Challenges and Opportunities in the Gaming Industry

1. Introduction

The scale of the gaming industry has surpassed that of film and music, but it has faced severe challenges in recent years. In 2023-2024, the industry encountered waves of layoffs and consolidation, soaring development costs, and significant reductions in investment.

The distribution and dissemination of games are becoming increasingly difficult. The proliferation of AI content, platform saturation, and players' preference for mature IPs make it challenging for new projects to stand out, and acquiring highly engaged users has become an unprecedented challenge.

Nevertheless, there are still huge opportunities in the industry. Generation Z and Generation Alpha, as digital natives, will continue to drive market expansion with their purchasing power. At the same time, the "Global South" market is experiencing explosive growth and will become an important incremental market for the gaming industry in the next decade.

This report will explore the latest challenges in game publishing, analyze the high growth opportunities in the "Global South," and focus on KGeN - a blockchain-based gaming platform aimed at reshaping the incentive mechanisms between publishers and players.

2. Challenges Facing Issuance

One of the biggest challenges currently facing the gaming industry is distribution. Changes in consumer habits, adjustments in regulatory policies, lower market access thresholds, and the continuous saturation of game content have made it more difficult to successfully promote games.

Players tend to spend most of their time playing familiar games or series. In 2023, the top ten games ranked by average monthly active users have all been released for more than seven years. In 2024, Steam will welcome 19,000 new games, but the games released that year will only account for 15% of the total gaming time of players.

The mobile gaming market once had a mature distribution model, but the changes in privacy policies by Apple and Google in 2021 affected the way publishers reach their target users. This has significantly impacted user acquisition strategies and mobile gaming business models, putting greater competitive pressure on smaller teams.

The Web3 gaming market faces additional obstacles. In addition to the challenges mentioned above, Web3 games must comply with stricter policies on mobile, Steam, and console platforms, and are even directly banned in some key markets.

The Web3 gaming market is relatively small, with approximately 6 to 7 million active wallet addresses interacting with over 3,000 on-chain game protocols. There are only about 200 protocols that truly have more than 100 active on-chain accounts.

In 2024, 104 new networks/ecosystems were announced to go live, while only 263 new Web3 games were launched during the same period. This led to a battle for player liquidity, with Web3 projects competing for the same limited pool of wallet users.

A group of Web3 companies is exploring new user acquisition models based on blockchain. Innovative incentive mechanisms and on-chain reputation systems are potential avenues for these companies to gain a competitive advantage through Web3 integration.

3. Global South

The Global South refers to countries and regions that have relatively low levels of economic development, typically located south of industrialized nations. This vast area is seen as an underdeveloped yet potentially huge gaming market.

The characteristics of the gaming market in the Global South are: a large player base, a primary reliance on mobile devices for gaming, and a generally low willingness to pay. The younger generation is the first group to grow up with smartphones and has a strong preference for game content. As this generation ages and benefits from economic development and increased income, many believe they will become the new generation of paying players.

India

India is rapidly emerging as the largest gaming market in the Global South. Currently, the number of gamers is approximately 466 million, and it is expected to exceed 640 million by 2027. Market revenue is projected to grow by 13.6% in 2024, reaching $1.4 billion by 2028.

The Indian market has a strong preference for mobile games, benefiting from the rapid growth of 5G and a widespread digital payment infrastructure. The internet penetration rate has increased from 14% in 2015 to the current 52%, indicating significant room for growth.

India's gaming preferences exhibit a unique pattern:

• Mobile games dominate, contributing 77.9% of total revenue.
• PC games and console games account for only 14.5% and 7.7% respectively.
• Real money gaming is the largest market segment, with an annual revenue of $2 billion.
• The total revenue from casual and hyper-casual games is 700 million USD
• The market size of other categories of games is approximately 400 million USD.

Southeast Asia

Southeast Asia is one of the most mature gaming markets in the Global South. In 2023, the region's gaming revenue reached $5.1 billion and is expected to grow to $7.1 billion by 2028. In 2023, there are 277 million gamers, and this number is projected to increase to 332 million by 2028.

Indonesia has the highest mobile game downloads, reaching 2.4 billion. Thailand has the highest in-app purchase revenue, reaching 400 million.

The smartphone penetration rate in Southeast Asia is high, and it is expected to reach an average penetration rate of 90.1% by 2026.

Latin America

Latin America is another major market worth paying attention to, with a large population and a strong gaming culture. In 2022, there were an estimated 316 million gamers, with Brazil having 101 million players, generating 2.7 billion dollars in gaming revenue.

The Brazilian market shows a strong preference for mobile games:

• 60% of players have played a mobile game at least once in the past six months.
• The penetration rate of smartphones is expected to reach 83% by 2025.
• 43% of players have in-game spending behavior

Africa

The African gaming market is expected to exceed $1 billion in revenue by 2024. Mobile games account for nearly 90% of the market share.

Main challenges: High data costs ( 42% ) is the biggest obstacle, followed by hardware prices ( 31% ) and network connectivity issues ( 31% ).

The payment system is both a challenge and an opportunity: 63% of players have in-game purchasing behavior, but payment methods vary by region.

Middle East and North Africa

The MENA region is the fastest growing gaming market in the world, with a revenue growth of 4.7% in 2023, reaching $7.1 billion. The compound annual growth rate is expected to reach 9.4% from 2024 to 2030.

MENA-3( Saudi Arabia, UAE, and Egypt ) are the core markets in the region, with an expected revenue of $2.9 billion by 2027. Saudi Arabia accounts for 60.6% of total gaming revenue and 30.3% of the total number of gamers in the Middle East and North Africa.

4. Introduction to KGeN

KGeN is a blockchain-driven gaming platform that leverages on-chain and off-chain data, an incentivized task platform, and a decentralized reputation system to enhance user engagement across different games. KGeN returns funds from publishers to users, driving its growth flywheel.

The core of the platform is a decentralized player data network that covers millions of micro-game communities ( KGeN Tribe ). This network utilizes the "Proof of Gamer" ( PoG ) engine to create a cross-chain player reputation layer and provides publishers with a highly engaged target user base.

Since January 2024, the total number of registered accounts has increased by over 700%, monthly active users have grown by 1333%, and the total amount of data attributes has increased by 992%. The KGeN ecosystem is currently undergoing a gradual decentralization, protecting the PoG engine through a distributed oracle network and providing greater transparency for all core stakeholders.

4.1 Grassroots Growth

The core of KGeN's growth lies in its grassroots tribes and tribe leader network. The tribes represent thousands of micro-communities that have joined the KGeN ecosystem. As of December 2024, KGeN reports a total of 2,525 tribes, of which 152 tribes have more than 100 members.

The tribe is one of the core ways KGeN promotes user acquisition based on recommendations. Approximately 1.7 million KGeN accounts that have passed KYC verification were acquired through the tribe. Tribe leaders are not only incentivized to bring in new members but must also coordinate tribe activities and maintain community engagement.

KGeN's largest market currently is India, but over 30% of independent active wallets and transactions occur on Kaia, which is the proprietary blockchain of the LINE messaging application. This indicates that KGeN has strong growth potential in Asia.

4.2 Incentivize participation through KGeN Play

KGeN Play is the front-end interface where most players on the platform participate, and all reward tasks are published here. Users can access KGeN Play through the PC portal or mobile app.

When the account is created, the system will automatically create a blockchain wallet in the background to store all of the user's assets and non-tradable player reputation NFTs. KGeN wallet supports multiple chains and gasless transactions, and has basic functions such as viewing balances, checking transaction history, and withdrawals.

The task activities are divided into K-Drops and K-Quests. K-Drops provide automatic real-time verification through endpoint API integration, while K-Quests are conducted through a manual verification process.

4.3 PoG Engine

The PoG engine is a decentralized player rating system hosted by a distributed network of nodes. PoG consists of five core pillars, each containing five to ten attributes. These data points track players' skills, "humanization", engagement, wealth, and social networks to build a multifaceted cross-chain reputation system.

The five core pillars are divided into:

• Proof of Humanity ( PoH ): Tracking data points that reduce the likelihood of users being bots.
• Game Proof ( PoP ): Determine the player's engagement with the KGeN platform and the types of games they have played.
• Skill Certificate ( PoS ): Recognizes players' abilities, competitiveness, participation, and achievements
• Commercial Proof ( PoC ): Identifying the monetization potential of users
• Social Network Proof ( PoSN ): Mapping the scale of user social profiles and establishing a social graph within the KGeN platform.

The PoG engine currently consists of over 270 million data attributes, sourced from more than 13 million registered accounts and 4.4 million MAU.

Using the PoG engine, KGeN is leading an alternative UA framework known as "Effective Customer Acquisition Cost" (eCAC). KGeN does not charge for simple impressions or top-of-funnel installs, but only charges for active users who reach the middle or bottom of the user funnel.

4.4 KGeN Token Economics

The KGeN economy will include two core assets: KCash and KGEN tokens. KCash has been online for a while and mainly serves as an off-chain asset for reward currency. KGEN tokens are a utility token, with a community distribution ratio of