Review of the Gaming Industry in Russia for 2022: Possible Prospects for Development
BCG consulting company conducted a large-scale study on the global gaming industry in late 2021, revealing that Russia has become one of the top five countries in the world in terms of gaming content consumption, alongside the USA, China, Japan, and South Korea.
The Russian video game market showed a growth of 9% in 2021 (177.4 billion rubles), as reported by My.Games specialists. This is a significant increase from 2019 when the market was valued at 121.3 billion rubles. However, the market outlook changed drastically in February 2022 when the Russian market was restricted by several sanctions against foreign companies, leading many leading game brands to halt sales to Russian users.
As a result, the future of the gaming industry in Russia is now highly debated among experts. It remains unclear whether the industry will experience a significant decline in the near future or if it can still be sustained if new players enter the market. QB Agency experts, who have been working successfully in the gaming segment for a considerable amount of time, have decided to investigate the current situation.
Who, when, and why did they exit the market?
In March 2022, several major game marketplaces began denying Russian users the ability to purchase games, citing sanction restrictions on their operations in Russia. Valve’s digital store was one of the first to disable payment systems for Russian users on March 2, 2022, but free games like Dota 2 and Brawlhalla remained available for download. Shortly after, on March 10, Sony Interactive Entertainment announced the termination of deliveries to Russia and the temporary closure of the PlayStation Store. Xbox and Nintendo followed suit, temporarily closing their online stores in Russia due to issues with ruble transactions. Kyoto also postponed the release of “Advance Wars 1+2: Re-Boot Camp” for the Switch console, which was originally scheduled for release on April 8, 2022. EGS, Blizzard, and EA also disabled access to their stores for Russian users, but allowed access to already purchased or free products. Additionally, the App Store and Google Play restricted purchases of mobile games and apps.
As a result, the gaming industry in Russia experienced an average drop of 15-17% in revenue compared to the previous year. This was reported by Dmitry Fokin, CEO of CarX Technologies, in an interview with Kommersant.
According to Dmitry Fokin, CEO of CarX Technologies, the company’s revenue is evenly distributed between sales of games on mobile platforms and on PCs and consoles. However, since March 2022, the company has not received about half of its revenue due to the fact that Valve, Sony, and Microsoft have stopped paying remuneration to Russia.
Other experts have also noticed negative changes in the market. Gadji Makhtiev, founder of rawg.io, predicts that the video game industry in Russia may decrease by 50% compared to 2021, or even more significantly by 75-85%. Independent expert on video games, Alexander Kuzmenko, expects the Russian market to decline to 50-60 billion rubles by the end of 2022, accompanied by an increase in the spread of pirated products. Loudplay is worried about the decline in consumer purchasing power. Meanwhile, representatives of My.Games are hoping for the emergence of Asian Games as one of the potential opportunities for the development of the gaming industry in Russia. However, the situation is not straightforward.
Made in China
China has rightfully earned its position as one of the fastest-growing gaming markets globally. According to Statista, a market research firm, the gaming industry in the country has grown from 89.2 billion yuan in 2013 to an estimated 420 billion yuan in 2022. Despite a vast number of gamers in the country, estimated at around 666 million internet users by the end of 2020, industry experts believe that the full potential of Chinese online games remains untapped. This is due in large part to the fact that developing companies tend to focus on their native market, rather than expanding into other regions. However, Chinese companies have significant potential to expand beyond China, including into the Russian market.
In 2020, Tencent, one of the industry leaders in China alongside NetEase, released a mobile version of the popular MOBA Arena of Valor through the AppStore and Google Play in Russia after acquiring 7% of the Russian Mail.Ru Group. Other prominent Chinese developers include Shanda, Perfect World, and Giant Interactive. With their extensive range of online games and cloud ecosystems, Chinese companies are gradually expanding their influence beyond their home market. However, expansion into new markets often takes several years, as companies tend to use services from other tech companies to support localization of their games abroad.
A notable case in point is Tencent’s localization of its data on the Russian market in 2019, with the help of regional IXcellerate, which created the largest infrastructure in Russia for developing cloud and gaming services. This move allowed Tencent to strengthen its position in the region and integrate further into the market. In 2021, Tencent took the next step by acquiring the majority of shares in the Russian companies 1C Entertainment and Inflexion Games.
Meanwhile, NetEase follows a different policy, continuing to release new game products, including in the Russian market, as announced at the latest NetEase Connect 2022 presentation. Perfect World is also updating its free version, including in Russian.
These developments suggest that Chinese games have gradually entered the Russian market long before the current events that have limited the activities of companies from other regions. According to experts, the Asian direction in Russia offers promising options for the market, particularly if Chinese companies offer products that are comparable in terms of entertainment and quality of gameplay to those from other countries.
However, as evidenced by Tencent’s experience, Chinese companies have not been the most active in promoting their products outside of their home market. This is largely due to the gradual implementation of technologies in new regions and subsequent localization of games. Nonetheless, the absence of significant competitors in the Russian market may accelerate these processes in the near future.
Russian users’ perspective
According to Mediascope, gaming is a popular activity among Russians, with 69% of the population playing games at least occasionally. Of this number, 42% play games on smartphones, 33% on PCs, and 9% on game consoles. The majority of users (55%) play games on a regular basis, with 68% playing at least once a month. In fact, 40% of users play at least one mobile game daily, making gaming applications one of the top categories in terms of usage time (15%), ahead of social media.
Despite mobile games’ popularity, PC games lead the sales in Russia, accounting for 85.4 billion rubles (48.1% of the market) in 2021. Retail sales of video games tripled in March 2022, according to DTF data, and this trend can be attributed to the limitations imposed by sanctions. Russian users rushed to purchase their favorite games, as no platform blocked access to previously purchased or free games. The most popular games were for PlayStation 5 and PlayStation 4, followed by Xbox and Nintendo Switch.
Gaming applications had a budget of 76.5 billion rubles (43.1% of the market), which was predictable given the abundance of free games available on mobile marketplaces. In 2021, applications created by Russian companies were the most downloaded (12.2%), followed by American releases (11.2%). However, games from China took the third place (10.7%) but were the leaders in sales (21% of user expenses), surpassing Russian, American, and other Korean developers.
In summary, Russian users are increasingly engaging in online gaming despite restrictions imposed by certain foreign companies. Meanwhile, prominent American, Japanese, and European manufacturers are leaving the market, making way for new gaming products in the near future. Many experts believe that Chinese gaming companies will have a promising future in this niche, given their successful experience in promoting their products in Russia. Nonetheless, the absence of significant Western competitors does not deter developers from other countries from entering the market.
Moreover, it is important to acknowledge that professional guidance is crucial for a triumphant entry into a new market. The process of expanding into a new territory demands a well-designed and efficient strategy that considers the unique characteristics and preferences of the target audience. With this in mind, the experts at QB Agency are available to provide tailored expertise for your gaming products to ensure a swift and successful introduction to the Russian-speaking gamer community.