Saudi Arabia has embarked on an aggressive investment campaign, spending nearly US $8 billion in the past 18 months to acquire and build stakes in gaming companies worldwide.

This strategic move by the country aims to establish itself as a dominant player in the gaming entertainment industry. The initiative is led by Saudi-backed Savvy Games Group which has secured significant stakes in prominent gaming companies such as China’s VSPO, Sweden’s Embracer Group and US-based Scopely. Savvy, fully owned by Saudi Arabia’s $650 billion Public Investment Fund and chaired by Crown Prince Mohammed bin Salman, plans to transform the kingdom into a global hub for the games and esports sector within seven years.

Saudi Arabia will generate over 40,000 jobs

Saudi Arabia aims to host 250 gaming companies and studios, creating over 40,000 jobs, with the industry contributing 1 percent  to the country’s gross domestic product by 2030. This ambitious plan includes venturing into esports through a partnership with VSPO, and then lining up similar deals via other partnerships in the future.

The focus on gaming and esports aligns with Saudi Arabia’s broader economic diversification efforts, which seek to move away from oil dependency by investing in new sectors. Additionally, the country has been investing heavily in sports, such as football and golf, as part of its pursuit of global soft power. However, critics argue that these endeavours serve as distractions from Saudi Arabia’s human rights record.

Riyadh’s entrance into the gaming industry has caused ripples as it competes with industry giants like Tencent, Microsoft, and Sony for top talent and intellectual property. Saudi Arabia’s youthful population, with 70 percent of its 36 million inhabitants under the age of 35, presents a fertile ground for the gaming industry. Prince Mohammed himself is an avid gamer and the gaming industry considers Saudi Arabia as an exciting market and partner.

Saudi Arabia’s economic diversification

The Public Investment Fund of Saudi Arabia has also acquired an 8 percent stake in Nintendo, becoming the largest outside investor, as well as holdings in Activision Blizzard and Ubisoft. The kingdom aims to leverage its financial strength to establish a significant presence in the $200 billion gaming and esports sector. Analysts predict that gaming will surpass traditional television as the largest source of entertainment revenue in the near future, given the generational shift in consumption habits.

New economic niche for Saudi

Saudi Vision 2030 is a strategic initiative aimed at reducing Saudi Arabia’s reliance on oil, fostering economic diversification and enhancing public services in sectors like healthcare, education, infrastructure, leisure, and tourism. Saudi is boosting economic and investment activities by creating new economic niches and expanding non-oil international trade.

Established in 2016 by Crown Prince Mohammed bin Salman, the Council of Economic and Development Affairs (CEDA) heads the implementation of Saudi Arabia’s Vision 2030.

However currently approximately 74 percent of the government’s budget is still reliant on revenue from oil exports.

 

 

While tax breaks and other incentives have long been used by governments worldwide to attract talent to the gaming sector, industry insiders caution that cash alone may not be sufficient to entice developers targeted by Savvy. Some industry veterans note that the Saudis have been willing to pay premiums above market prices to secure deals, but concerns remain about the creative environment and ethical considerations associated with doing business with the Saudi regime.

Despite Prince Mohammed’s social reforms, Saudi Arabia continues to face criticism from rights groups for its human rights abuses. The murder of Saudi commentator Jamal Khashoggi in 2018, allegedly ordered by Prince Mohammed, has further tainted the country’s reputation. However, businesses have returned to Riyadh, enticed by the substantial investments made by the Public Investment Fund both domestically and internationally.

As the gaming industry’s growth slows down and marketing costs rise, the influx of Saudi Arabia’s billions could arrive at a pivotal moment. Private gaming studios, faced with the challenges of pursuing initial public offerings find Saudi’s interest in the sector a  more appealing option. Other similar deals are in the pipeline and more investment into gaming and esports in Saudi is on the cards.

Saudi Arabia’s anti-gambling stance

Saudi Arabia has been resolute in its refusal to tap into the gambling sector. The country’s strict adherence to Islamic principles has maintained a strict prohibition on all forms of gambling. The Kingdom follows a strict interpretation of Sharia law, which regards gambling as haram (forbidden), a vice according to Sharia that undermines moral values leading to societal harm. Gambling has so far been viewed as incompatible with Islam..

Saudi places great emphasis on maintaining social stability and protecting welfare. Gambling is seen as a catalyst for social disintegration. Making gambling illegal is Saudi’s way to ‘safeguard’ society.

Legal framework and enforcement has left no room for ambiguity when it comes to legislation as all forms of gambling have been criminalised. Violators face severe penalties, including hefty fines, imprisonment, and even corporal punishment.

 

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