Gaming is the largest entertainment industry out there, consistently growing in the last eight years, and still showing great promise today. To understand how startups are driving the development of the gaming world, we spoke with SNC’s Jeremie Kletzkine, an entrepreneur with technological expertise in consumer electronics, video game, and 3D imaging industries, to discuss the challenges of the global gaming industry, the competitive advantage of Israeli gaming companies and the future of the gaming industry.
Jeremie was the Director of Worldwide Bizdev at PrimeSense (acquired by Apple) and is a co-founder of GameIS. He also sits on the boards of several innovative technology startups and is taking gaming in Israel to the next level. Below is a direct transcript of the interview.
1- What are the major challenges this sector is facing?
At the global scale, gaming is the largest entertainment industry ($90b in 2016), which is more than the sport industry ($70b), and double the size of the movie and the music industries (about $45b each, and both copyright-related content). Gaming doubled in size since 2008, and keeps on growing at a rate of +20% per year. In such a dynamic environment, there are many challenges the gaming industry faces: 1) The market fragmentation and lack of standardization; it is a jungle of platforms and contents. 2) Recognition, policies and generation gaps, because governments and traditional corporations are still disconnected from the realities of this economy. 3) Monetization, due to free content, piracy and new behaviors that appeared with mobility and changes in consumer habits. 4) The unfair competitive position of a few players, such as in online distribution: Valve with Steam for PC gaming and Apple with the iOS AppStore for mobile gaming. 5) Hardware innovations which can only be pushed forward by the few corporations that control a comprehensive and healthy ecosystem (hardware + OS + developer communities + content + distribution), Microsoft, Sony, Apple, Nintendo and Google.
2- What is special about Israeli expertise? What is the competitive advantage?
The Israeli gaming industry benefits from the great local startup ecosystem. Israeli engineers are at the forefront of innovation for sensors (to detect movements, emotions, wellness, etc.), Big Data (for online marketing, leverage user databases, etc.), computer vision and video analysis (VR, AR, etc.), Artificial Intelligence, IOT, and many more. In addition, since the end of the ‘90s and the rise of the Internet, some Israeli companies became world leaders in the online casino and poker industry and developed exceptional know-how around online user acquisition, retention, marketing, and monetization.
3- What unique technologies or companies come from Israel?
Playtika is the biggest local company developing social gaming platforms. They were sold in 2016 to a Chinese conglomerate for $5b.
Plarium is a global leader for Facebook and mobile mid-core multiplayer games, serving 260 million players in total.
TabTale will soon hit one billion downloads for their 400 kids’ games, which makes them the world leader, well before Disney in the App Store.
Other leading game development companies are Jelly Button, Funtactix, Sidekick, and various indie game studios.
Regarding online marketing, some of the leaders are Matomy and AppsFlyer. Playbuzz also offer innovative services for brands to use gamification to generate content. PrimeSense was the 3D sending technology behind the Kinect for XBOX 360 before it was acquired by Apple in 2015.
4- Will we see an Israeli AAA game in the future? Should the industry set it as a goal?
There are currently no AAA game studios in Israel. The gaming sector is different than the other traditional high-tech sectors – it is a bridge between technology and contents. Although all the talents are available locally, Israeli investors are not familiar with content development. The business models of AAA game studios are too different: the funding, the risk evaluation and the development cycles have nothing in common with technology startups. The budget to develop an AAA game starts at $10M and can reach $300M in some cases. Unless a global player will decide to bring its expertise to Israel, I do not see it happening… it will not grow organically from Israelis.
5- How do you predict the sector’s development and what will it lead to in 20 years from now?
The Israeli high-tech industry is facing major growth challenges; access to talents is limited, and salaries for engineers and tech specialists are exponentially rising. I do believe that the era of content development is still to come and that storytellers, musicians, graphic designers and animators will become as demanded as engineers. The gaming sector has a huge potential for horizontal growth and the global market will double again within just a few years. Israel still has a lot to strengths to leverage. Some countries that have managed to develop the gaming sector are Canada (they aggressively attracted talents using tax incentives), Finland (with the success of Rovio and Supercell – 2 mobile gaming powerhouses) and Poland (with CD Project RED – the creators of the most advanced AAA games and of a very popular marketplace, GOG). All the ingredients are available in Israel, and with a proper push, it can also become a country where gaming technologies, high-level contents, and online marketing meet and merge.
The dynamic industry of gaming continues to grow rapidly, but that doesn’t mean it’s not facing major challenges. Professionals like Jeremie, with exceptional insight, vision and know-how are the experts that will lead gaming companies to the next level of success.
Read here to learn more about how startups are shaping Gaming.