Unlocking the Growth Potential of the Online Gaming Industry in South Africa: Challenges and Opportunities
The Observatory is tasked with measuring and providing reliable information on the economic value of South Africa’s cultural and creative industries (CCIs). This we do through conducting research about the sector in line with the research agenda. In this edition, as we shall do in future, we highlight key findings from some of our research outputs.
Unlocking the Growth Potential of the Online Gaming Industry in South Africa: Challenges and Opportunities
In 2018, the global gaming industry consisted of 2.3 billion consumers, who spent nearly US$ 138 billion on games. Although the South African gaming industry is small, it is growing at an exponential rate. A recent PWC (2018) report identified the digital video games sector as one of “the biggest success stories” in the South African entertainment and media industries.
The PWC Media and Entertainment Outlook (2017) also makes the point that, in the past, participation in games was restricted to audiences who could afford to buy expensive PC or gaming equipment. Even in this segment, research reported on by Hall et al. (2017) showed that there were more than 11 million gamers in South Africa: 78% black; 8% coloured; 3% Indian/Asian and 11% white. However, the rise of mobile gaming via smartphones has meant that many more South Africans can afford to play.
This research identified 54 gaming or gaming and animation companies in South Africa. Nearly half (48%) are based in the Western Cape. The most commonly used gaming release platform is still PC, which may be a future constraining factor, given the international shift to mobile along with high data costs in SA.
There is considerable overlap between gaming and animation with 46% of companies producing games also doing animation work. Given turnover data provided in a detailed online survey, it is estimated that the turnover for the gaming and animation industry in the 2017/8 financial year was R476 million, of which R198 million was attributed to gaming and hybrid companies. This is a considerable increase from the R100 million revenue for the gaming industry in 2015 found in a previous study (IESA, 2016).
The South African gaming and animation sector currently create 1225 direct jobs, of which 457 are in the gaming sector. A challenge for the gaming and animation sector is transformation – the majority of people working in the sector are white men. Part of the reason given for this is that the sector is still perceived to be a risky and unstable sector, so that it is not recognised as a viable career path by many.
Support for the technical training required was suggested, as were tax breaks for smaller companies to encourage more start-ups. Advantages identified by those in the industry included: Unique African stories and cultural diversity; Lower production costs that enable international service work; a significant pool of talent and skills; the high quality of the work produced; and access to advanced production and infrastructure.
In a nutshell, the key findings from this research can be summed up as follows:
- International competition is fierce: 37% of the 800 million games released on Steam have zero downloads
- “Free-to-Play” is the current gaming meta, which has advantages, but means that developers have no income until the game becomes established.
- eSports are driving the popularity of online gaming, and are already offered at some South African schools and higher education institutions.
- The SA gaming industry is still small and new, but growing quickly, with an estimated turnover of R200m for 2017/18.
- 50% of gaming companies are “very small”, with annual turnover of less than R2 million.
- The SA gaming industry provides an estimated 457 direct jobs: 310 in gaming firms, and 125 in hybrid companies.
- Most gaming and animation firms are found in Cape Town (44%) and Johannesburg (42%).
- Most gaming and animation companies were founded in the last 10 years (65%).
Related links:
Policy Implications of the 4th Industrial Revolution for the Cultural and Creative Economy