Israel is a rapidly growing global gaming powerhouse with the potential to capture even greater market share with the right incentives in place.
These are the findings of a recent report by global consulting firm Deloitte and GameIS, a nonprofit that helps grow the video game ecosystem in Israel.
The global video game industry was worth $175.8 billion in 2021 with over 3 billion gamers, making it the largest entertainment industry in the world. Gaming and esports data firm Newzoo predicted last year that the global gaming market would exceed $200 billion in revenue by 2023, more than half of which would come from mobile.
In 2021, Israeli game publishers earned $8.6 billion in revenue, up from just $1 billion in 2016, representing an 800% five-year increase and compound annual growth rate (CAGR) over 55%.
The rate of expansion is staggering, in part due to Covid pandemic lockdowns when people sought out social gaming experiences – a category in which Israel is one of the world’s leading developers of mobile games, as well as casual games and hyper-casual.
“Last year was exceptional, as many consumers were locked up at home after Covid and for the first time really tried playing games online,” said Manuel Gelernter, Senior Director and Team Leader business planning at Deloitte Israel.
The new social currency
“We learned during corona that the social aspects of video games were a huge crutch for a lot of people during the crisis,” said Maya Rand, the Israeli founder and CEO of TheXPlace, an online community for video game professionals. based in Silicon Valley.
“When you look at young people, that’s their new social currency. This is how they will spend time with their friends.
Video games are also job generators in Israel, according to the Deloitte and GameIS report.
A total of 14,000 people were employed last year at some 190 Israeli gaming companies, compared to just 4,000 employees in 2017, an increase of 250% and a CAGR of almost 38%.
Industry insiders who spoke to ISRAEL21c agree with the report’s findings that with more support, Israel’s gaming sector is poised to soar even higher with more talent and more sophisticated games. in development.
“Israel is gearing up to expand to more platforms and genres,” said GameIS volunteer president Guy Ben-Dov.
“One of the big messages for me is the opportunity for Israel to attract people to the high-tech sector from outside markets – not just programmers,” Ben-Dov said, adding that the government must recognize how the Israeli video game market can contribute. to the overall growth of the country’s booming high-tech sector.
Israel is currently home to 12 game coaching programs. Universities or colleges run six of them.
A successful initiative not mentioned in the report is Game Hub – a Jerusalem-based incubator for independent game developers.
Founder and CEO Dani Bacon told ISRAEL21c that after years of effort, Game Hub has finally received government funding as part of last year’s budget.
The community space, located in the historic former Shaare Zedek Hospital building on Jaffa Street, also receives corporate sponsorship, including from the in-game advertising network ironSource.
“We try to help build that part of the ecosystem. The way we do this is to support independent game creators and try to help them create successful and amazing games – experimental and radical content and games, but also commercially successful games that can help them create their small businesses and hopefully have those businesses learn from them later on. succeed and build and create bigger companies,” Bacon said.
While calling Israel a “video game empire” with companies such as Playtika, CrazyLabs and Beach Bum Games dominating the global mobile phone market, Bacon said the next step is for Israel to become a world leader in what the video game industry calls “AAA” games with big Hollywood-style budgets, citing the massively successful online game “Fortnite” as an example.
Technology vs Content
Video game analyst Avihay Hermon, senior editor of Israel’s Vgames magazine, agrees with the report’s conclusion that the government should invest more in developing sophisticated types of games, echoing Bacon’s assessment that which the next step for the domestic game industry will become a success – midcore, hardcore, AAA, AA and so on.
However, moving beyond casual and hyper-casual games requires funding, and according to Hermon, the well has run dry because the government’s Israel Innovation Authority is too tech-focused.
“Right now, they only support new technologies. We want them to focus on content as well, because we see the video game industry not only as a technology platform, but also as a content creator,” Hermon explained.
“All we need is for the government to support video games the same way they support other technologies, other tech companies – the way they support cyber, fintech, foodtech. This is how they should support video games.
The Israeli video game industry also suffers from a lack of skilled local workers, especially developers, according to the Deloitte and GameIS report. A related challenge is the difficulty of obtaining work visas, which can make it harder for companies to recruit high-quality talent from overseas.
The report takes an in-depth look at countries offering strong incentives and subsidies to encourage the growth of their indigenous video game industry, with a focus on Canada, Poland and Germany.
“Canada has had a developer grant for years,” Rand said, recalling how, during his time at Electronic Arts, the California-based video game giant invested a significant amount of money in its northern neighbor.
For example, the Canada Media Fund provides 50% to 75% of project costs up to a maximum of $15,000 to $1.5 million per project. In 2020, the fund triggered $1.5 billion in production activity across Canada, generating more than 244,000 jobs.
“Governments see it paying off,” Rand said.
Israel can develop its domestic games industry to become a top international player as it has done with film and television production, insiders say.
“Local industry talent is heading to this incredible place. We will have a big footprint in the world [gaming] industry in all parts of the spectrum,” Bacon predicted.