Global Games: Brazil - How to Kickstart a Thriving Game Industry - Extra Credits

Welcome to our first installment of Global Games. There's a lot of information out there about the game industry in the US, Japan, South Korea, England, and Germany, but what about other parts of the world? This series is going to focus on those places, the regions we don't usually consider when we think of the game industry. Now, it's important to know going into this that because the information on the industry in these other countries is so limited, and what little there is is often biased because it's attempting to get people to come and invest in those countries, this series is going to be based strictly on James' observations while in those countries. He's often called upon to consult in emerging market, and he always tries to get around and get a lay of the land while there. So, this will be his transcription of how he views those markets. As such, we can't guarantee 100% accuracy. In fact, there are places where we may be dead wrong, and it's certainly possible that things may unfold differently than we predict, but we will do the best we can. So, with that caveat in mind, let's get things started with the country James is perhaps most familiar with, Brazil.

Brazil is an incredible country for games, both in terms of its potential and its challenges. Latin America is going to become a huge market for games in the next 20 years. There's just no other way to look at it. The economy of many Latin American nations is approaching the point where games are a viable mass market entertainment, while simultaneously we're just at that point in time where what we consider a game is changing, and the price point on games is dropping drastically with digital downloads and mobile and tablet games. When you couple that with the fact that the AAA industries in both Japan and the US have found that selling exclusively to their own internal markets is no longer supporting the budgets of the games they're creating, and that there are a half billion people living in Latin America, you've got the makings for a huge new market. And Brazil is poised to be at that new market's center. Okay, so let's talk Brazil's current strengths and weaknesses. First, the elephant in the room, piracy. Though the general perception of Brazil is starting to change, when James first began doing work there a few years ago, anytime he asked anybody in the US industry about Brazil, they would respond with something akin to, "Oh yeah, they're like China but without as much money." And that statement is false on a lot of levels, so let's correct

that. Now, when people say that sort of thing, it's because of the pervasive level of piracy in Brazil. The perception was that you can't sell games in Brazil because everything's pirated. And truth be told, there's a lot of piracy in Brazil. There are whole pirate markets just out in the open where you can get anything you want at a fraction of the cost. Most Xbox 360s there are sold pre-modded to play pirated games. Heck, even at legitimate game retailers, you can usually ask to see the book, which is simply a binder of pirated games at an unbelievable discount. But if that's all you see when you look at the Brazilian market, you're not looking closely enough. It's not that Brazilians won't buy games, it's that there's a number of impediments that make doing so completely unreasonable. First off is price. Because of the way Brazilian taxes and tariffs work, an Xbox 360 game that came out about 6 months ago in the US can run anywhere between 120 and 160 US dollars. Not adjusted for GDP, not in terms of buying power, but straight-up 120 to 160 dollars US for a game. That means that buying a game legitimately in Brazil costs anywhere from twice to almost three times the price you'd pay in the US. Now, many of us would be

hard-pressed to justify spending 160 dollars on most games. And while Brazil is doing quite well, the average citizen there doesn't have the same level of income as most game consumers. So, these prices are clearly prohibitive. Consoles themselves have the same type of price tag, with PS3s running over 1,000 dollars at retail just a few years ago. Now, compare that to your standard pirate store. Buying a pirated game usually runs about 5 dollars US, or about 1/25 of the cost, and comes with better service. At many of the pirate stands, if you buy a game and you don't like it, they'll just let you give it back to them and get something else instead if you do it within a few days of the original purchase. But this is a very solvable problem. The taxes and tariffs that are inflating these prices are holdovers from an era when Brazil was trying to establish their industry around the Sega Genesis, or Mega Drive, depending on where you live. In fact, funny side note, in Brazil, you can still buy a brand new Sega Genesis. They're the only place in the world still producing them. But these taxes are vestigial. They don't represent anything modern lawmakers care about. Just a little bit of pressure from the outside, along with the promise of new economic opportunity, and I am certain those taxes would just melt away. In

fact, I believe the only reason they're still there is that it's not high enough on anybody's priority list to change them. Exacerbating the piracy problem is the fact that until very, very recently, you couldn't access Xbox Live or PSN from Brazil. When James asked about hard drive sizes when going to buy a console there, the fellow running the stand said, "Why do you want a hard drive? You can't get anything on it. Here, just take this memory card. You'll be fine." Of course, this trend is changing, too. And with online play comes an incentive to buy legitimate games. Next in the jumble of legal issues surrounding the Brazilian game market, games there are rated by the government, not the industry like they are in the states or Europe. This means that every single game that comes out has to get a rating to be sold in Brazil. And that may not sound like a big deal at first. You may think to yourself, "Pretty much every game I play has a rating." But when I say every game, I mean every game. For the longest time, the Brazilian iTunes App Store didn't even have a game section because every single game that was put up would have had to go through that tiny office they have for approving these things. Again, though, I believe this is only the case because right now there's very little economic or political incentive to change this system. Finally, we have to talk about

distribution. While there are some big box chains in Brazil, there really isn't anything as ubiquitous as a GameStop there. And while plenty of people may complain about GameStop as a distributor, having to deal with a thousand mom-and-pop retailers is a huge headache. There isn't really a good equivalent to Steam down there, either. And while sites like Submarino sort of fill in for Amazon, it's still not enough. Of course, here too is an opportunity for companies like Steam or Amazon, who already have the infrastructure, to fill a much-needed niche and control yet another huge market in the process. But, assuming you can see past those issues, Brazil has the largest economy in Latin America. It has the largest population in Latin America. It has a relatively robust higher education system and turns out a number of excellent programmers. I mean, Lua scripting was invented there. Plus, Brazil has a strong 2D art tradition and a pretty decent 3D scene, as well. The size of the population means that it's possible for a games industry to grow there. This will probably come up in a lot of these episodes, but it takes either a large population, like in Japan, US, or China, or a very dedicated population, like in South Korea, to create the sort of internal market that a games industry seems to need to grow in. Nobody's making games for

Brazilians, or really even doing a great job localizing much for Portuguese. And even when they do, it's usually continental Portuguese rather than a Brazilian dialect. This means that this large internal market is underserved, and so has a chance to support local companies, rather than having them just be crushed by more established international developers who have more resources. Games are a leisure activity, so it takes a sizable economy with at least a moderate-size middle class to really create an internal market, both of which Brazil has. Additionally, from James's impressions while down there, Brazil is a place where a spirit of progress flows through a lot of society. From the civic level down to the individual level, there's a desire to see Brazil take its place amongst the most prosperous nations. There's still a lot of poverty, especially in the north, but with this desire to move forward comes a desire for the luxuries like games. While the K-12 public educational system is shaky at best due to a population explosion, the public universities are of extremely high caliber. The public universities are actually the harder ones to get into there. Private universities tend to not have as good a reputation. One of the things that a country needs to kick-start a games industry is a plethora of available programmers. While

Brazil isn't doing as well in this regard as some of the countries we'll cover in this series later, it certainly is one of, if not the strongest Latin American country in this regard. Oh, and interestingly enough, one of the ways Brazil's trying to solve its educational crisis is with games, both through schools which teach every subject through game production, like O Futuro Na Nave, and with public grants for educational and artistic games, which leads us to the last point. More than piracy, and more than distribution, if there's any one thing that's keeping the Brazilian industry from coming to life, it's a lack of funding. Most of the studios James visited while there were either satellites of larger international game companies stuck making games for a non-Brazilian audience, or small groups who self-funded. There's no such thing as a publisher there. There are no EAs or Activisions. Investors don't really understand the sector, and the government, while doing a phenomenal job trying to fund educational endeavors, doesn't have any real interest in subsidizing the entertainment side of the industry. Here to me is where established publishers might come in, be heroes, and make a great deal of money in the meantime. Dropping a few million dollars on Brazil now probably ensures that publisher is a major player in

Brazil, and thus all of Latin America in the years to come. Wait just a half decade, and Brazilians will solve this problem for themselves with great sacrifice and the loss of many small companies that could easily be saved. Or, we could work with them to solve it today. But after all this, you may be asking yourself, "Why should I care? What does it matter to me if Brazil can form its own industry or not?" It matters to all of us because games as an art are cultural products. Japan produces very different games from the US. South Korea gave us a whole new way to think about MMOs. Russia is now showing us that whole styles of games that we had considered dead and abandoned can still be resonant today. Brazil has an incredible and unique culture. Whether or not their industry gets off the ground it matters to all of us because there may well be entire genres of games that we'll never see without their perspective. That's the reason we're doing this global game series and trying to talk about different markets around the world. I hope you enjoyed this look at Brazil. In future episodes, we'll try to keep things a little shorter and establish a system for presenting the essential features to look at when seeing if a game's industry is viable in that country, listing some of that country's quirks, then perhaps showing a game that really highlights that country's strengths. I'm looking forward to doing

more of these. We'll see you next time.