Cover Story: Making it big in video games

This article first appeared in Enterprise, The Edge Malaysia Weekly, on July 13, 2020 - July 19, 2020.
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A few decades ago, when video games were just starting to be more accessible to the general public, many parents disapproved of their children’s dreams of turning their love of gaming into a career. They wanted their children to be doctors, lawyers and bankers, and viewed video games as a mere distraction.

How things have changed. Today, the video game industry serves a huge market and is one of the fastest-growing in the entertainment sector. According to market intelligence and analytics firm Newzoo, the world’s 2.7 billion gamers are expected to spend US$159.3 billion (RM681.4 billion) on games this year, a 9.6% increase from 2019.

This growth is prevalent in Southeast Asia as well. According to the firm, Malaysia’s 20.1 million gamers spent an estimated US$673 million on games last year alone, making the country one of the biggest markets in the region.

Gan Dong Chee, founder of Magnus Games Studio Sdn Bhd, is one of those who grew up playing video games in the early 1990s. He and his brother were so enthralled with the games that they covered their primary school exercise books with designs of video game levels.

After the brothers completed their secondary education, they became serious about creating their own video games. Using information collected from online sources, they managed to come up with their first mobile phone game.

At the time, mobile phone games were all the rage and people could not get enough of Candy Crush and Clash of Clans. So, the brothers thought getting into video games was a good opportunity.

But later, after learning more about the video game industry, they found that it was not such a good idea after all. Their game did not take off.

“We were very naive at the time. We had grown up with role-playing games (RPGs) such as Final Fantasy, Kingdom Hearts and Metal Gear Solid on consoles. Why did we force ourselves into unfamiliar territory?” says Gan.

“We took it as a learning experience and decided to move on. We went overseas to continue our studies, but our passion for video games did not die. When we returned to Malaysia, we decided to take another stab at it.”

In 2017, the brothers took a leap of faith and started a massive project now known as Re: Legend, a fantasy adventure simulation game. To fund the project, they launched what would become the largest crowdfunding campaign for a game in Southeast Asia, with 7,385 backers pledging a total of S$630,700.

“We were overwhelmed by the support because our family was initially not very supportive of our decision to make video game development a career. Now, they can see that it is a real job and have blessed us with their support. We are looking to release a full version of Re: Legend sometime this year,” says Gan.

Hafiz Azman also became a video game developer at a young age. When he  was studying engineering at the University of Cambridge, he teamed up with ­Winston Lee, a friend who was studying actuarial science at the London School of Economics, to release a demo of Rhythm Doctor, a one-button rhythm game.

“The game ended up winning the Student Showcase Selection at the Independent Games Festival 2014. We received an overwhelming response — the online demo game was played more than 500,000 times. We decided to spend more time developing the game and will release a full version soon,” says Hafiz.

This game also won Best Game Audio Winner at the Indie Prize Showcase 2017, Best Audio Winner at Bicfest 2017 and Best Audio Winner at Level Up KL 2017. Following this, Hafiz, Lee and Peru-based ­Giacomo Preciado at 7th Beat Games released another game, A Dance of Ice and Fire early last year which also received positive feedback. Today, the trio is working hard to release the full version of Rhythm Doctor before the end of the year. 

Outsourcing and other revenue models

Unlike Gan and Hafiz, Kaigan Games CEO Shahrizar Roslan was doing something completely different before getting into video game development. He worked in the human capital development industry before deciding to start a video game development studio with his brother Shahazmi Roslan.

“We ran that studio for about five years doing outsourced work. At one point, we discussed the possibility of creating our own product. Together with our co-founder Jeremy Ooi, we started Kaigan Games in 2016 and launched our first game for mobile phones, Sara is Missing,” says Shahrizar.

The horror simulation game took off and has become a viral success with more than five million downloads to date. Although the game provided the team with a proof of concept and a lot of exposure, it did not generate any revenue as it was available for free.

“It definitely was not a money-making gig. But we used the validation to set up a brand called Simulacra, which follows the same format,” says Shahrizar.

They launched Simulacra in 2017. The successor to Sara is Missing was also a success, winning multiple awards including Best Storytelling and Best Innovation at Level Up KL 2017. Early this year, the team released a sequel, Simulacra 2 on the Steam platform.

In Malaysia, there are a lot of studios providing outsourced services for AAA games (games developed by well-known studios with high budgets) instead of creating their own products. This is a safer alternative to developing a game that may not take off, says Shahrizar.

“We decided to do outsourced work because we knew nothing about creating a game back then. It also helped that building games for other people pays the bills,” he adds.

“We have done projects that paid us between RM10,000 and RM500,000. It was definitely a lot safer than creating our own brand from the get-go. It took us about six years to finally be ready to create something of our own.

“I think providing outsourced services is a very good income-generating venture. However, it is time for us to take what we have learnt and make something of our own that we can be proud of. That is why we started Kaigan Games.  However, we still do outsourced work on the side.”

Shahrizar says one of the main challenges of running a video game development company is getting next-stage funding. “Seed-stage funding is abundant. There are grants provided by agencies such as Cradle Fund and Malaysia Digital Economy Corporation (MDEC). The hard part is getting larger funding to scale the business and start bigger projects.”

To survive and thrive, game developers need to think about what they want to achieve in the long term, he says. “When you release a product in the creative industry, it can be a hit or a bust. Unfortunately, most of the time, it is a bust.

“That is why it is important for us to have a long-term vision. We need to ask ourselves what we can do next and where we can get the funding to do that because we do not have access to mature funding agencies. We cannot go to a banker and promise them that our next game will be a hit.”

Kaigan Games’ long-term vision involves betting on Simulacra’s intellectual property (IP) and branching out into other mediums like a television series or movie. “Right now, we are working on porting Simulacra 2 onto different consoles such as PlayStation and Switch. When the brand is big enough, we want to achieve something like a Netflix deal, if possible,” says Shahrizar.

“This works for us. The same cannot be said for those working on RPG titles. Perhaps they can consider a game as a service (GaaS) model.”

GaaS is a revenue model in which video games are monetised after they have been released. It involves building mechanisms within games to keep users playing for as long as possible, expanding the games’ lifespan similar to a software service.

“Via the GaaS model, developers can provide downloadable content every now and then to generate continuous income. It could be game expansions or even in-game micro-transactions. For example, in-game collectible items that can be purchased for RM5 or a new episode that can be purchased for RM60. There are many ways to make money out of your IP,” says Shahrizar.

Making it fun and shareable

The video game industry in Malaysia is growing thanks to the help of various parties such as government agencies that provide financial and non-financial support, says Gan. In many ways, this has been fuelled by the eSports boom, which has brought a lot of attention to the viability of the video game industry.

“We are very grateful that the government is giving a lot of attention to growing this space, especially when it comes to providing funding for seed-stage developers. I am one of the mentors of MDEC’s programme to help aspiring indie game developers. It is very encouraging to see fresh faces joining the programme and new studios popping up every year,” says Gan.

Hafiz concurs. He points out that Malaysia’s ecosystem has been very supportive of indie game developers, even when compared with developed countries. “I have spoken to a lot of our foreign peers over the years and found that they did not enjoy as many facilities as we do here in Malaysia.

“For instance, we are one of the few countries that actually provide incubator space to indie game developers. Other countries either make it very hard to apply for such support or have discontinued their facilities altogether.”

Gan says video game developers need to focus on creating a good product to help fuel the growth of the local industry. “Malaysian talents are already well known globally for doing excellent outsourced work. I have no doubt that we have the right skill sets. However, we need to come out with good products to compete with the rest of the world.

“I hear people say ‘We are a small Malaysian company, so whatever we do we will never be as good as the global players very often. I don’t think this is the right attitude.”

He says it is possible for small teams to make it big. Stardew Valley, an extremely popular indie game that sold 10 million copies worldwide, for example, was developed by a single person. However, it requires a lot of hard work and tenacity.

“Being an indie video game developer, the most important thing to do is make something a lot of fun. That must be the core feature of the product. Just like if you run a restaurant, the food has to be delicious to ensure that customers keep coming back for more,” says Gan.

“Video games have to be fun. The consumers need to have fun to justify the investment they made in your product.”

Hafiz says developers should also make the game “shareable”. He explains that indie game developers usually do not have enough funds to conduct proper marketing exercises. So, if the game is shareable, meaning fun enough to play and share with others, it will benefit from the free exposure.

“One of the biggest challenges that indie game developers face is getting the word out. We were quite lucky that our game was picked up by a lot of streamers who ended up liking it. This provided us with a lot of good exposure,” says Hafiz.

“If we were given money and the option to either spend it on marketing or improving the game to make it more fun and shareable, I would definitely skew towards the latter.”

The state of Malaysia’s video game industry

In Malaysia, the video game industry falls under the digital creative content sector, which is one of the fastest-growing in the national digital economy, as recorded by the MSC Malaysia Annual & Quarterly Industry Report (AQIR). The industry generated revenue of RM7.1 billion last year (exports worth RM1.2 billion), with a compound annual growth rate (CAGR) of 1.6% from 2014 to 2018.

According to Hasnul Hadi Samsuddin, vice-president of digital creative content at Malaysia Digital Economy Corporation (MDEC), more than 330 studios in the country are directly involved in various stages of production and development in the digital creative content industry. The video game industry, as reported by MSC Malaysia AQIR, brought in revenue of more than RM580 million in 2019 alone. More than 90% of that was exports, he says.  

“Major AAA games have seen their game art and co-development in Malaysian studios, including Street Fighter V, Gears of War 5, Marvel’s Spider-Man, Final Fantasy and Uncharted 4. Multiple original local intellectual properties (IPs) have seen steady growth — titles such as Crab Wars, Postknight, King’s League and Simulacra have been highly successful. A future slate of titles, including Re: Legend and No Straight Roads, are currently in the process of signing deals with global publishers,” says Hasnul.

According to PWC Global Entertainment & Media Outlook 2019-2023, the Malaysian video game market generated revenue of US$443 million in 2018, with a forecast CAGR of 4.8% to reach US$561 million by 2023. The report states that Malaysia’s high proportion of smartphone ownership has enabled rapid growth in social and casual gaming revenue. Social and casual gaming overtook traditional gaming revenue for the first time in 2017, accounting for an estimated 60.6% of the total games market in 2023.

MDEC provides a lot of support for local players in the industry. For instance, Level Up Inc is a content accelerator hub for games and interactive media located in Bangsar South, Kuala Lumpur. This facility houses development programmes with early-stage content incubation, facilities, mentoring and accelerator programmes as well as R&D amenities, such as console development kits, to enable content creation and prepare content developers for IP commercialisation.

The agency also organises Level Up KL — a conference and business platform — to attract, develop and catalyse the Malaysian and regional ecosystem. It is the biggest and most influential game developer and game industry business platform in Southeast Asia.

Business development programmes that allow access to game markets around the world are also provided. “This includes assisting Malaysian studios in having a sustained presence in global markets such as the Game Developers Conference, Tokyo Game Show, Gamescom, Taipei Game Show and Chinajoy,” says Hasnul.

Other ecosystem and development programmes provided by MDEC that serve the game industry include the Digital Content Grant, Digital Content Creators Challenge and Digital Content Enrichment and Upskilling (DICE-UP) programme. The Digital Content Grant is a government fund designed to support local digital creative companies develop, produce, co-produce and market their digital content in animation, digital games and interactive media content.

Meanwhile, the Digital Content Creators Challenge (DC3, formerly known as IPCC and DICE) is a platform for local talents to hone their creativity and ability to develop new content ideas. DC3 winners will receive consultancy and mentoring from industry heavyweights. The programme currently supports three categories: animation, interactive media and digital comics.

DICE-UP is the most recently launched programme catering for industry demand for talent development. The programme provides financial incentives of up to RM10,000 for skills development that strengthen capabilities in the digital creative content industry such as for technical professionals and those in leadership roles.

“MDEC leads the game industry ecosystem through effective engagement and supports the Malaysian game ecosystem, which includes stakeholders such as the Ministry of Communications and Multimedia, Ministry of Finance, Economic Planning Unit, Ministry of Youth and Sports and Esports Malaysia. This also includes the game developer community such as the International Game Developers Association Malaysia and Game Development Council of Malaysia, as well as various other industry and academic partners,” says Hasnul.