Video Games: Arab Market Poised for Growth

The Middle East online video game industry has seen an immense amount of growth in recent years, and it might continue to.

NourMerza of Reuters says, "About 60 percent of the 350 million people in the Arab world are younger than 25, with Internet penetration in the region at about 70 million users -- over 300 percent growth in the last five years, according to numbers from United Arab Emirates-based entrepreneurship research portal Sindibad Business." He also mentions that Internet penetration is expected to reach 150 million users by 2015.

In the past two years, at least six Arab video game developing companies have received funding from local investors, and several start-up firms have been acquired by larger developers. While video games such as first-person shooters are popular globally, there has been an increasing demand for games with local characteristics.

Co-founder of Peak Games Rina Onur said, "People want to see their national days, their special dishes reflected in these games -- people who look like they're from the region, not just blond with a cowboy hat." EA Sports, a U.S. video game company, is also starting to cater to the Middle East market, starting with an Arabic version of its FIFA soccer games.

A major focus for Arab developed games is to reverse the image that they have gotten from military-styled games designed in the U.S. Many games have depicted Arabs as terrorists, so several Arab developers want to reach out to the youth in their countries to change the stereotypes that have been given. Semanoor founder Emad al-Doghaither said, "Games are being used to ruin the image of Arabs. We went into games because we want to reach the youth who use them and show them a different picture."

Business section: Investing ideas
Analysts think the Arab online gaming industry is poised to grow rapidly over the next few years, but will U.S. and other major game developers be able to compete in the different culture? Below is a list of some of the biggest game developers in the world. Do you think they can keep up with the growth?

List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)

1. Activision Blizzard (NAS: ATVI) : Publishes online, personal computer (PC), console, handheld, and mobile games of interactive entertainment worldwide. Market cap at $13.84B

2. Electronic Arts (NYS: EA) : Develops, markets, publishes, and distributes game software and content for game consoles, PC, mobile phones, tablets, and more. Market cap at $5.47B

3. International Game Technology: Designs, manufactures, and markets electronic gaming equipment and systems worldwide. Market cap at $4.87B

4. Konami: Develops, publishes, markets, and distributes video game software products for stationary and portable consoles, as well as for use on personal computers. Market cap at $3.91B

5. Take-Two Interactive Software (NAS: TTWO) : Develops, and distributes interactive entertainment software, hardware, and accessories worldwide. Market cap at $1.40B

6. Develops and operates online games in the People's Republic of China. Market cap at $1.38B

7. Shanda Games (NAS: GAME) : Engages in the development and operation of online games in the People's Republic of China. Market cap at $1.22B

8. Perfect World Co. (NAS: PWRD) : Engages in the research, development, operation, and licensing of online games primarily in the People's Republic of China, the United States, and the Rest of Asia. Market cap at $593.27M

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.

Kapitall's Danny Guttridge does not own any of the shares mentioned above.

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