Why Garena Made a Pivot to Football: A Deep Dive into Market Diversification, Licensing Realities and the Economies of Southeast Asian Sports Gaming
The world of digital entertainment and interactive gaming has become one of intense discipline. The fiery, post-COVID growthpanels that bent the early years of the decade are cooling into a reality of growing user acquisition costs, labyrinthine regional regulatory regimes, and a race to get access to player screen time.
For Garena, the leading digital entertainment arm of Singapore-based consumer internet company Sea Limited, the environment calls for a fundamental pivot in long-term portfolio strategy.
Previously, the corporate identity of Garena and its revenues were tied to one single, globally successful IP: Garena Free Fire. Released in 2017, the mobile battle royale hit became a cash cow like no other, fueling take no prisoners growth for Sea Limited’s e-commerce platform Shopee and its digital financial services arm SeaMoney.
Still, putting too much stock in a single game can be dangerous, long-term, for a publicly traded company. The pivot Garena is making toward sports simulation, namely football, is perhaps the most crucial strategic change. Garena’s publishing deals and regional operations of EA Sports FC Online and EA Sports FC Mobile in Southeast Asia has turned football into a fundamental pillar of its business sustainability. This strategic shift is enabled by market diversification, licensing potential, cultural fit, and attractive revenue sharing model.
1. De-Risking the Portfolio: Exiting the Single-IP Trap
To grasp why Garena has placed football at the heart of its multi-year growth roadmap, one needs to understand the inherent fragility of the single-IP business model. For years, investors following Sea Limited have highlighted the “Free Fire dependency” as a risk.
Thanks to Free Fire's minimalist specs and highly addictive gameplay loop, the title managed to build enormous user bases across Latin America, Southeast Asia and India. But, even the most popular games have an eventual natural lifecycle peak, and you can see it with games too.
By the mid-2020s, the battle royale craze had run its course. It became more expensive to acquire new players and more cost-intensive to maintain existing users through marketing, events and updates.
More significantly, the brief, temporary ban of Free Fire in India in early 2022 was a wake-up call. The regulatory ban immediately decimated Garena’s largest active user base and sent the value of Sea Limited plunging. While the game did eventually return to the Indian market with a localized approach, the incident demonstrated that geopolitical and regulatory changes can cause a company’s revenue to vanish overnight. Football, meanwhile, is world recognised and far less susceptible to ephemeral consumer trends. Garena has also developed a highly dependable secondary revenue stream that mitigates its business sheet from the high volatility seen in the battle royale genre by capturing a commanding position in the sports simulation market in Southeast Asia.
2. The EA Sports Partnership: Taking Advantage of Regional Licensing Constraints
Garena’s strategic pivot: the restructuring of football video game licensing worldwide. The historic thirty-year partnership between Electronic Arts (EA) and the International Federation of Association Football (FIFA) came to an end, causing a massive rebranding in the football gaming space. [UPDATE 1/11/2023 10:30PM ET: Garena today announced that FIFA Online 4, which Garena operates under a regional license on PC in Southeast Asia, will be rebranded as EA Sports FC Online.]
For EA the big question on publishing a giant free to play game in such regions as Southeast Asia is how do they do it. It's mind-bogglingly complicated to figure out how to work around the odd payment ecosystems, language barriers, local server infrastructure requirements, and internet-cafe cultures across nations like Thailand, Vietnam, and Malaysia. EA has traditionally turned to Garena to serve as its regional engine, handling the localization, customer relations, and local physical marketing for its online football titles.
Garena took the rebranding transition as an opportunity to strengthen its positioning. With the acquisition of long-term regional publishing renewals for both EA Sports FC Online and EA Sports FC Mobile, Garena has cemented its position as the provider of premium virtual football in Southeast Asia. In this relationship, EA has the world class game engine and global player licenses and Garena deals with the operational logistics, payment gateways and grass roots marketing networks that could help monetize the product in emerging markets – a true win-win for both the parties.
3. Cultural Alignment: Harnessing the Passion of Southeast Asian Football Fandom
One of the golden rules of publishing games is that you must make sure that your product line is in line with the culture of the country you are targeting. In Southeast Asia, football is more than just a sport – it is a common cultural obsession that stretches across demographic groups.
In countries such as Vietnam, Thailand or Indonesia, football is a near cradle to grave sport. Local domestic leagues have been very vibrant and European leagues command huge television and streaming audiences. In becoming the ultimate publisher for football games - as it were - Garena directly addressed this pre-existing desire.
And [note: Garena’s marketing is infinitely more successful at localizing global sports titles]. This is the case in EA Sports FC Online, where Garena has strived to create unique in-game player cards of local national team stars such as Chanathip Songkrasin in Thailand (and other allies among the region’s best players from the Vietnamese national squad).
By letting players create squads with local icons and global superstars such as Erling Haaland and Kylian Mbappé, Garena crafted a personal connection that you just don’t get in dailies or shooters. This cultural connection also leads to extremely strong user retention as players tend to keep playing season after season.
4. The Sports Game Economy: Big Margins, Small Costs
Sports simulation games have some massive operational and financial advantages over character-driven action games or multiplayer online battle arenas (MOBA) when it comes to running the business.
In a traditional live-service game such as a shooter or an RPG where you need to keep players hooked, you have to maintain a relentless, absurdly expensive treadmill of content. They must create new maps, write stories, code complex character abilities and regularly tweak game balance to make sure the meta remains fresh. The process takes hundreds of developers, designers and you guessed it, quality assurance engineers — working nonstop.
But sports games run on an incredibly lean development cycle:
Self-Updating Meta Football games “content updates” are largely produced by the world around them. When the European transfer window shuts down, or when a young player has a breakout season in real life, the game’s database is updated with these changes. The real-world sport is constantly driving player interest, new narratives and mechanic updates with minimal development overhead for the publisher.
The Card-Collecting Loop: The biggest money-making way in EA Sports FC Online and other such titles is the collection of cards and player training. Using virtual packs players open better players in order to improve their squad’s overall rating. This method generates very high Average Revenue Per User (ARPU). Players are after statistically superior cards, not new game modes entirely, which means Garena can keep high profit margins with relatively low costs of asset creation.
5. The Brand-Safety Benefit: Accessing Non-Endemic Business Sponsorships
Corporate sponsorships are crucial to how the esports industry makes money. Traditionally, many mainstream brands, often labelled as “non-endemic” advertisers (banks, automotive manufacturers, insurance companies and family-friendly consumer goods brands) have been reluctant to back esports.
This reluctance stems from the visual nature of the most popular titles as well. Tactical shooters and battle royales contain simulated violence, guns, and the risk of being eliminated, which may not align well with the image of more conservative brands. And even complex fantasy MOBAs can be hard for corporate executives to grasp, so they shy away from committing big marketing budgets.
Football totally sidesteps these brand-safety barriers. It’s a recognized, nonviolent, family-friendly sport,” said Tony Novak, a professor of leisure studies at Eastern Michigan University and a longtime football fan.
This was the breakthrough for Garena to tap into a huge freelance sponsorship monetary pool for its competitive leagues such as the FC Pro tournament series in Thailand and Vietnam. Top banks, telecoms and consumer brands that would never dream of sponsoring a shooter are falling over themselves to support a top-tier virtual football league. This brand-safety by way of structure means Garena’s esports business continues to be highly lucrative and attractive to corporate advertising despite initial skepticism.
Conclusion: Garena’s Strategy for Sports, in the Long-Term
With Garena now entering the later development stages of the global digital entertainment industry, the football obsession on which it has capitalised is a natural, low-risk and lucrative business tactic.
Roosting its risk by gradually turning its focus on sports simulation, Garena has effectively hedged its historical dependence on Free Fire. It has obtained long-term, mutually beneficial licensing deals with EA, accessed straight to the strong football culture in Southeast Asia, developed a highly profitable monetization model with barely development overhead, and opened clean, brand-safe corporate advertising income.
Although action-oriented games will always be a core aspect of Garena’s identity, the inclusion of football in its stable means that Sea Limited’s digital entertainment arm can bank on a rock solid, sustainable and highly profitable base to steady the ship through the turbulent waters of the global games market.