critical to doing business in China, we also cover the topic of regulations with frequent news and updates on our blog. Localisation and culturalisation are also key for games to succeed in these markets, with developers and brands needing to be aware of cultural nuances or taboos that could either help a game succeed or fail.
JS: Finally, what can we expect to see from the Asia games market in the year ahead?
DA: ‘High-end’ games are a space to watch. Game developers in China lead the world when it comes to mobile game development and have been able to implement a development and operations process that allows them to create high revenue generating titles. Chinese developers are now looking to take these learnings and apply them across different genres and platforms. Games like Genshin Impact have shown how games can provide a high quality experience (AAA), scale across multiple platforms (PC/Console/Mobile) and reach a large audience (F2P / Global launch). We expect to see more Chinese developers create fully realised games with global appeal. You can read more about our predictions for the Asia games market in 2021 on our website.
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