Online gaming is the coming thing in Indian business. The burgeoning sector now is a global hub of investments and startups.
India’s online gaming industry, which is a gift of start-ups and their ecosystems, is now becoming a big industry, and billionaires and transnational firms across sectors are vying for a slice of the pie. Joining the bandwagon are e-commerce giant Amazon, telecom firms Jio and Airtel and payment wallet Paytm. According to Sharma’s research, more money is being spent on gaming than other, more common, pastimes—Twitter earns $8 revenue per user, Facebook is at $19, Google at $27, while Fortnight, a game, earns $96.
“The user engagement has increased meaningfully, with average time spent per user per week on gaming growing by more than 50 per cent post lockdown. The usage pattern for gamers has also undergone a change with more distributed consumption being witnessed throughout the day,” Girish Menon, partner and head, media and entertainment, KPMG India. Last year, KPMG came out with an online gaming industry report, expecting revenue of Rs 11,900 crore by financial year 2023 at a 22 per cent CAGR (compound annual growth rate).
Aided by high penetration of smartphones and cheap data plans, online mobile gaming in India witnessed a boom despite slow economic growth and the Coronavirus pandemic. In last four years, the small space witnessed over 40 deals, with investors from countries like Singapore, Japan, China and the US. The biggest investments and deals have come across genres, from investors like Tencent, AG Tech, Clairvest Capital, Kalaari Capital, Sequoi, Matrix, Tiger Capital, Times Internet and Steadview. Apart from investments into gaming start-ups in India, global gaming companies are also building a presence in the fast growing Indian market.
What is driving the business is the sheer number of people into mobile gaming. According to Sharma, the number of games downloaded in India is the highest in the world—58, outstripping the US (53), China (30) and Turkey (21). India which had 365 million gamers in 2019 is expected to add 486 million more by 2022, as per industry estimates.
Online gaming and business is divided into four categories. The first is traditional, or ‘casual gaming’, like Candy Cursh and Temple Run, where the business model is in-app purchasing and running advertisements. The second is skill-based gaming or fantasy sports, where you have games like Dream 11. Here you bet money on real-time players and winners are based on the actual performance of players. The games are available both in free-to-play and pay-to-play formats.
The companies make money through pay-to-play formats and advertisements. The third category is real-time money games like Mobile Premier League where people play games with real money. For example, players A and B play for Rs 10 each, the winner gets Rs 15 and Rs 5 is kept by the company. This is direct competition between two people. The fourth is e-sports, where publishers (game owning companies) organise tournaments for teams/individuals. It’s based on a format of intellectual property rights.
Menon of KPMG says, “Various companies, including e-commerce and telecom players, are building an ecosystem of products/services to own a greater digital footprint of their consumers. With gaming emerging as a mainstream entertainment option, firms are integrating casual games on their own platform. Gaming acts as an important use case for such companies to acquire and retain customers on their digital platforms. Besides user engagement, online games create multiple monetisation abilities for such companies as well, in the form of customised marketing solutions.”
Nodwin co-founder and MD Akshat Rathee, who was a venture capitalist till 2012, described an experience that inspired him to form Nodwin, which is witnessing a growth of 100 per cent in revenues, 300 per cent in participation and is profitable—in a span of just five years. Akshat, along with his co-founders, had gone to the Indian Gaming Carnival in Noida in 2012. “While the event was a disaster the enthusiasm among participants inspired us,”says Akshat.
An investor in online gaming firms says, “As investors, we are always in the lookout for new ideas and online gaming was one. It had its grey areas when I invested, but it was also promising. Its life-cycle would be maybe one or two decades, but before the trend dies, I’ll recover my money.”
‘Cloud gaming’ is arriving soon, to be fuelled by 5G, where the consumer needn’t own the physical hardware to process the game.
To start an online gaming business, one has to follow the regular company formation norms, including registering with the RoC, appointment of directors etc. Most online gaming companies Outlook spoke to claim that the business is ‘clean’, and so are the books. In fact, online gaming firms contributed more than Rs 9.8 billion in indirect taxes in 2019, according to FICCI.
Between April and June 2020, the Indian fantasy sports industry introduced new sports like baseball, handball and rugby, and hosted over 1,000 matches from around the world. Some tournaments included global mainstream sporting events such as Bundesliga, La Liga and EPL, while others were from places like Austria, Caribbean Islands, Australia and Russia. Some FIFS members helped a few of these tournaments by becoming a sponsor, thereby contributing directly to the growth of the entire sports ecosystem.
Stopress Update: Responding to this article quoting details provided by Tracxn, Games24×7 said: “RummyCircle is one of the several other gaming platforms owned by Games24x7. Chaitanya and Prema were employees at Games24x7. Not investors. Our major investor is Tiger Global.”