Author

Ellis Ng, journalist

The gaming industry in South-East Asia, worth US$6bn in 2023, is catching the eye of investors like never before. As the region’s 300 million gamers drive explosive market growth, gaming companies are increasingly turning to accountants to help them make sense of the complex financial rules that vary from country to country.

Gaming in South-East Asia has changed dramatically in recent years, with Thailand and Indonesia leading the pack in revenue growth. Singapore has established itself as a hub for major gaming companies, attracting industry giants such as HoYoverse and Ubisoft. Meanwhile, Indonesian indie developers have also made their mark, launching more than 250 games on the Steam platform.

‘Gaming companies need to consolidate their revenue streams’

As the industry takes off, companies find themselves in urgent need of expert financial advice in tax planning, financial forecasting and risk management.

Kuala Lumpur-based Quinn Lu, a senior associate at Dezan Shira, says: ‘Gaming companies operating in diverse markets need to effectively consolidate their revenue streams. This involves implementing a centralised accounting system, adhering to revenue recognition and allocation standards, and providing segment reporting to break down revenue by geographic region, product or service.’

As gaming companies expand across borders, accountants are playing an increasingly strategic role in their operations. According to Raghav Manohar Narsalay, partner and research and insights hub leader at PwC India, a thorough approach to financial planning has become essential. ‘As they scale, gaming companies must stress-test their financial models, building their digital twins,’ he explains. ‘These twins must factor in scenarios such as currency fluctuations, regulatory changes and competitive dynamics.’

Tax planning

Gaming companies, in particular, face major challenges with revenue recognition and tax compliance. They have to manage money coming in from all directions – from straightforward game sales to in-app purchases, subscription fees, advertising, royalties and licensing agreements. Each revenue stream needs its own careful accounting approach to stay in line with international financial reporting standards.

‘Mobile gaming accounts for 65% of South-East Asia’s gaming revenue, driven by affordable smartphones and 5G rollout,’ says Shouradeep Chakraborty, founder of mobile gaming app PlaySuper. ‘Investors are pouring funds into hypercasual and mid-core mobile titles, with studios like Garena and Moonton leading the charge.’

The digital and global nature of gaming operations makes strategic tax planning paramount. Singapore, with its business-friendly tax system, has become a go-to spot for companies looking for a base for their intellectual property (IP) operations. Meanwhile, Vietnam and Thailand are rolling out special tax breaks for game developers.

Lu says that ‘establishing IP holding companies in low-tax jurisdictions’ can be an effective strategy. Singapore, for example, offers an edge thanks to its ‘low corporate tax rate, extensive network of double taxation agreements and robust legal framework for IP protection’.

Diversity’s difficulty

Yet the evolving rules and regulations across Asia are making things tricky.

Take Indonesia, which just changed how it classifies and approves games for advertisement and publication. Meanwhile Vietnam enforces rigorous gaming restrictions, requiring foreign developers to establish local entities and limiting players under 18 to three hours of daily gameplay. With so many different rules to juggle, gaming companies need solid accounting advice to stay compliant while trying to grow their business.

Dealing with risk, especially forex, has become a top priority

Dealing with risk, especially around unpredictable currency exchange rates, has become a top priority for gaming companies.

Chakraborty says some studios are taking proactive measures. He cites Malaysian studio Eureka Games as using ‘forex forwards to lock in rates for 70% of its US$-denominated ad revenue’. Companies such as Singapore’s Sea are also diversifying their currency holdings to mitigate exchange rate risks, he adds.

Target metrics

When sizing up a gaming company’s future prospects, investors keep a close eye on specific numbers. They are especially keen on such metrics as average revenue per user growth, user retention rates and revenue diversification.

Narsalay emphasises that digital twin simulations help ‘provide an insight into what would be the average revenue per consumer, user acquisition costs and churn, as well as retention rates – metrics that investors value’.

Keeping track of all the revenue streams takes accounting knowhow

Revenue and risk

The mobile-first future already sees studios adapting their financial strategies to regional realities. Chakraborty points out that companies are ‘pricing in-app purchases to align with regional spending power’.

Regional tech giants such as Grab and Gojek are jumping on the bandwagon too, adding mini-games to their apps. It opens up new ways to make money, but keeping track of all these revenue streams takes careful accounting knowhow.

‘To maintain investor appeal during periods of rapid expansion, gaming companies should focus on robust risk management strategies,’ Lu advises. ‘This includes hedging against currency risks using financial derivatives or diversifying revenue streams across different markets.’

The gaming future looks good for South-East Asia, with the market expected to be worth US$7.1bn by 2028 while the number of gamers in the region climbs to 332 million. But doing business in the region is no simple task – there are lots of moving parts to manage. One thing is certain, though: accountants will keep proving their worth in helping gaming companies steer their growth in the long haul.

More information

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