Quick: What’s the fastest-growing sport in the Middle East? Football? No. Cricket? Not even that. It’s esports. Yes, that’s right. There are over 377 million gamers across the region. 

Last month, Riyadh hosted thousands of professional gamers, publishers, and fans worldwide during the first Esports World Cup (EWC).

This year’s tournament featured some of the world’s top organizations—such as T1, FlyQuest, Gen.G Esports, Fnatic, and G2 Esports—competing for a $60 million prize pool, the largest prize in esports history. The EWC comes after the Gamers8 event last year, which boasted a $45 million prize purse. 

Next year, Saudi Arabia will host the inaugural Olympic Esports Games, highlighting the region’s growing presence in the esports industry.

“We are a youthful nation, with over 23 million gamers, and our kingdom has become a global hub for professional esports. This is a natural next step for our young athletes, our country, and the global esports community,” said Prince Abdulaziz bin Turki Al Faisal, the Saudi Minister of Sport. 

Last year, Saudi’s Qiddiya City announced plans to launch the world’s first Gaming and esports District, which will have four esports venues, providing a combined seating capacity of 73,000. 

Its neighbor, the UAE, is taking esports to the next level. Gaming lounge operator True Gamers will build a $1 billion esports island in Abu Dhabi, including a digital technology and innovation workspace, a resort hotel, a complex of training and meeting spaces, and an arena designed to host multi-format events and exhibitions. 

The latest addition to the UAE’s sprawling portfolio of esports events and arenas is the opening of the Ferrari Esports Arena at Ferrari World Yas Island in Abu Dhabi, which offers an immersive esports experience centered around Ferrari’s legacy in motorsports.

Abu Dhabi has a well-established track record of hosting esports events. Last year, it hosted the Blast Premier World Final, an international tournament with a $1 million prize pool, for the second time. 

“Hosting international esports tournaments and events has boosted the region’s visibility on the global esports map. Events like Gamers8 and Esports World Cup in Saudi Arabia have attracted top teams and players, further fueling local interest,” says Vincenzo Musumeci, Principal with Strategy& Middle East. 

These projects—esports events and arenas—advance cities like Abu Dhabi and Riyadh among regional destinations, rapidly growing as global centers for sports and sports-led development. 

INCREASED REVENUE, MORE GAMERS

Gulf nations looking to diversify their economies have a large footprint in competitive gaming. In recent years, the Public Investment Fund bought some of the biggest companies in the industry, including Savvy Gaming Group, which acquired ESL, a leading organizer of esports events.

Esports-related revenue in the region increased nearly 8% to almost $2 billion in 2023 and will continue rising through the end of the decade, according to a report by Niko Partners. Saudi Arabia generated more than half of the revenue, followed by the UAE, which generated almost one-third. 

Asia, the Middle East, and North Africa account for over 56% of the global esports billion-dollar market. This is due to various factors, including a young, tech-savvy population, increased internet penetration, and a strong cultural affinity for gaming. 

“The region is set to serve as a geographical link in the gaming industry between the East and West,” says Mario Pérez, CEO of MENATech Entertainment, adding that government backing via Saudi’s National Gaming and Esports Strategy and the UAE’s Dubai Program for Gaming 2033 emphasize gaming as a key sector for diversification. 

Traditional sport still dominates the region, yet every day, new evidence emerges of change.

“Gaming has become an integral part of youth culture in the Middle East; esports aligns with the region’s growing entertainment and leisure industry, making it a popular form of entertainment,” says Musumeci.

“In fact, the UAE boasts the highest percentage of gamers worldwide, and by 2026, the number of gamers in MENA is expected to rise from 67.4 million to 88 million, signaling a powerhouse in the making,” adds Pérez. 

Musumeci adds that Saudi Arabia is home to more than 23 million gamers, which is 65% of the population, half of whom are women.

“Training programs, academies, and grassroots tournaments are being established to nurture local talent to develop the next generation of esports professionals.” 

Globally, esports has been experiencing a difficult period, with leagues struggling to make money, sponsors slashing their advertising budgets, and many teams operating at a loss; however, a seismic shift is underway in the GCC countries, especially in the UAE and Saudi Arabia, with huge ambitions and investing billions to match. 

The region is just starting out on the esports road, yet observers say both countries have growing control over the entire industry.

But that is only half the story. 

CHALLENGES IN COMMERCIALIZATION

The Middle East doesn’t have a robust esports infrastructure and ecosystem that could further fuel growth and profitability.

Commercialization of esports is a challenge. The industry is facing the challenge of generating consistent revenue from its media rights and sponsorships, which are “critical with the limited opportunity to generate revenues from traditional sources, such as event ticketing, merchandise, due to the digital-first nature of esports,” says Musumeci.

When looking closer at media rights, revenues typically constitute 30%- 40% of traditional sports revenue, with few exceptions, while they constitute just under 20% in esports. “One key reason is that esports today are typically free to view,” adds Musumeci. “While being free to view has allowed consumers to discover and access content easily, it also removed an important monetization source.”   

“Sponsorships, on the other hand, account for 60% of the esports’ revenue model vs. only 10-25% for traditional sports, but total sponsorship revenue lags far behind most traditional sports on a revenue-per-viewer basis.” 

Major brands have recognized the potential of sponsoring esports teams, players, and events to access a relatively youthful and tech-savvy audience; however, Musumeci says, “brand willingness to pay for sponsorship rights remains low” due to market fragmentation, unproven ROI, and intense competition for sponsorship spend. 

WHAT NEEDS TO BE DONE?

“Brands, governments, and the private sector must collaborate more effectively,” says Klaus Kajetski, founder and CEO of YaLLa Esports. “Initiatives often fall short when executed in silos. The industry can set and achieve more ambitious goals by teaming up with local startups and uniting efforts.”

Kajetski adds that locally focused esports events are not attracting enough viewership and engagement to justify large sponsorships.

While esports’ substantial following in the region underscores its potential, more efforts are needed to strengthen the engagement of existing fans and attract new ones.

For the commercialization of esports, he says the key is to build export products with a regional flair and capture the essence of local gaming culture while featuring global superstars. “Such efforts ensure worldwide distribution and engagement, attracting sustainable revenue streams and boosting the commercial viability of esports in the region.”

According to Pérez, esports is fragmented, with players competing across multiple game titles and leagues, each with different rules. 

“Esports need a cohesive governing structure to align popular games and create a consistent competitive landscape…innovative revenue-sharing models can unlock esports’ financial potential and expand its audience.”

Pérez adds that continued investment in infrastructure, such as dedicated arenas and training facilities, is essential. Additionally, increased regulation and standardization will ensure fair competition, building trust and credibility within the community. 

It is the wild west out here. The world of esports is exciting, largely, and ripe for exploitation in a region with a young population interested in gaming. 

“However, transforming into a global leader in esports is a process that requires time and strategic development. Building the next generation of esports athletes and cultivating genuine fandom are essential steps that cannot be rushed. This maturation process is key to creating a sustainable and thriving esports ecosystem,” says Kajetski.

While it appears the UAE and Saudi Arabia’s involvement in the industry is set to grow with potential crowds, it’s yet to be seen how successful esports will be in the region, with revenues to match.