Spotlight: Brazil's gaming industry aims for the next level

With around US$1.5bn in revenues, Brazil pairs with Mexico as the largest gaming market in Latin America, even though it has around 22mn players more (75mn total) than Mexico.

That's according to Renan Barreto, general manager of Brasil Game Show (BGS), considered the game industry's largest event in Latin America.

Mexico's proximity to the US and its treaties with Europe, explains Barreto, benefits the country with lower costs related to imports of physical media and consoles. Taxation in Brazil, as compared to Mexico, also plays a role, Barreto said.

The Brazilian market has considerable room for growth: if on the one hand the country is  currently  the third largest market in the world in  number  of players, it fluctuates between the 10th and 15th position in terms of revenues.

But the market is maturing. According to the 2nd Census of the Brazilian Digital Games Industry, conducted in September 2018 by the culture ministry ( MinC ) in partnership with  Unesco , the number of Brazilian developers rose to 375 from 142, an increase of 164%, between 2014 and 2018.

What is more , that study shows the Brazilian gaming market has been developing across all regions in the  country.

While  most developers are still concentrated  in more affluent south and southeast regions, the north and  midwest  saw the largest proportional growth in new developers in the period.

In terms of size, most Brazilian developers are small and independent companies, with annual revenues of up to only 81,000  reais (US$21,000). They are also young, with over half of the companies having  been created  in the five years before the survey.

Of the 1,718 games created in the country in 2017,  43% were developed  for mobile devices, 24% for computers, 10% for augmented reality and 5% for virtual consoles. Of the total, 874 were for educational and professional training purposes (also known as serious games) and the remaining for entertainment.

The census showed that mobile gaming (smartphones and tablets) is the main source of revenue for 37.8% of the developers, followed by computers (standalone) for 25.6% of them. The computer platform represents 34.1% when added the categories standalone and  multiplayer .

Technological expansion in recent years made it possible to develop good games more economical.

"Mobile is definitely the fastest-growing platform in the gaming industry. This is what most people have been playing on. It is much easier and cheaper to just grab the phone and  start playing . It is also cheaper to produce content for mobile. Games for consoles and PCs  tend to be  more complex to develop," said Barreto, whose Game Show will have for the first time this year a mobile-only area.

Either way, in both mobile and standalone gaming the revenue model has changed.

"It is no longer  simply  about buying the game itself. There are games  that are  free to play, but whose content,  items can be purchased . Advertising in mobile gaming is also an important source of revenue for companies," Barreto said.

EXPORTS

While mobile gaming is on the rise, some developers still prefer to focus on the development of games for PCs and consoles.

Founded 19 years ago, Hoplon is one of the largest developers in Brazil. It is also a major exporter of games and develops products almost  exclusively  for PCs.

"Mobile gaming is something  that  we are considering, but it is not a priority," Tatiana Moreira, Hoplon's marketing manager, told  BNamericas .

Over 50% of the company's revenues  are currently generated  outside Brazil, particularly in Europe. The company's most successful product, Heavy Metal Machines, is present in 73 countries, including the US and Mexico, and nine languages.

Hoplon is now aiming to expand its footprint in the US, Russia and China,  as well as  in Latin America, Moreira said.

In general, however , the Brazilian gaming market is still in an early stage when it comes to exports, according to Brazil's largest games association Abragames , which has over 150 associates.

Barreto thinks that  exporting games has only begun in the last two years. To date, rather than games, the country has exported talent, which ends up at big development studios.

Among the main hurdles for local developers are the complexity in opening a company, high taxation and difficulty in access to credit.

Public policies targeting the segment were few and between.

In December, the culture ministry and the national cinema agency ( Ancine ) launched a call to finance game developers, which for the first time included augmented reality (AR) and virtual reality (VR) projects among others.

In total, 35 .2mn  reais  were expected to  be channeled  by the Audiovisual Sector Fund (FSA) for the production and commercialization of digital games. Another 10mn  reais  would be allocated to accelerators, totaling investments of 45.2mn  reais .

The government census showed that while the development of digital games is the core business of 95.5% of the companies surveyed, only 49.8% of them have their main revenue source in this activity.

The data  indicates  that half of the Brazilian developers need activities other than the development of games to complement their revenues and be financially sustainable. Such activities include software development, digital content, animation, educational services, advertising and cinema/TV production.