- Record-breaking $60m on offer
- Foreign investment in esports slows
- Optimism remains for Saudi market
Saudi Arabia will offer a record-breaking $60 million prize pool for its upcoming Esports World Cup, at a time when the kingdom is facing challenges attracting foreign investments to the sector.
The amount of prize money for this summer’s event breaks the previous record of $45 million set by esports festival Gamer8 in 2023.
Saudi Arabia has experienced a significant decline in foreign investments in gaming and esports, despite ambitious plans outlined in the country’s National Gaming and Esports Strategy.
The strategy aims to bolster the sector’s contribution to the gross domestic product by more than SAR50 billion ($13 billion) by 2030 and create 39,000 new job opportunities.
Yet industry experts highlighted the hurdles that might impede achieving this target.
Philip Bahoshy, CEO at UAE-based venture data compiler Magnitt, said that prolonged high interest rates have been dampening venture capital both globally and regionally.
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Last year there was a 33 percent increase in esports investment in Saudi Arabia. But Bahoshy said that for this to be maintained there would need to be a surge of funding into late-stage investments, a sector that has been hit hard by the global slowdown.
Brian Ward, CEO of Savvy Games Group, a subsidiary of Saudi Arabia’s Public Investment Fund (PIF), said the current geopolitical situation is a significant challenge.
“Worldwide market conditions are different than they were two years ago,” he said, citing the Russia-Ukraine war.
“It’s difficult for a lot of companies to attract the same level of [foreign] investment or the same types of investors as they did a couple of years ago. Macroeconomic situations are different.”
Supplied/Savvy Games GroupDeclining sponsorship opportunities further compound the sector’s challenges, as reported by Bloomberg in February.
Esports company ESL FaceIt Group, owned by Savvy Games, had to reduce its workforce by 15 percent earlier this year.
Co-chief executive officers Craig Levine and Niccolo Maisto said in a statement that the job cuts are intended to support “sustainable growth ambitions and profitability”.
However, Ward remains optimistic about the future of Saudi Arabia’s gaming and esports industry.
“The region has a lot of attractiveness and is the second-fastest growing market for games in the world behind Latin America,” he said.
The Esports World Cup is “expected to attract both local and foreign investment through incentives such as tax exemptions, access to financing, and social reforms,” said Yahsir Qureshi, VP at Riyadh-based mobile game developer Sandsoft.
The government has also shown support of the gaming industry, with the PIF securing a 5 percent stake in Nintendo in 2022 which they increased to 8 percent a year later.
The sovereign wealth fund has invested more than $1 billion to acquire a 2 percent stake in Reliance Industries, which owns esports ventures in India, and has also allocated $265 million to Chinese esports firm VSPO.