Russian Video game industry in Live report strikes back

Did you know that the number of players in computer clubs has doubled in three years, and the clubs themselves have more than doubled? And that schoolchildren are holding technological competitions that include the creation of AR and VR applications and computer games? And about the fact that at the governmental level it has been announced to support the export of Russian video games to China?

Last time we discussed the “Live Report on the State of the Video Game Industry in Russia” for the period from February through September 2022. The new version of the report looks at what happened over the next six months. It gathers key information from the latest analytical reviews and studies, updates the list of government support measures, and touches on key changes in Russian video game industry companies.

But we can’t talk about the industry in isolation from the world, so let’s start with the state of the global vide ogame industry, then look at the Russian market, studios, support measures, conferences and educational events.

I suggest discussing it in the comments.

Global video game market

The global video game market in 2022 declined 4.3% year-on-year to $184.4 billion. According to analysts, this is due to a market correction after prolonged growth, with a number of releases postponed due to the pandemic and delays in the development process, as well as inflation forcing more spending on necessities. AAA games have also faced delays and are in post-production.

It’s worth adding that Atomic Heart was supposed to be released in 2022, but the game didn’t end up being released until the first quarter of 2023.

The majority of the market — namely 65% of video game revenue — was taken by the Top 10 companies. Tencent, Apple, and Google were successful thanks to growth in the mobile and subscription sectors, while Microsoft benefited from its Xbox Game Pass subscription service. Sony’s share, on the other hand, declined — albeit slightly.

The market on the global stage is growing primarily due to consumers from the US as the most paying audience and countries in the Asian region due to demographic factors.

The ranking looks like this:
Asia Pacific (47%)
North America (26%)
Europe (18%)
Latin America (5%)
Middle East (4%)

Although, at the same time, key markets experienced a decline in video game market volumes. For example, North America saw a 5.1% decline, Asia Pacific saw a 4.1% decline, and Europe saw a 3.5% decline.

The number of gamers continues to grow, reaching 3.2 billion in 2022, with a projected increase to 3.6 billion by 2025. Mobile games are preferred by 2.7 billion players, console games by 0.6 billion, and PC games by 1 billion.

Video game market in Russia

The Russian online gaming market shrank by 78% in 2022. Its volume amounted to 21.8 billion rubles. These data were presented at the E+ conference held by the Russian Association of Electronic Communications (RAEC) on March 21, 2023.

To what extent these calculations are correct, it is difficult to say, as the research methodology is not available in open sources. Some believe that this is too pessimistic, and in fact the drop amounted to 35%-50%.

The RAEC names the main reasons:

• departure of large companies,
• relocation of Russian studios,
• problems with financial transactions.

In addition, there were “barriers” to the development of the industry, including the lack of systemic funding, the “unclear social status of gaming”, low motivation of studio employees, and “failed dialog” between the state and developers.

News of Russian studios

VK Play has conducted a study of the video game market, which points to a decline in console gaming in Russia, while games on mobile devices are becoming increasingly popular. This is a trend that can be observed not only in Russia, but all over the world.

In 2022, VK announced the sale of its gaming division to Leta Capital and the creation of VK Play. VK Play is a Russian platform for game fans, developers and content creators. It combines streaming, cybersports, a place to communicate with like-minded people, a game catalog and cloud gaming.

In August 2022, the platform introduced a new functionality — games in the platform’s catalog can be published not only by legal entities, but also by individuals. In this case, the service commission is only 5%, and all other funds are received by the developer. To upload your game, it is enough to write to the VK Play team on the site.

The number of Russian developers on VK Play has doubled since June 2022 — up to 600 authors. Of them, 60% came from the Steam service. As of November 2022, there were over 13 thousand games and more than 7 million accounts in the catalog.

My.Games and Astrum Entertainment have split the rights to the online shooter Warface, planning to develop the project in the Russian and foreign markets. The rights to the game and the brand will remain with Astrum, which will develop Warface in Russia. My.Games will get the code of the current version of the shooter to use it to launch the new product abroad.

For Russian players Warface will be available through the VK Play service, the company will retain all accounts. Users on Steam and Epic Games Store platforms will be able to transfer their progress to the new platform.

1C Game Studios has moved its game distribution structures under Russian jurisdiction to facilitate asset management and increase its game development and distribution activities.

1C acquired from Cyprus-based DM Investments Multi Ventures Inc. Ltd 100% stakes in Company Soft Club LLC and 1C-Softclub LLC. The restructuring took place at the end of November 2022. Both companies are engaged in the distribution and publishing of video games, their total revenue in 2021 amounted to 11.5 billion rubles with a net profit of 89.2 million rubles.

The company is engaged in the expansion of the existing Il-2 Sturmovik series, support for the Kalibr online shooter, and is also engaged in the development of new projects, including projects in the Fairy tales of Old Russia universe.

Computer clubs

Langame, a one-stop ecosystem designed to develop the culture and business of professional and amateur gaming, has explored the computer club market. The company has recently entered the UAE market.

Over the past three years, the number of users who gamble in computer clubs has doubled to 2.5 million. 92% of the guests are men.

The market for cyber clubs has grown from RUB 13 billion to RUB 20 billion between 2019 and 2022.

While in 2019 there were just over 1,000 clubs in the country, in 2022 the number has grown to 2,300.

The top three in terms of the number of cybercrimes are:

• Colizeum,
• True Gamers,
• CyberX.

A total of 60000 computers and 4000 consoles are installed in Russian computer clubs.

Among the most popular PC games are CS:GO and Dota 2, with up to 70% of visitors playing them. The most popular games on consoles are FIFA, Mortal Kombat and UFC.

Technological trends

Now you can see the established technological trends of the video game industry in Russia and the world.

Neural networks are everywhere… Now they are used for rendering images and concept art: with the help of generative neural networks Midjourney and Stable Diffusion, studios are reducing the cost of creating art for games, removing routine and labor-intensive tasks from artists, and remastering old games. In “Assassin’s Creed: Odyssey,” by the way, Ubisoft used a neural network model to improve character animation.

Cloud gaming continues to evolve: Russia’s VK Play Cloud, Loudplay and Drova claim growth in users and revenue, while Razer, Logitech and Microsoft have announced the release of portable consoles designed for cloud gaming.

In terms of game engines, it is important to note that Epic Games unveiled a new version of Unreal Engine 5 with automatic generation of large and detailed worlds, and VK started accepting applications to participate in testing of the Russian game engine Nau Engine, which is under development.

Industry support

Work continues on government measures to support the IT industry, under which the video game industry also falls.

The Russian government has expanded the list of activities with which a company can qualify for state accreditation, reduced the requirements for employees of IT companies to obtain a preferential mortgage, reported on the growing popularity of the program of preferential lending for IT projects, and clarified the list of requirements for obtaining a deferment from mobilization.

The government also continues to show interest in the development of the video game industry and stimulates its development through investments and the creation of specialized education programs.

For example, the Ministry of Digital Development announced support for exports of Russian video games to China — this will allow Russian developers to gain access to a new market and expand their capabilities. And on May 30, at the Creative Industries Exhibition, Vladimir Putin promised to help Russian video game companies enter new markets in response to a request from VIDO: “We will put this in the negotiation process with our partners. The market is colossal. And not just China — in all the BRICS countries.”

Since then, two autonomous non-profit organizations related to the development of the videogame industry in Russia have been established.

Established in December 2022, the VideoGame Industry Development Organization (VIDO) defines itself as an independent association of industry experts from among executives and leading employees of large companies and small studios. It includes more than 100 industry participants and more than 10 industry companies. The CEO of the organization is Vasily Ovchinnikov (that is me :)). VIDO plans to support projects and initiatives significant for the industry, to coordinate interaction between business, scientific and educational communities and the public sector.

“Association of Professionals of the Game Operating and Development Industry” (APRIORI) was established in April 2023, the CEO of the organization is VK Play product director Alexander Mikheev, and its members include VK, Federation of Computer Sports of Russia, Astrum Entertainment, Innova. APRIORI states that the association’s activities will be aimed at building a dialog between all participants in the video game industry. The Ministry of Digital Development stated that they support the creation of the association and intend to actively cooperate with it.

Events — from federal to regional

While earlier there were a number of large-scale events in the country, such as DevGamm, White Nights and IgroMir, in 2023 the organizers refused to hold them in Russia.

At the same time, regional specialized events continue to develop:

• GameDev CityFest — an annual conference for developers of computer and mobile games in Novosibirsk.
• PLAYPORT-branded events — festivals, gas pedals and conferences in Kaliningrad. The PLAYPORT brand has already announced the PLAYPORT SUMMER CAMP summer school of game development and the PLAYPORT festival for 2023.
• Eastern Digital Forum Russky MeetUP 2023 is a traditional digital forum dedicated to the development of information technologies in the Far East. The forum combines the formats of the business program, in addition, in 2023 the forum includes a cybersport tournament
  on Dota 2.
• GAMEDEV ACCELERATOR ended in Izhevsk, during which young teams developed their first mobile game projects under the mentorship of experienced specialists.
• B8 Xelerator — is a program for accelerated development of startups, including mentoring, infrastructure, educational and financial support. The organizer is the Innovation Development Fund of the Republic of Sakha (Yakutia). The priority area is information technologies. GameDev startups of the gas pedal: Poligonium Games — has been developing hyper-casual video games for two years; FadeMemory — creates a story-oriented computer game in the genre of psychological thriller, which plans to see the light of day in 2023.
• A large-scale hackathon “Leaders of Digital Transformation” took place, where in partnership with the Organization for the Development of the Video Game Industry a gameplay challenge to create a video game prototype with images of Moscow appeared.

Interesting fact that educational events continue to develop in Russia. For example, a new season of the National Technological Olympiad will start in August. In the 2022/2023 season, among the areas in which schoolchildren of grades 8–11 competed was the development of VR- and AR-applications and computer games.

The winners of the All-Russian contest “Start a Game” in the direction of “Game Project Accelerator” have been determined. The teams have already passed the Fast Track consulting program and became Skolkovo residents.

In January 2023, it was announced that VK plans to invest 300 million rubles in Russian video game studios in 2023 and launch programs at universities to train specialized specialists. Such programs may appear at the Higher School of Economics, VSU, ITMO, PSU and other universities.

Summarizing

Today, the video game industry in Russia is in a difficult position. It is facing new barriers to its development. But barriers and challenges are at the same time opportunities. The industry has potential for growth and development, especially in the area of mobile games and cybersport. In order to overcome the barriers, joint efforts of all market players, government support and consumer interest are needed.

And where do you see growth points for the domestic video game industry? And it is especially interesting if you work in this industry — tell us what opportunities are opening up, what should developers pay attention to?