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Saudia Arabia is spending billions to buy stakes in gaming companies in a bid to become a global player in the esports industry, according to recent reporting from the Financial Times.
In the past 18 months, the Saudi-backed Savvy Games Group and others have spent nearly $8 billion. Savvy Games acquired US-based mobile game developer Scopely in April, and it holds stakes in China’s VSPO and Sweden’s Embracer Group.
Savvy is owned by the Kingdom’s $650 billion Public Investment Fund, the entity that also backs LIV Golf — aka the organization that just announced a merger with the PGA tour. Savvy has $38 billion at its disposal, according to an FT report.
Meanwhile, the PIF owns an 8% stake in iconic video game producer Nintendo.
Crown Prince Mohammed bin Salman, who oversees the PIF and is reportedly a gamer himself, has said he plans to make Saudi Arabia into “the ultimate global hub for the games and esports sector” in just seven years.
Specifically, the plan is for Saudi Arabia to house 250 gaming companies and create 39,000 jobs, with the industry ultimately generating 1% of the kingdom’s GDP by 2030.
The PIF has faced accusations of “sportswashing” its human rights abuses by using ventures like LIV Golf to purchase soft power around the world.
This latest strategy — esportswahing, if you will — could be even more potent, as 70% of Saudi Arabia’s 36 million population is younger than 35, according to reports.
The latest from Microsoft
Stateside, Microsoft’s proposed acquisition of video game maker Activision Blizzard was temporarily blocked by a US judge, granting a request from the Federal Trade Commission. A hearing has been set for June 22-23 in San Francisco.
The hearing will determine whether a preliminary injunction, which would remain in place suring an administrative review of the case, is necessary.
The $69 million deal, announced in January 2022, has slowly moved through the legal process of obtaining approval in various juridictions, including the European Union last month.
Had the FTC not sought a temporary block, the deal could have closed as soon as Friday.
Critics of the deal, including PlayStation maker Sony, argue the deal would stifle competition.
Activision makes Call of Duty, a popular game for esports players. Control of heavy hitting titles matters as players make decisions about what consoles to use and esports companies jockey for pieces of the pie.
Elsewhere in the sector, FansUnite Entertainment Inc (TSX:FANS, OTCQX:FUNFF), based in Vancouver, reported a first-quarter margin that came in at $5.41 million, or 62%, compared to $5.90 million, or 61% in the same period in 2022.
Game developer East Side Games Group (TSX:EAGR, OTCQB:EAGRF) recently reported first-quarter revenue of $24.3 million, which the company called a “strong start” to 2023 following the recent release of its Milk Farm Tycoon and Doctor Who: Lost in Time games.
Then there’s Versus Systems Inc, which recently received a US patent covering its use of machine learning and artificial intelligence to optimize rewards and coupons within interactive media.
Importantly, the patent includes methods to contextualize and personalize digital and real-world rewards for both the player and the prize-providing brand. It also includes advertising campaign optimization and player value optimization.
From the billions sitting in the Saudi PIF’s war chest to small caps in North America, the coming months will be crucial to shaping what the industry looks like long term.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
Follow him on Twitter @andrew_kessel