The iGaming market in Southeast Asia (including online video games) has been steadily growing.
In 2022, the market value reached 5.33 billion USD, and it is expected to grow to 7.14 billion USD by 2026. Mobile gaming is the main contributor, accounting for about 70% of this revenue, followed by video games, which account for 23%.
Analysts predict that the shift towards "hyper-casual games" may further stimulate the mobile gaming market. Increased foreign investment has further driven this growth, with the new Sony PlayStation studio in Malaysia being a case in point.
Sony Recognizes Malaysia's Role in Game Creation
Sony has decided to establish its first PlayStation studio in Kuala Lumpur, highlighting the importance of Southeast Asia in game development. This Malaysian studio is the flagship store of this entertainment giant. The studio is described as "state-of-the-art," built from scratch specifically to accommodate innovation and creativity.
The studio is not responsible for specific projects but manages a wide range of first-party games and game projects, such as "The Last of Us Part I" and "MLB The Show 2022." It also creates new character models and other visual assets, including motion capture. The studio has 77 full-time employees.
The Emergence of Independent Companies
Environmental modeling, concept art, animation, and video game development are highly sought-after skills throughout Southeast Asia. However, many believe that Malaysia has an edge in innovation and technology.
Sony is not the first such investor in the country, but it has joined the ranks of numerous international and independent studios that have also set up video game development projects in Malaysia. Over the past few years, companies like Bandai Namco, Codemasters, and Larian have established large studios overseas.
Market changes indicate that the dominance of AAA developers like Square Enix and Activision is gradually diminishing. Independent companies such as Toge Productions and Mason Games also benefit from setting up companies in Malaysia.
The Malaysia Esports Federation (MESF) is the governing body for all esports in Malaysia. Founded in 2014, its co-founder Dato' Ananth S. Nathan is also the elected chairman, dedicated to promoting esports in Malaysia. His vision is to make Malaysia a world leader in esports.
Currently, Malaysia has only one legal land-based casino. This casino has over 400 electronic table games, 3,000 slot machines, and 30 other tables, offering games like blackjack, sic bo, roulette, and rolling ball. However, Muslims and those under 21 are not allowed to enter the premises.
The Future of Online Gaming in Malaysia
Although online gambling remains illegal under the current 1953 Common Gaming Houses Act (CGHA), the government is acting very cautiously and seems to be looking for solutions.
The government also plans to introduce new rules to regulate online gambling. If the industry is regulated and companies obtain proper licenses, this could potentially bring about 650 million USD in tax revenue losses for the government.
Online gaming is very popular among the Malaysian Chinese community, with favorites including mahjong, baccarat, sic bo, lottery, roulette, and slot machines. Skill-based games centered on fishing and hunting are also big business.
The country recognizes the gaming industry as crucial to the economy, a significant source of foreign investment, and a generator of tax revenue. The country has attracted a substantial amount of foreign direct investment (FDI) into leading small and medium-sized gaming startups, some of which create IP for game creation, while others serve as outsourced developers for international publishers.
Digital Content Ecosystem
Malaysia's Digital Content Ecosystem (DICE) policy aims to strengthen the digital content industry. This policy is supported by government initiatives, promoting the industry through financing schemes, training, incubation, business connections, and market access.
The higher education system is committed to nurturing talent, with over 50 higher education institutions offering game-related courses. With this ecosystem, Malaysia is well-positioned to provide a good national fund and skilled labor force for game startup companies.
A recent survey by KPMG shows that Malaysia ranks fourth in competitiveness in the region, with ratings in business costs, legislation, and taxation comparable to other Asian countries.
The government recently invested 5.1 billion USD to upgrade its telecommunications infrastructure, providing gigabit-speed fixed broadband to 7.5 million households, expanding 4G mobile coverage to 96.8% of densely populated areas, and upgrading mobile broadband speeds to 35Mbps.
Potential of Online Gaming in Malaysia
Many offshore gambling sites accept Malaysian players, who are typically of Chinese or Indian descent, making up 37% of the total population. With an average age of 30 years, an English proficiency score of 562, smartphone ownership of 26 million, and 23 million gamers, the iGaming market is yet to be fully developed.
Malaysia offers rich opportunities for iGaming companies, and the prospect of government regulation of online gambling opens a window for foreign companies to operate onshore.
The iGaming market in Southeast Asia is on the rise, with Malaysia leading the way. The rapid growth of the market, coupled with the shift towards hyper-casual games and the rise of esports, offers numerous opportunities for both local and foreign investors. As the government continues to explore ways to regulate and develop this lucrative market, the future prospects for iGaming in Malaysia look bright.
