10 2017 | BUSINESS
Media coverage of Mexico is too often dominated by reports on gang violence or their ongoing border disputes with the US. But reality isn’t that grim at all in this economy on the rise. The games sector especially can expect boom years ahead. A paysafecard country profile.
There were thousands of kids screaming and cheering on their teams. I couldn’t believe it the first time I went – it was crazy! But the event grew even bigger next year!” Octavio Flores’ enthusiasm for the growing e-sports scene in Mexico is contagious, even through a long distance phone line. Flores is paysafecard’s consultant in Mexico, a country where the games market's annual growth of 19.6% beats even the market leaders in total revenue in Asia, North America and Europe. 1.1 billion dollars are spent on games per year in this Latin American country. Flores is confident that these numbers will keep rising: “Mexico has a very interesting demography. Nearly half of the population is 25, or under. This means there’s huge business potential. Especially when you know that back in 2009, only 31% of the roughly 128 million Mexicans had access to the internet. Today this number has grown to an internet penetration of 52%. I’m sure that in five years from now it will be around 80%.”
GDP GROWTH RATES OF 5%?
A young population with easy and affordable access to the internet is a perfect environment for game-developers, publishers and e-commerce merchants. But will Mexicans have enough money to spend on their digital pastimes? The basic economic data and outlook is quite good, says Friedrich Steinecker, economic expert and representative for the Austrian Economic Chamber, located in Mexico City. “Right now there are some dark clouds on the horizon, due to the low oil prize, the weak Peso and the US presidential elections. But in the coming years I see excellent prospects for Mexico’s future. If the global economy starts to pick up again, the next five years may indeed become Mexico’s moment and we may see GDP growth rates of 3, 4, or even 5%.”
THE ADVENT OF THE MAQUILA INDUSTRY
One reason for that is that Mexico has established a maquila industry. Especially the big automotive corporations from all over the world have invested big time in Mexican car manufacturing plants. Audi, VW, BMW and Continental are just a few. “What we are seeing right now is a re-industrialization of the Americas. Many manufacturers start investing in Mexico instead of China, because labor costs are on the same low level here, but the huge American market is right next door,” Steinecker explains. Especially the young and able are profiting from this development. In Volkswagen’s plant in Silao, for example, in which the average age of an employee is an astonishing 20 years.
»What we are seeing is a re-industrialization. Many manufacturers start investing in Mexico instead of China.«
YOUNG AND WELL-EDUCATED
In the near future, managers will not only be looking for low-paid assembly-line workers, Steinecker is also certain: “Cisco has told the public, for example, that it will be spending four billion dollars over the next two years for new Mexican plants,” Steinecker says. Their investment is just one example for the trend towards high-tech production methods at the moment, which puts quality training of the work force high on many managers’ wish lists. Hence, the Mexican government under president Peña Nieto is very keen to start reforming the education system and providing young Mexicans with the knowledge to adapt to the ever-changing situation.
49 MILLION GAMERS
Education is not the only sector undergoing reform, however. The Peña administration is also doing a lot in terms of digital infrastructure. It has deregulated the telecommunications market and is now looking for new ways to get the internet to the more remote areas of this vast country. No wonder that the games scene, with its young and internet-savvy target group, has exploded in recent years. “There are more than 90 game developer studios in Mexico and about 49 million gamers,” says Alejandro Bertoldi, director of “gaming partners,” a marketing agency specializing in the games market: “The studios are creating games for all devices, but mostly for smartphones. Certain studios like Game Coder or Kokonut have great content that has been published by international brands like Bandai Namco or Chillingo,” says Bertoldi, proud of the growing scene’s achievements.
CONSOLE VS. PC
Mexico is still a heavy console gaming market, according to Bertoldi. “XBOX 360 is the gaming device with the biggest installed base over here. In the newer generation of consoles both XBOX ONE and PS4 are growing at almost the same rate.” But there’s also an explosion of PC gaming, says the Marketing Manager: “The most popular titles in the country are League of Legends, Halo, FIFA, Call of Duty and Gears of War. We are reaching a tipping point here, where PC gaming will return to dominate the gaming community. Games like League of Legends or Clash Royale are making the traditional videogame industry look into creating new and attractive content to stay relevant.”
SMARTPHONE GAMING GROWS BY OVER 58%
Bertoldi’s observations are backed by the figures published in this year’s Newzoo global games market report on Mexico. Console and PC games have an equal share of 33% of the total amount of money spent, while smart phone games account for only 24% of the total revenue. But what’s equally interesting are the year on year growth rates of these gaming segments. Smartphone games are growing the fastest at a 58.3% rate, while PC games have earned 11.8% more over 2015 and console games can only manage a mere 4.3% growth on last year. For Bertoldi, these numbers are reason enough to see the games market prosper during the next few years: “The market has doubled in 5 years and there are many indicators that this trend will continue. Since there are more devices and video games are becoming more and more a part of people’s lives in Mexico.“ According to the Newzoo report, currently 48.3 million gamers live in Mexico, of which 30.4 million are paying gamers. A quite high ratio of 63% compared to the global average. Anyone of these players spends an annual average of $36.97 on games.
And they dislike using credit cards, says paysafecard’s country consultant Flores: “Only around 23% of Mexicans own a credit card. A number every online merchant in the Mexican market should keep in mind,” he says, laughing. This is one of the reasons why paysafecard is working with young bloggers to make its alternative payment method better known. One of them is 31-year-old Eduardo Lavin, who calls himself “Beaner” and regularly uploads videos on YouTube and Twitch. 204,000 people have subscribed to his channel and 70,000 follow him on Twitch. “In Mexico, many parents think it’s unsafe to pay with a debit or credit card on the net. So paysafecard is the perfect solution for young gamers,” he is convinced. He made a video tutorial on how to use it in one of his blogs for that reason. “Even some gamers from my channel didn’t know about paysafecard before. But I’ve changed that,” he says, smiling.
HOW PEOPLE PAY
Beaner’s example proves that Mexico is a market driven by local payment methods. International merchants can only have access to credit cards, which represent a mere 28% of the whole Mexican e-commerce market, according to the Allpago Cross Border E-Commerce report. To access the full potential of the market, a company must go local. Diverging from the rest of Latin America, the number of debit cards with 134 million is much higher than credit cards, which only amount to 30 million. But debit cards are traditionally used for ATM withdrawals, rather than for online shopping. Most of them are not allowed either to process online transactions, or to process foreign currencies. This would be the main reason why only a few e-commerce purchases are made through this payment method. Thus, prepaid solutions like paysafecard are an option not only for young gamers in Mexico. “Of course we are getting a lot stronger in gaming and entertainment services like streaming, which have a huge potential over here”, says country consultant Flores: “But gambling is important for us, too. Many Mexicans love to watch the Champions League and Boxing is really big over here. Twice a year, we have big boxing events and during this time we see paysafecard-transactions surge. For me, this is a great indicator that sports betting and gambling will remain an interesting segment for us, as well.”
So there are many reasons for Octavio Flores to be enthusiastic about his market and the Mexican economy, in general. And he can transmit his enthusiasm – even through a crackling long-distance phone line.