- Yossi Man, Arnon Bersson, Zachary Ainbinder-Barkley
Leveling Up: The Middle East Gaming Industry as a Path for Regional Dialogue
Saudi Arabia has invested billions of dollars in recent years with the aim of establishing a leading gaming industry of its own, and Israel – with its technological expertise and experience – can be a promising potential partner. Establishing collaborations in this field can boost Saudi economic ambitions while simultaneously promoting people-to-people dialogue in the Middle East
Illustration photo: Glenn Carstens-Peters (Unsplash)
In July and August 2022, Gamer8, the largest video gaming festival in the world, opened its doors to elite esports players from all over the world. Aside from a slew of gaming tournaments with a total prize pool of $15mn, it offered participants music festivals, concerts, shows, events, and much more. Perhaps the most surprising aspect of the seven-week event was the venue: Riyadh, the capital of Saudi Arabia.[1]
What brings the ultra-religious Islamic kingdom to host a festival dedicated to video gaming? The answer lies in regional demographics, changes in the local and global economies, and the shifting geopolitics of the Middle East. In recent years, developments in these areas have led the Saudi government to invest billions of dollars to establish its own gaming and esports industries.
These efforts, and others, are nested in the Saudis’ strategic “Vision 2030” plan to diversify their economy and move away from reliance on fossil fuel production. The Saudis expect that a thriving gaming industry will create a growing technological sector and help integrate the Kingdom's young population into the labor market, strengthen its national identity, and even empower its women.
In terms of cost and benefit, Saudi Arabia stand to gain much from a potential collaboration with Israel’s advanced gaming industry
This article argues that the Saudi thrust into the gaming industry represents a non-conventional opportunity to bring the peoples of the Middle East closer together. Against the backdrop of the Abraham Accords, which in 2020 normalized relations between the State of Israel and several Arab and Muslim countries, gaming can potentially connect the younger generation in neighboring countries and help promote better ties between them.
More specifically, we argue that in terms of cost and benefit, Saudi Arabia stand to gain much from a potential collaboration with Israel’s advanced gaming industry, even though the two do not currently have formal diplomatic relations. Such collaboration would not require creating new frameworks or breaching existing ones, can done remotely or through a third party such as the US, and – in a regional environment that already allows for direct dialogue with Israel – will not likely result in significant diplomatic or political fallout. What they may gain is a significant boost in the creation of an important industrial sector capable of diversifying the local economy and improving human capital in the country.
Fossil fumes
The Middle East region is currently undergoing significant change. Alongside geopolitical shifts and a growing search for economic diversification due to a foreseeable end to the fossil fuel era, it is also witnessing the rise of a dominant young age group and a growing desire to promote shared values between the West and the Middle East. Combined, these simultaneous developments arguably make gaming one of the most interesting avenues for building bridges between communities in the Middle East.
Gaming transcends gender, ethnicity, and religion. In recent years, several countries in the Middle East have put significant efforts into making it an industry that reflects the culture, climate, and history unique to this region. Consequently, gaming is now among the fastest-growing industries in the region.[2]
One of the gaming industry’s most significant investors in recent years is the Kingdom of Saudi Arabia (KSA). In 2016, the Saudi government launched the “Vision 2030” program as a means of diversifying its economy and moving away from its historical and heavy dependence on oil. The program consists of a series of investments, acquisitions, and projects aimed at developing public service sectors such as health, education, infrastructure, recreation, and tourism.[3] Led by King Salman and Crown Prince Mohammad bin Salman (MBS), the Kingdom sat out to make immediate changes in a whole new way.
Significantly, “Vision 2030” strongly emphasizes the development of a skilled, educated local workforce. Historically, other than the top-tier positions, the Saudi oil sector has been mostly run and maintained by international directors and foreign workers. The reliance on foreign labor essentially curbed opportunities for Saudi citizens and came at the expense of developing a highly skilled local workforce.[4] KSA leadership understood that for its immediate and future economic development plans to bear fruit, it needs a new approach – one that differs from the way the Saudi oil industry was established in the 20th century, and is more independent and self-reliant.
Buy everyone, import talent
One of the main reasons for the Saudi interest in esports and gaming is demographics. Saudi Arabia – like many other countries in the Arab Gulf and wider Middle East region – is very young compared to other regions in the world. Currently, around 70% of the Kingdom’s population is under 30 years old.[5] An estimated 40% of gamers in the Kingdom – around 2.23 million – are women.[6]
The KSA government knows that for the Saudi gaming industry to adhere to the “Vision 2030” guidelines of self-sufficiency, most of the industry – from the foundation up to the managerial positions – must eventually be staffed by locals. However, creating a new national industry from scratch isn’t simple nor easy, and the Saudis have found the potential for growing a future high-level workforce to be severely lacking.
Promotional video for the Gamers8 tournament in Riyadh | Source: Gamers8 Youtube channel
The gaming industry’s workforce is relatively young, and talent is often recruited from among university graduates, mostly from Western institutions. In contrast, there is still a talent and experience gap in the MENA region compared to other major gaming hubs. Universities and educational institutions in the region have only recently started focusing on game design and development, data analytics, and artificial intelligence, all of which are required fields for attracting industry specialists. Furthermore, while many young Saudis choose to acquire a Western education, several studies related to the success of Saudi university students in the U.S. and the U.K. have identified difficulties in translating their abilities into academic excellence.[7]
As a result of all the above, the Saudis currently lack an experienced and educated workforce and are having difficulties in training one. To overcome this significant obstacle, KSA leadership has in recent years led a two-pronged foray into the global gaming industry – first, by buying what it can from successful gaming companies overseas; and second, by “importing” overseas talent to help establish a budding local industry.
Since late 2019, the Saudi-held Public Investment Fund has invested 39% of its portfolio in the global gaming industry
Since the onset of the COVID-19 pandemic in late 2019, the Saudi-held Public Investment Fund (PIF), the main financial driver behind Vision 2030, has invested 39% of its portfolio in the global gaming industry.[8] In December 2020, Savvy Gaming Group, which is owned and operated by the Saudi PIF, purchased $3.3 billion worth of shares in three of the biggest American gaming companies – Activision-Blizzard ($1.4 billion), Electronic Arts ($1.1 billion), and Take-Two ($826 million).[9] In May 2021, the fund increased its total holdings in these companies to $6 billion.[10]
In 2022 alone, PIF, directly or through Savvy, has purchased shares of gaming companies in Sweden,[11] Germany,[12] the United Kingdom,[13] and Japan.[14] Together, these numerous and diverse acquisitions have helped create a conglomerate of video game companies under a Saudi umbrella.[15]
The second part of the Saudi approach consists of laying the foundations of its gaming industry. This includes building local gaming hubs and attracting investors, companies, experienced industry directors, esports tournaments and international gaming conventions to the Kingdom.
In February, the heads of the NEOM project, a futuristic city and one of Vision 2030’s "Crown jewels," signed an agreement with MBC Group, the largest media company in the Middle East and North Africa region, to establish an AAA games studio in the Kingdom – making it the first of its kind in the Middle East.[16] This agreement may yet allow KSA to produce some of the market’s highest budget games.[17]
Additionally, several experienced and well-established industry executives have recently been hired to help Savvy’s ecosystem, its game studios, and its infrastructure company. Brian Ward, former head of studios at Activision-Blizzard, is leading the Savvy Gaming Group alongside several other experienced industry leaders.[18]
To further facilitate the growth of the local gaming industry and other economic fields it is trying to promote, the Saudi government has recently passed three business-friendly laws on finance, regulation, and required presence in the Kingdom. Their shared goal is to create a hospitable business-legal environment for foreign companies by de-regulating and providing incentives, while simultaneously demanding the companies’ physical presence in the Kingdom to boost the local economy and workforce.
By doing so, the KSA hopes to become more competitive among its neighbors, such as the UAE and Bahrain, whose business and regulation laws are considered much laxer and more inviting for investors.[19] The success of the Saudi gaming and esports industry relies on the effectiveness of such regulation shifts.
Potential for Collaboration
As reviewed above, establishing a locally based, industry-leading gaming sector from scratch is a daunting task, and the Saudis suffer from several major disadvantages. Here, friendly states can potentially help them close the gaps. One of these countries is its longtime ally, the United States, whose gaming companies the Saudis have been heavily investing in. However, we wish to argue that Israel, as a regional leader and self-proclaimed "Startup Nation," can also discreetly assist the ambitious Saudi venture.
In 2020, the Trump administration brokered the Abraham Accords – normalization agreements signed in 2020 between Israel and several Arab and Muslim countries. Since the signing, Israel’s covert ties with Saudi Arabia have increasingly come to light. We suggest that despite a lack of official relations, cooperation between the two does not need to be restricted to matters of security and state.
The Saudis' exposure to Israeli expertise and its ecosystem can help promote an exchange of knowledge and eventually deepen ties
Israel's standing as a technological powerhouse and a young nation with extensive knowledge of the region’s people may allow the gaming industry to facilitate the next important stage of the Abraham Accords: establishing a dialogue between peoples. Collaborations between the two countries can be done discreetly (virtually, or through a third party such as the U.S.), and – given the Abraham Accords normalization of Israel in the region – is not likely to provoke significant backlash for the Saudi government.
We identified a few areas for potential collaboration that could involve KSA, the USA, and, in some capacity, the State of Israel: the mobile gaming sector, gaming and esports development schools and programs, and games that are based on regional culture. All these areas are interconnected; together, they can create a multi-layered collaborative ecosystem to advance the gaming industry in KSA and the region, bringing its peoples closer together. It
Mobile Games
The mobile games market is worth an estimated $92.2 billion worldwide and accounts for 52% of the global games market.[20] Mobile gaming is also the most dominant sector of the Israeli gaming industry. Three of the most notable mobile gaming companies in Israel are Playtika, Moon Active, and CrazyLabs, all of which focus on app development.
Like Israel, mobile games are the most popular games in KSA and are played by approximately 84% of all adults, almost half of them women.[21] Indeed, mobile gaming was one of the few sectors that grew continuously during and after the pandemic, and it has had a tremendous positive impact on the Saudi economy.[22] That being said, there are currently very few e-gaming firms and substantial game developers in the Kingdom. Herein lies part of the potential for collaboration, as Israeli mobile gaming companies could locate potential partners in this way.
In August 2021, Swedish-based gaming giant Embracer purchased 100% of CrazyLabs shares.[23] As a consequence of Savvy Gaming’s acquisition of Embracer in June 2022, there is currently an Israeli gaming company that is indirectly owned by the Saudi government, meaning indirect cooperation between Israeli and Saudi companies is already happening. The Saudis' exposure to Israeli expertise and its ecosystem can help promote an exchange of knowledge and eventually deepen ties.
Another potential step for collaboration may lie in creating multi-national work and research groups – for example, bringing together Saudi, Israel, American, Japanese, and European gaming companies, as well as professionals in the field, all of whom seek to benefit from the combination of a growing industry, advanced technology, and an aspiration to create a bridge between nations. A longer-term goal we can suggest is convening an American-sponsored gaming “summit,” with representatives from the gaming industry in these countries and other MENA members.
Gaming and Esports Development Schools and Programs
For sustained collaboration, the younger generation must be at the forefront, since they will be the ones to establish the KSA gaming and esports industry. Indeed, opportunities to use gaming to draw countries together are a new avenue currently being explored by governments and non-governmental organizations, including in the Middle East.
For example, this past academic year, the U.S. State Department launched an exchange program with Israeli, Emirati, and Bahraini youth. 450 high school students from these countries participated in a 10-week virtual program, where they spent critical time learning more about the video game development process.[24] Furthermore, the US State Department is set to help 2,700 students in the United States, Israel, the United Arab Emirates and Bahrain engage in a virtual student exchange program centered on the development and creation of social impact video games.[25]
As mentioned above, the main obstacle the Kingdom's gaming sector is currently facing is a lack of university-level programs to help guide and teach all aspects of this industry. To begin countering this trend, in January 2022, Amazon Saudi Arabia and the UAE announced a collaboration with MENATech, a GGTech Entertainment Group company, to launch “Amazon University Esports,” the first educational esports league in each country.[26]
But alongside a regional approach, we also suggest pursuing an international one: bringing together aspiring students interested in joining the gaming industry – Saudis, Palestinians, and Israelis from all faiths, as well as other regional players. These youth can study and explore together, and hopefully transcend state boundaries and historical tensions.
Games based on regional culture
The potential of the Middle East gaming industry also lies in the development of games that express regional characteristics and traits. For example, in recent years, local developers have released games related to the Muslim world and Arab history. The “Muslim3D” simulator, developed by a German company with Saudi and Islamic experts on their team, is the first of its kind to offer a game that expresses Islamic culture to the global Muslim community. Similarly, “Ibn Battuta,” which retells the wandering explorer's travels, also reflects a similar trend – strengthening Arab identity.
From this point of view, to strengthen the connection and common identity, regional games can bolster the connection between the countries and create an innovative line of entertainment. Israel’s Arab minority – composing roughly 20% of the population – as well as Israeli Jews that are descendants of Arab countries, can have a deep connection to, and understanding of, the region’s language, culture, and history. Combined with Israeli experience and technological prowess, regional actors stand to gain from such a collaboration.
Conclusion
Two years is too short a period to assess the impact and depth of the ties between the countries that signed the Abraham Accords. Nevertheless, the lessons of the past oblige us to examine why countries that signed peace agreements failed to guarantee that it would be peace between peoples, and not just between leaders and elites. To ensure that the Abraham Accords diverge from their predecessors, they must not only rely on security interests or a common enemy, but instead on the creation of shared social, cultural, and economic frameworks.
Gaming is one of the fastest-growing industries in the Middle East. It reflects the ambitions of the region’s rulers to invest in a sector that has the potential to create technology-driven economic diversification, as well as reflect its unique social and demographic structure.
The aspiration to create a long-term dialogue based on common values and economic interests can bring governments and private companies together for joint projects in the field of gaming. In the spirit of the Abraham Accords, we believe that collaboration between game development teams from the region’s countries has significant business and diplomatic potential. Games can connect people – especially the younger generation – who will find this industry as a source of cooperation and dialogue that connects neighboring nations. This is true even for those states conducting an indirect dialogue that, perhaps, are waiting to get into the game.
Dr. Yossi Mann is the head of the “Israel and the Arab Gulf” Program at the Abba Eban Institute for International Diplomacy at Reichman University, Israel. He specializes in economic and social aspects in the Arab Gulf, especially the oil market in the region. He has been a research fellow at Oxford University, Renmin University in China, Gdansk University in Poland and Reichman University.
(Photo: Reichman University)
Arnon Bersson has years of experience working in the US stock market and in commodity trading, conducting market research with a broad background in Geo-Politics and economic intel analysis. He has worked as a researcher and analyst for several Israeli companies related to the Hi-tech and energy industries. After studying in the US, he returned to Israel to complete his MA thesis, from Bar-Ilan University, which deals with the subject of Israel's energy security policy by analyzing the question of geopolitical and economic effects caused by energy pipelines. Arnon has been Dr. Yossi Mann's research assistant for many years. Together, they have worked on numerous research projects regarding the world energy market, specifically pertaining to Saudi Arabia and the Arab Gulf Oil and Natural Gas industries.
Zach Ainbinder-Barkley is a third-year undergraduate at American University, currently pursuing a BA in International Policy with a concentration on the Middle East. A Nashville, TN native, Zach was a summer intern for the Abba Eban Institute's Israel and Arab Gulf program.
(Photo: courtesy of the author)
Notes:
[2] "2022 Middle East & North Africa Games Industry - MENA-3 Gamers Reached 65.32 Million - ResearchAndMarkets.com,” Business Wire, 4 March 2022. https://www.businesswire.com/news/home/20220304005434/en/2022-Middle-East-North-Africa-Games-Industry---MENA-3-Gamers-Reached-65.32-Million---ResearchAndMarkets.com [3] https://www.vision2030.gov.sa/
[4] International Monetary Fund, Economic Diversification in Oil-Exporting Arab Countries, Annual Meeting of Arab Ministers of Finance, April 2016. https://www.imf.org/external/np/pp/eng/2016/042916.pdf ; McKinsey Global Institute, “Saudi Arabia Beyond Oil: The Investment and Productivity Transformation,” McKinsey & Company, December 2015. https://www.mckinsey.com/~/media/McKinsey/Featured%20Insights/Employment%20and%20Growth/Moving%20Saudi%20Arabias%20economy%20beyond%20oil/MGI%20Saudi%20Arabia_Executive%20summary_December%202015.pdf ; Hend Al-Sheikh and S. Nuri Erbas, “The Oil Curse and Labor Markets: The Case of Saudi Arabia,” Economic Research Forum, July 2012. https://www.researchgate.net/publication/325768484_The_oil_curse_and_labor_markets_The_case_of_Saudi_Arabia
[5] Central Intelligence Agency, “Saudi Arabia,” 2022. https://www.cia.gov/the-world-factbook/countries/saudi-arabia/
[6] "48% of Saudi Arabia's gamers are women," Saudi Gazette, 23 August 2022. https://saudigazette.com.sa/article/624188
[7] Nida Qayoom and Mohammad Saleem, “A Study of Saudi Advanced Academic Writing Students’ Perceptions of Research Essays, and Gaps in Their Knowledge,” International Journal of Learning, Teaching and Educational Research, Vol. 19, No. 6, June 2020, pp. 223-237. https://www.researchgate.net/publication/343198286_A_Study_of_Saudi_Advanced_Academic_Writing_Students’_Perceptions_of_Research_Essays_and_Gaps_in_Their_Knowledge; Samah Zakareya Ahmad, “Virtual Research Teams to Develop EFL Students’ Research and Academic Writing Skills,” 2020. https://journals.ekb.eg/article_106680_2658e529b63a6c07203925a0c20e1ba3.pdf ; Noof Saleh Alharbi, “Proposed Model to Assist Saudi Postgraduate Students in their English Academic Writing,” Arab World English Journal, Volume 12, Number 1, March 2021, pp. 527-542. https://files.eric.ed.gov/fulltext/EJ1297825.pdf
[8] Paul Abelsky, "Saudi Wealth Fund Loads Up on Video-Game Makers and Exits Suncor," Bloomberg, 18 May 2021. https://www.bloomberg.com/news/articles/2021-05-18/saudi-wealth-fund-loads-up-on-video-game-makers-and-exits-suncor
[9] Tom Ivan, “Saudi Arabia invests over $3 billion in Activision, EA and Take-Two,” Video Games Chronicle, 18 February 2021. https://www.videogameschronicle.com/news/saudi-arabia-invests-over-3-billion-in-activision-ea-and-take-two/
[10] Shalini Nagarajan, “Saudi Arabia's $400 billion wealth fund doubled down on its stakes in US video-game makers and dumped a major oil position in Q1,” Business Insider, 20 May 2021. https://markets.businessinsider.com/news/stocks/saudi-arabia-q1-wealth-fund-video-game-makers-dumped-oil-stake-2021-5-1030451312
[11] In June 2022, Savvy also purchased a $1 billion share of Embracer, the Swedish gaming group giant, which constitutes 8.1% of the company. Casey David Muir-Taylor, “Saudi Arabia Buys $1 Billion Share of Giant Gaming Group, Embracer,” IGN, 9 June 2022. https://www.ign.com/articles/saudi-arabia-buys-1-billion-share-of-embracer
[12] In 2022, PIF bought Germany's ESL Gaming, considered to be one of eSports’ most well-known tournament operators, for $1 billion. Rachel Kaser, “ESL Gaming sold for $1 billion to Savvy Gaming Group,” VentureBeat, 24 January 2022. https://venturebeat.com/games/esl-gaming-sold-for-1-billion-to-savvy-gaming-group/
[13] In 2022, PIF bought London-based FACEIT for $500 million. Oliver Adey, “Takeover of ESL and FACEIT: Saudi Arabia offers itself a large share of Esport,” get to text, 25 January 2022. https://gettotext.com/takeover-of-esl-and-faceit-saudi-arabia-offers-itself-a-large-share-of-esport/
[14] PIF took a 5.01% stake in Nintendo Co., its third investment in a Japanese games company, and after purchasing 5% stakes in Capcom and Nexon. The holding is set to make the Saudi fund Nintendo’s fifth-largest shareholder. Furthermore, Electronic Gaming Development Company (EGDC), a subsidiary of a foundation run by Saudi crown prince Mohammed bin Salman, now owns 96.18% of Japanese developer SNK Playmore. See: Eddie Makuch, “The Year Of Gaming Investment Continues With Saudi Government Buying Stake In Capcom And Nexon,” Gamespot, 4 February 2022. https://www.gamespot.com/articles/the-year-of-gaming-investment-continues-with-saudi-government-buying-stake-in-capcom-and-nexon/1100-6500323/; Ian Walker, “One Of The Worst People In The World Now Owns Over 96% Of SNK,” Kotaku, 6 April 2022. https://kotaku.com/snk-saudi-arabia-mohammed-bin-salman-mbs-king-of-fighte-1848754233
[15] Luke Plunkett, “Saudi-Backed Company Buys ESL For $1 Billion,” Kotaku, 24 January 2022. https://kotaku.com/esl-faceit-esports-public-investment-fund-saudi-arabia-1848413393
[16] Omar Ahmed, “Accused of 'sports-washing', are the Saudis now 'games-washing'?,” Middle East Monitor, 24 February 2022. https://www.middleeastmonitor.com/20220224-accused-of-sports-washing-are-the-saudis-now-games-washing/
[17] Ibid.
[18] Dean Takahashi, “Why Saudi Arabia’s Savvy Gaming Group is diving into esports and games,” VentureBeat, 13 April 2022. https://venturebeat.com/games/why-saudi-arabias-savvy-gaming-group-is-diving-into-esports-and-games/
[19] “Saudi Arabia won't work with foreign firms without regional HQ from 2024,” Reuters, 15 February 2021. https://www.reuters.com/article/saudi-company-int-idUSKBN2AF1PX ; “Saudi Cabinet approves new companies law to drive entrepreneurship,” Arab News, 29 June 2022. https://www.arabnews.com/node/2113171/business-economy ; Paul Arnold, “KSA’s investment law to ‘boost international business over 50%’,” Zawya, 25 April 2022. https://www.zawya.com/en/economy/gcc/ksas-investment-law-to-boost-international-business-over-50-u061a2kq
[20] Daniel Allen, “The mobile games market is making more money than PCs and consoles combined,” Android Police, 2 February 2022. https://www.androidpolice.com/the-mobile-games-market-is-making-more-money-than-pcs-and-consoles-combined/
[21] “A deep dive into Saudi Arabia’s mobile gamers,” Arab News, 3 November 2021. https://www.arabnews.com/node/1960866/media
[22] Elena Hinnawi, “Pandemic provides spark for growth in Arabic mobile games industry,” Arab News, 9 June 2022. https://www.arabnews.com/node/2100431
[23] Both Embracer and CrazyLabs agreed not to disclose the purchasing price and other terms, but it was reported that “the purchase price contains an upfront part and consists of a mix of cash and newly issued Embracer B shares.”
[24] Noah Smith, “State Department pursues ‘people-people’ diplomacy through video games,” The Washington Post, 8 July 2022. https://www.washingtonpost.com/video-games/2022/07/08/game-exchange-program-games-for-change/
[25] Mike Wagenheim, “The Abraham Accords’ Newest Yield: Video Games,” themedialine, 17 May 2021. https://themedialine.org/life-lines/the-abraham-accords-newest-yield-video-games/
[26] Divsha Bhat, “Amazon University Esports to expand to UAE, Saudi Arabia with MENATech,” Gulf Business, 20 January 2022. https://gulfbusiness.com/amazon-university-esports-to-expand-to-uae-saudi-arabia-with-menatech/