With smartphone penetration projected to hit 40% within the next 3 years, and 38 million first time users Indonesia represents the largest potential market in Southeast Asia for mobile games. A relatively young population with a large share of the population below 20 could also offer opportunities to develop hardcore mobile games.

According to Newzoo, the market for mobile games for Southeast Asia is projected to double to about $2.2 billion in 2017. However, speak to many developers and publishers who work in the region and they will tell you that each of the countries within Southeast Asia are unique and may require different strategies.

By far the most promising market for the future seems to be Indonesia (See here). Indonesia presents a good opportunity for hardcore games in the next 3 years mainly due to two factors, the coming boom in first time smartphone users and favorable demographics.

Firstly, let us look at the potential market for mobile games.

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Souces: TechinAsia, ondevice

We can see that the 3 major markets in Southeast Asia with good potential runway are clearly Indonesia, The Philippines and Vietnam. If there is one thing we have learnt from the smartphone boom in China and in Southeast Asia, rapidly increasing smartphone penetration leads to a huge increase in mobile gaming. So why Indonesia? Of all the larger ASEAN states, it has the highest population of 250 million as well as a very low smartphone penetration. According to emarketer, this is projected to grow to 40% by 2017.

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Source: emarketer

This means that in the next 3 years we will see about 38 million first time smartphone users in Indonesia. Which is a huge number of first time mobile gamers.

Why Hardcore games?

The demographics of a typical Midcore and Hardcore gamer are listed below.

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Source: Developers Magmic

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Source: Developers Magmic

This information should fit into the picture of what most of us would expect. Young male gamers within the ages of 18 to 34 are the main demographic which are attracted to hardcore games.

Contrast this with Indonesia’s population pyramid and we will see a huge bulge in the population, at precisely the 10-19 age range. Which means that in the next 3 years, many of these teenagers will move into the prime age range for hardcore games.

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Source: CIA World Factbook, Index Mundi

The Current Market in Indonesia Is Probably not Ready to Support Hardcore Games

Hardware is still dominated by cheaper lower end models which may not be able to support these games

Like most countries in SEA, the market for smartphones in Indonesia is dominated by cheap low end smartphone models. Samsung is the market leader in Indonesia with smaller local brands like Smartfren, Evercross, Advan and Mito also popular. (Sources: Markplus Insight and Mobile World Live) At this point it seems that the hardware may not yet be ready to support hardcore games which often require larger screens and more processing power. However, therein lies the potential. A huge number of Chinese smartphone manufacturers including, Oppo, Haier and ZTE are rushing to open smartphone manufacturing plants in Indonesia to cater to the incoming demand for smartphones (TechinAsia).

However, there is future potential as smartphones upgrade and Indonesians start to afford higher-end models

If trends elsewhere are any indication my bet is that processing power, screen size will continue to increase for Indonesian smartphones. This will create a great opportunity to develop a more immersive gaming experience required by hardcore games.

Payment solutions are also currently inadequate

Hardcore games generally require In-App purchases for monetization. A high Average Revenue Per User, high Lifetime Value Per User are generally required in order for hardcore games to successfully monetize. Indonesia, like the rest of SEA has still a relatively low penetration of financial cards and online banking services. This may be the most important factor affecting the development of a hardcore mobile gaming market in Indonesia.

HALO Digital offers some interesting statistics correlating usage of financial cards to average spend per player. According to data tracking the Chinese market, the average monthly payment amount by users using financial cards is double that of those using prepaid cards. (4RMB vs. 2RMB). The lifetime value of a single user as segmented by users who use financial cards vs prepaid cards also shows a marked difference of 68RMB vs 30 RMB. (Source: Halo (Digital))

Below documents the change in payment methods used by mobile gamers from 2012 to 2014 on the HALO (Digital) mobile payments platform. There is also a scatter plot of the average amount spent per year for high spending players on a hardcore mobile RPG game.

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Source: HALO (Digital)

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Source: HALO (Digital)

While the data does not allow us to infer any causal link between the two it does show a strong positive correlation between use of financial cards and spend per high spending player.

While extrapolating data has its risks, I would venture to say that high financial card penetration is necessary for a hardcore game to monetize successfully in Indonesia. How then does Indonesia do in this respect?

Although penetration of financial cards is increasing, this will not keep pace with smartphone penetration

Statistics provide an encouraging picture. According to Euromonitor, the number of financial cards continues to increase having more than doubled in the last 5 years to 103 million in circulation.

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Source: Euromonitor

While encouraging, these numbers will probably not increase at a quick enough pace to satisfy the growing demand for mobile payments. Credit card penetration remains at a paltry 1% and all other financial cards at 20% (Source: Euromonitor)

Monetization likely to be the biggest problem facing hardcore games in Indonesia

The demand for hardcore games will likely grow strongly due to demand side factors, mainly due to demographic reasons as well as the large number of first time smartphone users. However, the lack of payment options and will likely present a serious obstacle especially for hardcore games.

In Indonesia, casual games rule today, but the market for hardcore games may be ready within the next 3 years

According to HALO (Digital), Indonesia is ranked 13th worldwide and 3rd in Southeast Asia in terms of growth in revenue from hardcore games. The 1st and 2nd being Malaysia and Thailand respectively. Indonesia is a nascent market for hardcore games today, however it may pay to be ready to catch the wave in the next 3 years.

Furthermore, with the market for mobile games doubling in the next 3 years and Indonesia contributing the most growth in terms of the number of the main markets for Mobile Games in Southeast Asia, it seems very likely that a huge chunk of that revenue growth is going to come from Indonesia.

By: Tan Shi Wei

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