Does Russia Have a Shot in the BRICS Video Game Market?
© AFP 2023 GREG BAKERPeople play computer games at an internet cafe in Beijing on September 10, 2021 (Photo by GREG BAKER / AFP)
© AFP 2023 GREG BAKER
One of the most promising and dynamic segments of the country's entertainment business, the video game market in Russia has grown significantly in recent years. The government, however, looks for novel approaches to widen its market penetration abroad.
As gaming has continuously evolved globally, people have become more attracted to it as a favorite daily activity. This is happening because of the increasing variety of games and genres, players' easy access to gaming platforms, and the affordability of gaming devices. The gaming industry became a transformative mechanism for unleashing artistry through creativity into a form of entertainment facilitated by technological innovation in today’s world.
Consequently, the Russian Federation has demonstrated a robust tradition in game development due to its deep background in science, information, and communications technology, and a growing number of specialized IT experts like developers, programmers, and an expanding game development hub.
During his visit to the exhibition 'Development of the Creative Economy in Russia,' President Vladimir Putin called for draft proposals to promote Russian video games in international markets, focusing on the BRICS markets (Brazil, Russia, India, China, and South Africa).
Amid the international success of the Russian first-person shooting Atomic Heart Sputnik provides insight into the Russian gaming industry and other related details that highlight the economic significance of this market and its prospects.
What is a Video Game?
This digital game involves interacting with a user interface or input device (such as a joystick, controller, keyboard, or motion-sensing device) to produce an audio-visual relay on a display screen.
This visual feedback is most commonly presented on a television, computer monitor, flat-panel display, or mobile device touchscreen (tablets, smartphones, personal digital assistants) or through a virtual reality headset.
How Big is the Russian Gaming Market?
August 2021 data revealed that Russia has entered the top 10 leading countries in the consumption of games, alongside China, the USA, Japan, South Korea, the UK, India, and France.
Statista reported that in 2023, the earnings from video games are forecast to be around $3.27 billion. It's anticipated that revenues will grow annually by about 6.99 percent between 2023 and 2027. By 2027, it's estimated that Russia’s video game market will be valued at roughly $4.29 billion. The number of Russian video gamers is expected to hit 52.1 million in the next 4 years. This year, it is speculated that user penetration will reach 32.7 percent, but a 36.0 percent rise is expected by 2027. Moreover, the average revenue per user in Russia's video games market is estimated to reach $68.72 this year.
The share of Russians surveyed who play video gamers jumped from 18 percent in 2018 to 60 percent in 2022, according to a survey of residents in 53 Russian regions.
A 2022 study by the business research and analytics firm NAFI said that Russians who bought video games (or procured a subscription) for themselves or their relatives in 2021 spent an average of $25.36 on games for a smartphone or tablet, $46.75 on games for a PC and laptop, and $29.38 on games for a console.
Who Constitutes the Russian Gaming Industry?
The Russian gaming ecosystem comprises diverse participants who collectively contribute to financing/investing, developing, distributing, and consuming video games in the country and global markets. They are as follows:
Game Developers: These can be individuals or firms (game studios) responsible for creating various video or mobile games.
Game Publishers: They ink deals with game developers to help fund, market, and distribute games in exchange for a percentage share of the game's proceeds. Major Russian publishers like VK Play and RuStore also adopt this business model, alongside international platforms like Steam, Google Play, App Store, Tencent MyApp and more.
Investors and Venture Capitalists: These are individuals or companies that offer funding to game development studios and related businesses, thereby contributing to growth and innovation within the ecosystem.
Game Technology and Hardware Producers: These companies manufacture gaming hardware, peripherals, new consoles, video cards, smartphones, tablets, and other gaming-related devices.
Game Engine Developers: They receive a percentage from each game developed using their engines. For example, VK's newly developed Russian Nau Engine operates in this way.
Gaming Events and Conventions: These gatherings bring together game developers, publishers, gamers, and professionals from Russia's gaming industry to network, showcase gaming products and services, and more. An example is the annual Russian Gaming Week.
Esports Organizations: The rise of digital sporting events has created a niche for competitive video gaming among teams of Russian professional gamers (such as Gambit Esports, Vega Squadron, Moscow Five, ESL, Vaevictis Esports, etc.). They participate in organized tournaments like BetBoom Aunkere Cup 2023, Russian Cybersport League 2023, and others.
Game Marketers and Digital PR Agencies: These are Russian or foreign outsourced companies that work following existing laws to advertise or market gaming content. They also assist in developing creatives and other materials to increase the game's lifetime value and user acquisition. This category also includes game streamers and content creators.
Government Regulators: They are responsible for creating a smooth regulatory environment for the industry in areas such as tax incentives, age ratings, and censorship.
Gamers or Game Users: The final consumers patronize or play these games.
How Much Revenue does Russia's Video Game Market Generate?
The market yielded 9 percent growth by device segment year-on-year in 2021, with mobile games recording 14 percent, console games 8 percent, and PC games 4.2 percent, industry insiders revealed.
However, the Russian video gaming market value saw an increased between 2019 and 2021 by device segment according to market figures.
In 2019, it yielded a total of roughly $1.9 billion from three segments: PCs ($956 million), Mobile ($752 million), and Consoles ($171 million).
In 2020, the industry earned approximately $2.1 billion - PCs ($1.1 billion), Mobile ($880 million), and Consoles ($189 million).
In 2021, about $2.4 billion in total was earne - PCs ($1.1 billion), Mobile ($1.0 billion), and Consoles ($207 million).
Furthermore, PC video games generated total revenue of $387 million in Russia in 2019, and it's expected to hit $457 million by next year.
Income from mobile games reached $1.06 billion in 2019, but it is estimated to increase to $1.99 billion by 2024.
Earnings from video games on consoles in Russia stood at $321 million in 2019, but market analysts project it will grow to roughly $404 million in 2024.
What are the Growth Drivers for Russia's Video Game Industry?
Presently, Russia is experiencing exponential growth in game development and publishing companies, alongside higher education institutions that are dedicated to training game developers, programmers, coders, and other specialists in the field of video game development. However, it's essential to note that several factors contribute to the growth and development of the industry in Russia.
Russian government assistance: In 2022, Internet Development Institute triggered a means for state support by dispensing roughly $13.3 million to support Russian game developers. The Internet Development Institute (IDI) revealed its project budget for the year 2023 on January 18, totaling $301 million. A substantial portion of this sum, precisely $258 million, will be dedicated to national content, with the remaining $43 million earmarked for youth-oriented content. In Russia, dedicated zones for nurturing innovation have been established, providing tax benefits and infrastructure backing to businesses and independent game developers operating in the industry.
Foreign and local investments: The video game sector in Russia is rapidly gaining traction, drawing the interest of numerous angel investors and venture capital firms. These investors have provided funding to various Russian game studios and game dev start-ups, enabling them to develop top-notch games and expand their global reach. For example:
In early 2021, a Russian video game developer Nexters struck a deal with Russian SPAC Kismet Acquisition One Corp (KSMT.O) to go public, resulting in Nexters being treasured at $1.9 billion.
Playrix, a major global mobile gaming company founded in Russia, secured a partial ownership stake in AppQuantum, a mobile game developer and publisher based in Cyprus founded by Russians.
GEM Capital, headquartered in Moscow, invested $500,000 in Gameram - a social app designed for video gamers and was designed by Terraform Games, a company based in Cyprus co-launched by Russian game developer Philipp Gladkov.
Thriving pool of game developers and other specialists in Russia: This factor significantly impacts the potential for growth in the Russian video game industry. Each year, the game development community in Russia becomes increasingly active and skilled. This enables Russian developers to produce and market their gaming products and services effectively while networking with other local and global experts, such as through associations like the Russian Guild of Game Developers.
The advancement of technology and the evolution of next-generation consoles: These are key drivers behind the burgeoning game development scene in Russia. Modern technology equip game developers with state-of-the-art equipment and skills that enable them to create games with superb gameplay and a fulfilling expression of their creativity. Also, the affordability of handheld devices have also helped deepen user engagement. The development and infusion of augmented and virtual reality in video gaming has elevated gaming taste among players.
The broadening video gaming audience and varying game genres: It is another trend in developing markets is the fusion of game genres, where various elements from specific genres blend to forge fresh and creative gameplay encounters. This hybridization caters to a broader and more diverse gaming audience and enhances depth, diversity, and replay value. Moreover, it allows game developers to stand out amidst competition and venture into novel realms of game design.
Does the BRICS Market Offer Opportunities for Russian Video Games?
Indeed, there is massive potential for video games, game dev studios, and other specialists in the industry from Russia. In 2021, the BRICS countries had about 3.24 billion people, more than 40% of the world's population. In 2022, the bloc's combined economy was worth over $26.03 trillion. In 2021, it is estimated that the BRICS countries have a combined population of 3.24 billion people, over 40 percent of the world population.
The 5-member association also offers prospects of expanding its members during their upcoming summit later this month in South Africa. This implies a bigger market and increased bilateral trade between member states.
Establishing a common currency for payments within BRICS countries could streamline intra-bloc transactions a7nd remove trade barriers, cushioning reliance on the US dollar. This move is seen as crucial, especially in the wake of Western sanctions against Russia.
Brazil’s video game market earnings is envisioned to reach about $2.6 million, with an expected yearly growth rate of 7.97 percent between this year and 2027. The largest segment in this market is mobile games, with a market volume of $1.4 million in 2023.
India’s revenue in the video games market is projected to reach US$2.8 billion in 2023 and is expected to deliver a growth rate of 11.03 percent from 2023 till the next 4 years. Online games constitute its biggest market to the tune of $1.3 billion this year.
The Chinese video games market is on track to accrue a substantial income of $109 billion in 2023, with an anticipated 8.04 percent growth per annum. The dominant sector within this market is mobile games, which is predicted to have a market volume of $81.90 billion by the end of 2023.
South Africa is projected to earn around $642 million from the video games market in 2023, with an expected annual gain of 7.43 percent from this year until 2027. The primary segment in this market is Mobile Games, boasting a market volume of $302 million in 2023.
What are the Top Russian Video Game Developers?
Playrix - Township, Fishdom, Homescapes, Gardenscapes, etc.
Mundfish - Atomic Heart;
Battlestate Games - Escape From Tarkov;
Atom Team - Atom RPG;
Oovee Game Studios - Spintires;
Destiny Games - TERA: The Next, Imperial Hero II, Draft King, etc.
Nival - Allods Online (Russia's famous MMORPG), Edmiurges - the dilogy, Night Watch, etc.
Appfox - Starcraft VR, Dream Walkers, Cossacks 4: The Battle, Battle of the Gladiators, etc.
Pixonic - War Robots, etc.
Morteshka - The Mooseman, The Black Book, etc.
Nikita Online - Parkan: Chronicle of an Empire, Parkan II, Sphere: Rebirth, World of Dragons, Full Pi, etc.
Nevosoft - Kingdom for the Princess, Evocraft, Super Cow, DreamLand, etc.
1C - IL-2 Sturmovik, Konung: Legends of the North, etc.
Gaijin Entertainment - War Thunder, Wolfhound: Way of the Warrior, IL-2 Sturmovik: Birds of Prey, Apache: Air Assault, etc.
Darkflow Software - Enlisted, CRSED: F.O.A.D.
Targem Games - Magic of War, Shadow of the Lord, War Magic: Banners of Darkness, etc.
Alawar - Song of Farca, Beholder I & II, Distrust, Do Not Feed the Monkeys, The Horror Sammy, etc.
Ice-Pick Lodge - Pathologic and Pathologic 2, The Void, Knock-Knock
Crazy Panda - Waporoandbe, etc.