Bolstering Lebanon’s game development community

With a touch of the screen, fat bunny bounces his way up the vibrantly colored mountain terrain, munching on the occasional carrot. Press too long or too little, however, and splat goes bunny into the mountainside – game over.

Like many mobile games, Fat Bunny’s concept is simple, yet its gameplay addictive. It was launched in its beta version on March 20, the first offering of Lebanese game studio Groovy Antoid, who, along with another Lebanese newcomer, Van Ahmar, were selected as part of a piloted partnership between the startup accelerator Speed@BDD and Arab Arcade, a self-described community initiative.

Game development is not new to Lebanon. Local game studios began appearing 2008-2012, boosted by investment from the likes of Middle East Venture Partners (MEVP), Berytech and Resource Group Holding. But this last year has seen a sudden surge in activity and a more concentrated effort to grow the game development community in Lebanon –  at the heart of which lies Arab Arcade.

Creating a community

The initiative has been operating since January 2016 with a stated mission “to grow and bolster the game development community in Lebanon and connect aspiring game creators across the region.”

The last six months have seen a flurry of activity. Arab Arcade organized the Beirut Games Festival back in January at the Beirut Digital District (BDD), alongside a range of other events such as Games Jams (48-hour-long marathons where teams compete to create a game) and Fuck-Up Nights (where enthusiasts gather to learn from each other’s mistakes) – all seeking to foster ties between those who are passionate about games and those who are experienced in game development.

It also launched an incubation program for game studio startups that provides everything from office space at BDD, to mentorship, help finding investment, and business and PR support. Groovy Antoid was the first team taken under their wing, and slots are open for the next to apply.

It seems as though the Lebanese game development scene has been touched by an angel; indeed the investors behind Arab Arcade have a particular love for the local industry. “Our angel investors see great potential for gaming in the Middle East,” explains Arab Arcade’s CEO and co-founder Raja Riachi, who declined to name the investors or the amounts they’ve invested. “And on a personal level, they are passionate gamers who want to see more and more games coming out of Lebanon.”

Passion aside, there is also money to be made. The game industry brought in close to $100 billion globally in 2016, and Arab Arcade takes either equity or revenue share from teams they incubate – they took equity from both teams in Speed’s accelerator. They also arrived on the scene at a particularly prescient moment, with Speed CEO Sami Abou Saab stating that the generalist accelerator has reached a point of maturity, and they are now keen to move into niche markets.

When Arab Arcade approached him about using Speed’s space at BDD for their events, a deeper partnership evolved. “Gaming is pretty interesting, since the teams draw technical co-founders on board, which is very important for Speed,” he says, explaining what made the case for focusing on gaming startups.

We’ve got a huge pool of talent adjacent to what a game designer or developer would need

Arab Arcade and Speed officially launched their partnership on March 15, alongside Speed’s Cycle IV acceleration program. The two game studios will receive the usual support from Speed, in addition to in-kind gaming-specific mentoring from Arab Arcade.  If the pilot scheme proves successful, it could lead to an acceleration program aimed specifically at gaming startups, according to Abou Saab. “We are looking to get the feedback of the startups after the acceleration [program] and how this joint effort helped them build their studios. The traction and end-user engagement with their games is one of the criteria for success that we’re looking at,” he says.

Yet, there are still obstacles to be overcome before Lebanon can claim a place as a regional hub for game development, namely the lack of funding, resources, and specific talent.

Investment remains challenging for game developers in Lebanon, where there is no venture capital fund specialized in gaming. According to several game developers Executive spoke with, there is talk of, but no viable university level degree capable of producing graduates with the necessary skills to transition into the field.

Instead, there is passion and talent on the peripheries of game design. “I think we’ve got a huge pool of talent adjacent to what a game designer or developer would need,” explains Riachi.  “Translating that talent shouldn’t take too much; we are trying to set up the infrastructure that would make that transition easier.”

Encouraging investment

The majority of game studios in Lebanon are focused on mobile gaming, seen by some as a high risk/high reward venture. However, Abou Saab explains that investors are only willing to back gaming startups if they have a vision for more than one game. “If they have a plan about how they are going to do it – and also a conception of how they are going to monetize in the future – then the investors are interested.”

The numbers alone show why investment in Lebanese game development, financial and otherwise, could prove a smart move. Globally, the games industry rakes in billions of dollars annually and is on a path to eclipse other entertainment mediums. “In 2020 it’s going to overtake all other entertainment industries; I’m talking movies and music combined,” says co-founder of game developer Wixel Studios, Ziad Feghali. Such claims are not so hyperbolic when you consider that the global movie production and distribution market generated $95 billion last year, according to IBISWorld’s Global Movie Production & Distribution: Market Research Report, compared to the global games industry’s $99.6 billion in revenue – a year-on-year increase of 8.5 percent – according to Newzoo’s 2016 Global Games Market Report.

The future may well lie outside the big screen, as the smallest screen is the segment showing the greatest increase. Mobile gaming accounted for 27 percent of the global games market last year, generating $36.9 billion, up from $30.4 billion in 2015. This trend is showing no sign of abating, with the mobile games segment set to rise each year to a predicted 34 percent market share and revenues of $52.5 billion by 2019, according to Newzoo.

While MENA is by no means the largest market – Asia-Pacific accounts 47 percent of the global market, compared to MENA and Europe’s combined 24 percent – the potential for investors is still there. “The growth of smartphone adoption in MENA, paired with an increasingly younger population – 50 percent of current MENA population [is] below 24 years of age – support further growth of mobile games in the region,” explained MEVP’s Wajdi Ghoussoub via email. MENA was also the fastest growing gaming region last year, with a year-on-year growth rate of 26.2 percent from 2015 to 2016, and revenues of $3.2 billion.

When asked what criteria MEVP would look for when deciding to invest in a gaming startup, Ghoussoub identified three key areas: a team that is experienced, can execute their company’s strategy and adapt to an ever-changing environment (for example, the growth of mobile games and virtual reality); the business model of the company, whether they are a developer, publisher or both, and how they spend their resources; and return on investment, evaluating user economics and engagement to establish growth trajectory.

In agreement with Abou Saab, Ghoussoub says that while investors would love to come across the next Pokémon Go, sustainable growth is what attracts them. “In theory, we are always looking for a company with the next big game, but that does not mean that anything short of global dominance is a failure. Having a strong portfolio of games and a pipeline for new ones is critical, as it allows the company to diversify its risk and keep on bringing to the market new and engaging games after some might sunset,” he explains.

MEVP brought a gaming studio into its portfolio with an investment into Falafel Games back in 2011. Falafel Games runs on what Ghoussoub says, in MEVP’s experience, is the most common business model; free-to-play with monetization from ads and/or in-app purchases. “An overabundance of mobile gaming options has forced game publishers to resort to this model as consumers have grown accustomed to a vast availability of titles free of charge,” he says.

Games with a smaller reach can still generate significant revenue provided they are able to engage a loyal fanbase, such as Falafel Games’ clientele. CEO Vincent Ghoussoub (a distant relation) says that most of the studio’s games are MMOs (massively multiplayer online games), which make on average around 40-50 cents per day per active user, with active daily users close to 10,000. The company also closed a small –  by industry standards –  but significant round of investment last October that brought in $2.6 million from MEVP and iSME Holdings, among others.

Falafel, which counts localization among their business strategies –  50 percent of their market is Saudi Arabia, where language and cultural concerns are part of doing business –  recently relocated its headquarters to Lebanon and plans to launch projects that are Lebanon specific, though Ghossoub remained coy on details.

Game Cooks is another profitable Lebanese game studio, counting their daily active users at around 30-40,000, though they are focused on the American market. A year ago they also had an in-app purchases business model, but have recently changed their focus from mobile games to virtual reality (VR), a potentially risky move given the projected growth of mobile gaming and industry skepticism about the longevity of VR.

“VR is not a platform you do a lot of in-app purchases in, it’s particularly for premium users,” explains CEO Lebnan Nader. The company’s first VR game was launched on Samsung Gear at $2, and their latest will be at a higher price on the HTC Vive.

Nader acknowledges that there is no way of knowing yet if VR is a fad – the equipment itself is an expensive investment for the user, with good VR kit costing between $500-800 and requiring a top-of-the-line PC. Yet, he was convinced that it was the right direction after seeing both the interest of investors in VR at the Game Developer Conference in San Francisco and experiencing the “unbelievable immersion” of VR games first hand.

Mobile gaming accounted for 27 percent of the global games market last year, generating $36.9 billion up from $30.4 billion in 2015

Building from the ground up

While established gaming studios have managed to find funding, monetize and expand, there are still barriers to creating a vibrant Lebanese game development community.

“One of the major problems we have is that, although we have a lot of gamers, we don’t have the suitable belief from universities that this can actually be a career,” says Feghali.

Feghali knows this firsthand, as he and Wixel co-founder Reine Abbas teach courses for a Masters degree in Game Design and Development at the Lebanese University, one of the few games-specific courses in the country. They argue that without the foundation of a BA program, this can never be fully fledged. “Developing games is a mindset,” Feghali explains,  a multifaceted discipline that needs a dedicated program.

With Lebanon and the region woefully behind in gaming education, he and his wife Abbas took matters into their own hands in 2014, launching the Spica Tech academy, which teaches children ages five and above about game development.

We are shifting these kids from dumb digital consumers to smart digital producers,” explains Abbas. The courses, which are always free for girls – part of Abbas’ desire to see more women in gaming – run across Lebanon, with an online platform under construction to launch the academy globally.

Wixel Studios was founded back in 2008 by the couple and Karim Abi Saleh, and has always had a social tint to its games. Their latest, Antura and the Letters –  a partnership between Wixel, Cologne Game Lab and Video Games Without Borders –  was selected in March 2017 as one of the winners of the Education App for Syria competition.

Wixel is further evidence that game development is viable in Lebanon, staying profitable through creating advertisement games for clients and also receiving funding from Berytech back in 2013.

What they and other successful entrepreneurs agree on is the need to redirect talent into game development. “I think, if one or two big universities in Lebanon open up a game development course, that it would be a very good start,” says Nader.  “People can learn how to think about a game, how to take it from idea to development to execution – and obviously how to market it.”

For the Game Cooks CEO, the biggest challenges faced in Lebanon – other than the usual annoyances of infrastructure – are putting a team together, and finding funding in a landscape wary of games.

All also agree that Arab Arcade’s push to create a game development community that is business literate about the is a good first step. “There are finite cases of experienced people who don’t talk to each other. So the Game Festival and Arab Arcade in general foster a liquidity of experience,” says Falafel’s Ghoussoub.

There is still much work to be done if Lebanon is to become a regional hub for game development. It remains to be seen if Speed and Arab Arcade’s partnership will prove successful and, if so,  become the model of how to support a new generation of Lebanese game developers.

This article was originally published in Executive Magazine‘s March issue.

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