Gaming in Israel is becoming as big as hi-tech. Local firms are rooted in online gambling, producing games designed to extract more and more money out of users
The gaming industry’s estimated income in 2021 is $176 billion dollars – more than the music and cinema industries together. In fact, it emerged as the world’s biggest entertainment industry a few years ago and has since left all the others far behind.
Nonetheless, the gaming industry’s great leap forward took place in 2020, when income rose by 22.6 percent. The reason was clear: The coronavirus pandemic left people shut in at home, unable to go to restaurants and cinemas. Everyone was forced to find a new source of entertainment. Many turned to an activity they may have never considered before – video games.
The success was so huge that an estimated 3 billion people, about 40 percent of the world’s population, currently play computer, console or mobile games.
Israeli companies are taking up a growing place in this thriving industry, although they mostly specialize in a specific niche. It is possible that there are Israeli developers who dream big and aspire to develop the next Grand Theft Auto (the popular game known as GTA) and thus win the hearts of hundreds of millions of gamers. But so far no Israeli game developer has yet aimed for heavy gamers, trying to offer complex games with an elaborate plot.
The most successful gaming companies in Israel, like Playtika, which at its peak was traded on Nasdaq at a value higher than $13 billion, and Moon Active, which recently raised $$300 million at a valuation of $5 billion, specialize in developing so-called casual or hyper-casual games. These are mobile games that are targeted at a mass-market audience and are easy to learn, simple and addictive. They can be played on the bus or in the doctor’s waiting room.
These games are usually based on one of two economic models: The first is based on short video advertisements displayed to players between the game’s levels. The second is based on what is called “In-Game Purchases” – virtual products that can be purchased during the game – which is free in itself. In this model, the free game offers a limited number of strikes once they end one must wait several hours for their renewal – or pay to get more lives, usually at the cost of a few dollars, thus allowing them to continue playing immediately.
Moon Active’s Coin Master game combines a slot machine gamers can spin to win coins and then use them to upgrade a virtual village they are charged with running. The number of spins the free version of the game supplies is limited in order to urge players to buy more spins instead of waiting a few hours for the supply’s renewal. Some gamers became hooked and are willing to pay varying sums to continue playing. Since these addictive mechanisms are built into the games, some see them as a form of gambling designed to prey on human weaknesses. Indeed some question the legitimacy of such games, suggesting they are just like casinos.
The game Call of Duty, on the completely other end of the spectrum, is an example of extremely large companies developing extremely complex games, in this case a combat action game. Hundreds of developers and designers work on games like these or others that belong to the world of “multiplayer online role playing” games like World of Warcraft. They take years to develop, are very profitable and recognized internationally as cultural events. Why then, do gaming companies in Israel, the “startup nation” that produces unicorns at a dizzying pace, focus almost exclusively on casual mobile games?
How is it possible that the abundance of brilliant programmers, entrepreneurs and talented designers and storytellers, don’t sprout up companies that create more complicated games?
A history of gambling
Guy Bendov, chairman of the Israeli gaming NGO GameIS, believes the answer is first of all money: “It involves a huge risk, because a game’s development cost starts with millions of dollars and climbs as high as hundreds of millions of dollars in more elaborate games,” he says. “Also, labor in Israel is very expensive and in these games, which require at least dozens of workers, the development cost will be significantly higher than in other countries.”
But money isn’t the only thing missing in the local industry, Bendov says. “There’s also knowhow required to develop this kind of games,” he says. “You need a large team of people with real, proven experience. There are people in this industry who think that because they are heavy gamers, and spend a lot of their time on these games, they would be able to develop and design such a game. Of course this is not true. It’s like a person who thinks he can be a chef because he goes to restaurants a lot.”
Ofir Katz, who runs a school for developing and designing games in Tiltan College in Haifa, says: “Even if someone graduated from the Technion cum laude in computer science, it doesn’t mean they will know how to develop this kind of game. You need specific knowledge and years of experience – this is true for programers as much as it is for leadership.”
There’s also a simpler answer: “This is how we know how to make money right now,” says Dr. Renard Gluzman, a lecturer in the M.A. program in designing and developing digital games in Shenkar College. In the 90s he created the indie games company Rating Intrigues that created the cult Israeli game called “Piposh.”
“The Israeli industry is a gaming industry, not a computer game industry. The word ‘gaming’ has one foot in the grey area of gambling. Calling hyper casual games ‘games’ is like calling a commercial a movie,” he says.
There are other voices as well who defend the Israeli brand of hyper causal games. “All kinds of purists have a problem with the Israeli gaming industry’s emphasis on causal and hyper-casual games. I think it’s bullshit,” says Katz.
“The Israeli gaming industry grew organically from the gambling companies that were here previously, like 888. The owners of Playtika and Moon Active took the knowledge that accumulated there and applied it to the new world. They created an industry that makes billions and provides work for thousands of people and we have no reason to be ashamed of that.”
Indeed, the Israeli gaming industry, like the global industry, has become a cash monster. A joint report of GameIS and Deloitte shows that the Israeli industry consists of 200 companies, 14,000 employees and $7.5 billion – about 4.3 percent of the world income. Moon Active alone raked $887 million in the past year and Playtika gained no less than $2.5 billion, according to the report.
Where’s the local content?
In the indie realm the sums are lower, Gluzman says. These games’ creators are motivated by the love of the work rather than by purely business considerations. Katz, despite his disapproval of the criticism of the Israeli casual gaming industry, heads an indie studio called Grime, which operates in Tiltan College. For the past few years he and others have been working on Clover, an original indie game that was developed on a budget of $1.5 million. It went on the market this year and received raving reviews.
The American gaming site IGN gave it nine out of ten. Katz says the game was also profitable and has raked in millions of shekels in its computer version. In view of the fact that it’s expected to go out to the various game consoles next year, he expects “it will make much more than return its investment.”
There are even more successful indie games in the world. The American game “Among Us,” based on the Russian party game “Mafia,” was developed by a team of three and was released in 2018, but was not successful. Gradually, following video clips that a few gamers posted on YouTube, the game gained popularity until it came first on the sales list of the video live streaming service Twitch.
It’s success exceeded the game world when congresswomen Alexandria Ocasio-Cortez and Ilhan Omar took part in a streaming broadcast playing Among Us on Twitch, in a bid to encourage young voters to take part in the presidential elections.
Among Us may have an unusual story, but many of the people we interviewed stressed that this is the type of games the industry should aspire to – if not bigger ones. “Indie developers are often those who, in contrast to the big studios, can take risks, work in the margins and come up with more creative games,” says Katz. “In Israel, unfortunately, you almost don’t see any of that. Because they don’t develop triple-A games in Israel,” he says using the term for games created by big brands. “All kinds of local indie creators are trying to imitate those big games and creating less successful, low budget versions of them instead of developing unique original games.”
Gluzman says the games’ content is another problem, usually denying its locality. “The industry in Israel systematically erases any link to where the games are created and to its wide range of cultures, aesthetics and types of content,” he says.
“Israeli gaming – and ironically, Israeli indie gaming as well – generate games with visual and global content, so as not to annoy anyone and to appeal to as many gamers as possible. But why not deal with local content?”
An example of this can be found in one of the highest-rated triple-A games of the past century. The Witcher 3 was launched in 2015, shocking the gaming world. The game, featuring an immense virtual world and a captivating story, sold over 30 million copies, making its producer, CD Projekt, such a fortune that it was worth over $13 billion at its high point. But contrary to what you might expect, the company is located not in Silicon Valley or in Japan, but in the Polish capital of Warsaw. The creators used what they knew, basing the plot on the fantasy novels of Polish author Andrzej Sapkowski, which combine Slavic folklore with an uber-cynical protagonist. In exchange for the rights to the books, the creators offered Sapkowski to partner with them and receive part of their future earnings. But the author scorned video games and their ability to tell a story, and turned them down, demanding a one-time 9,000 dollar payout instead. Several years and several billion dollars in profits later, he sued them – and lost.
Spoiling you senseless
Indie developers in Israel who decide to take the risk, open a small studio, and develop a special and original game, encounter a major difficulty in the recruiting stage. How can they compete with the excellent benefits offered by the Israeli developers of casual games and attract the talent they need?
Many hi-tech firms offer their employees perks the rest of the labor market can only dream of, but it seems that gaming firms break all previous records. At Moon Active, for instance, workers get a 20,000 shekel signing bonus if a candidate they recommended was hired; they enjoy a dining room with three meals per day by a famous Israeli chef, and get gifts such as the newest iPhones, PS5, and getaways for two at the exclusive Beresheet Hotel, at regular intervals throughout the year. At Rosh Hashanah and Passover they receive gifts to the tune of 2,500 shekels, and on other holidays they receive personalized gifts.
“Salaries and benefits are crazy here,” a company employee tells Haaretz. “However, I have to admit it’s not what I dreamed of doing. I’ve been a gamer from a young age. I’ve been playing games since they were pixelated. Whenever someone asked what I want to do when I grow up, I said – game developer. But after graduating with a computer science degree I realized that I don’t really have many options in Israel. While I work for a company that calls itself a gaming company, it’s actually a gambling company in disguise, where most resources are invested in data and analytics. They keep trying to think how to make the users spend more and more money, and less on how to improve the quality or game experience.
“On the other hand, working here allows me to rent an apartment alone in midtown Tel Aviv. And besides, even if I wanted to switch, where would I go? There are no companies making triple-A games in Israel, and the only alternative for someone like me is to relocate.”
Recruiting investors is also a hurdle for indie game developers. “Nowadays, investments in indie companies are less suitable to us as a venture capital fund,” admits Eitan Reisel, founder of the VGames fund which was established in March 2020, and which was the first fund in Israel to focus solely on gaming companies. “Due to the nature of the industry, on the local level we invest mostly in mobile gaming firms,” he explains. “On the other hand, abroad we invest in triple-A firms, and we absolutely do not rule out investing in such a company in Israel, should an appropriate offer present itself. The problem is that we’re not looking for a company that can produce one big game and that’s it, but a company that can grow, develop several such games and become a global market leader – and that’s hard to find.”
At the same time, Reisel, whose fund manages $300 million and has invested in 11 Israeli firms thus far, predicts a rosy future for the local scene. “The industry will double in three years,” he declares. “Israel is only at the beginning when it comes to gaming. I expect to see more and more unicorns here developing casual games. But alongside that, I have no doubt that we will see a growth of the indie industry, due to the game development schools that have opened around the country. Students there have passion and I’m sure they’ll find a way to develop unique and original games at a level not seen here before, even without big budgets.”
And indeed, Katz confirms that following the success of Grime, the studio he heads is working on the development of no fewer than three new indie games.
But what about triple-A games? Will the local industry join a host of countries such as the United States, the U.K., Canada, and Germany, and produce one big game the whole world will talk about? “I’m sure that in four-five years it will happen,” says Reisel. “We still don’t see offices of firms of that caliber here, but they talk to me all the time and I know there are such plans.” Bendov confirms: “There are several projects underway now. They’re only at the beginning, and there’s no telling the future- but it’s happening right now, as we speak.”
