Gameconomy: India's Gaming Opportunity

The gaming industry has evolved both culturally and technologically throughout the years, and this rate of development continues to accelerate even today. As games became more complicated and realistic, they moved from arcades to homes, computers, and mobile devices. The rise of the internet and mobile devices had a significant influence in transforming gaming into this intriguing monster of an industry. It continues to boom, both in terms of scope and revenue, as a result of factors including a progressively younger population, the widespread use of smartphones, reasonably priced internet, higher salaries, and social media. Gaming has grown more immersive, realistic, and entertaining because of cloud-based technologies, Artificial Intelligence-Machine Learning, Virtual Reality, Web3, and Blockchain technology. The Animation, Visual Effects, Gaming, and Comic (AVGC) sector in India has the potential to become the torch bearer for "Create in India" and "Brand India".

By 2025, India might hold 5% (US$ 40 billion) of the global market with a yearly growth rate of between 25 to 30% and the creation of more than 1,60,000 new jobs. The gaming sector is anticipated to grow by 30% annually, as one of the fastest-growing segments in media and entertainment by 2025 and the number of game users is anticipated to rise by 50% over the last year. With Gen Z being heavily influenced by e-sports, it is yet another gaming space that is rapidly growing. By 2025, India is anticipated to create more than 250 thousand employment opportunities and 2,000+ gaming enterprises.

Source: Kalaari Capital

Gaming Industry in India

The market for online gaming increased by 28% in 2021, reaching US$ 1.2 billion. This unprecedented rise is being driven by demographic trends, changes in media consumption habits, and industry advancements during the last few years. Additionally, the COVID-19 pandemic has sparked a long-lasting shift towards digital entertainment, which has caused the game industry to develop exponentially throughout the pandemic. India is anticipated to emerge as one of the world’s leading markets in the gaming industry. It has been continuously increasing in value over the previous five years and is anticipated to triple to US$ 3.9 billion by 2025. India is only behind China in terms of the total number of gamers. Most of the funding has gone to platforms for fantasy and real-money sports. The number of gaming studios receiving venture capital funding has increased. The surge in capital is a result of a few high-profile exits and increased awareness of monetisation potential. The gaming business is predicted to generate one lakh jobs by 2023 and 2.5 times that number by 2026. The sector is expected to grow by a factor of five times over the next 7 years, from US$ 857.81 million (Rs. 7,037 crore) in FY19 to US$ 1.74 billion (Rs. 14,300 crore) in FY22 and US$ 4.64 billion (Rs. 38,097 crore) in FY26.

Indian Gaming Landscape

• Real Money Games (RMG)

It is a business structure in which consumers play games for real money in the hope of winning more than they initially paid. Example: Zupee, Winzo, etc.

• Casual and Hyper-Casual
  • Hyper-casual games are characterised by lightweight, instantly playable games that players return to frequently due to short session length. and engaging game mechanics. They are "Tap-to-play" and are "hyper-casual" and typically just require one or two swipes or taps to be played. For example, Pong, Breakout, Pac-Man, etc.
  • A casual game is a video game aimed towards a large audience, aimed at hobbyist gamers. It has simple gameplay mechanics that require minimal time or effort from the user to understand or play. Examples: Candy Crush Saga, Angry Bird, etc.
• Mid and Hardcore
  • Mid-core games need skill and strategy to develop, and as a result, players must be more involved than in a standard casual game. For example, Call of Duty, etc.
  • Hardcore games are ones that demand a significant time commitment from the player and, as a result, have the highest levels of player involvement. Hardcore game genres include massively multiplayer online role-playing games (MMORPGs), first-person shooters, and multiplayer online battle arenas (MOBAs). For example, Minecraft, Destiny, etc.
• Esports

Esports, commonly referred to as eSports, e-Sports, e-games, or electronic sports, is a kind of organised competitive video gaming. It primarily consists of teams fighting against each other in tournaments for financial prizes. Dota 2 is one of the most popular eSports games in India. Esports has attracted a great deal of interest in India, and gaming is quickly becoming a desirable and feasible professional path. By 2025, the number of Esports participants is anticipated to increase from 200 thousand to over 1.5 million.

• PC and Console
  • An electronic game played on a personal computer (PC) is referred to as a computer game. Examples are Red Dead Redemption 2, Fortnite, and God of War.
  • A console game is a sort of interactive multimedia software that employs a video game console to create an interactive multimedia experience through a television or other display device. The typical gaming console comprises a computer that runs the game's software, a portable controller and other accessories. PS5 and X-Box are famous gaming consoles.

   Source: Kalaari Capital

In-app purchases in the Casual, Hyper-casual, and Midcore sectors are expanding at a 35-40% CAGR. The average non-RMG expenditure will have surpassed US$ 20 by 2025. Revenue from in-game advertising is expected to increase from US$ 300 million to over US$ 1 billion by 2030. India's contribution to global gaming income is expected to double from 1.5% to 3% by 2025, and 5% by 2030.

Time and Data Consumption

Presently 11% of the total smartphone time is spent on gaming and an average of 2GB of mobile data is consumed on gaming per month. Compared to other forms of entertainment like OTT and music streaming, Indians spend a greater percentage of their smartphone time playing games. Social engagement remains the most powerful incentive and method of discovering new games.

Key Stakeholders in Game Supply

• Game Dev Studios

They are responsible for the whole creation of a game, from the initial vision and concept through the final release of a playable version. For example, 99Games, etc.

• Game Publishers

They are responsible for overseeing the finance, production, marketing, distribution, and licencing of a game. For example, Nazara Games, etc.

• Advertising Networks

The commercial intermediary serves as a commercial bridge between game developers and advertisers to facilitate revenue generation and reach. For example, Google AdSense, etc.

• Distribution Platforms

App markets, platforms, and marketplaces that host and distribute games across several channels (mobile, PC, console). For example, Google PlayStore, IOS App Store etc.

Key Areas of Opportunity

• Localisation of Game Content

Indian developers have a unique chance to capitalise on our rich history and cultural heritage. Our mythical stories and characters can be readily converted into fascinating and exciting games in genres such as strategy and rogue-like that have the potential to reach a worldwide audience. It is critical to focus on developing culturally relevant and homegrown games that represent India's distinct personality since this will assist Indian game makers establish themselves in the global gaming market. Game content hooks for increasing relatability, interest, engagement, and long-term monetisation possibilities. Games that incorporate vernacular capabilities early in development have scalability potential across growing Tier 1/2/3 locations.

• Gaming 3.0 And GameFi

GameFi is a market area within the decentralised finance (DeFi) ecosystem that blends blockchain technology with elements of game theory to raise interest in a certain blockchain project and strengthen users' relationships with a specific cryptocurrency. Global cryptocurrency owners surpassed 300 million, and over US$ 6.5 billion in venture capital was invested in GameFi businesses. Blockchain stacks are still in development, but the feature advancements they give will improve user experience and ownership, ultimately leading to the formalisation of the black and grey gaming business, which is estimated to be worth more than US$ 12 billion globally.

• Community Formalisation

Players spontaneously develop numerous communities in which they swap items, play together, make new friends, and achieve various game goals together. Games that encourage a 'social' experience have much higher discovery and retention rates across all user and game demographics. Gaming communities are intensely personal and exclusive. They are proving to be crucial for extending the life of a game and boosting its monetisation.

• Cloud Gaming & Game Dev Tools

As Indian game creators grow, there is a chance for the emergence of technologies that ease and address development issues, as well as scale globally. Game dev Tools that focus on user acquisition, retention, gamer profiling, data mining, analytics, audience engagement, and personalization in the current context. GameFi Tools and platforms provide game creators to convert their existing games and libraries and enable FT/NFT/Crypto integration functionalities. They can provide an opportunity for the introduction of India's first 'game passes' and cloud platforms that distribute hefty game titles to Indians at a fraction of the cost.

Government Initiatives

• Government Amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) rules, 2021

  These guidelines address the dual difficulties of catalysing and developing online gaming innovation while also protecting citizens from illegal online betting and wagering. Rules will serve as a drive for the greater invention while banning/prohibiting wagering on game outcomes and betting. The goal of these revisions is to require greater due diligence from online gaming and social media intermediaries in relation to online games and incorrect or misleading information relating to government business. The amended rules are as follows-

  • Intermediaries are required to take reasonable steps to avoid hosting, publishing, or sharing any online game that might harm a user or that hasn't been approved as a legal online game by one or more self-regulatory bodies for online gaming that is designated by the Central Government.
  • The self-regulatory body will have the power to verify that the online game does not involve betting on any outcome, that the online gaming intermediary and the game comply with the rules, the legal age requirement to enter into a contract (currently 18 years old), and a framework created by the self-regulatory body regarding safeguards against user harm, including psychological harm, and measures to safeguard through parental control, age-rating mechanism, and measures to safeguard users against the risk of gaming addiction.
  • If the Central Government makes a notification in the interest of users or other stated circumstances, the same regulations and obligations will be made relevant to even those games where the user is not needed to make any deposit for winnings.
  • The government may notify multiple self-regulatory bodies, which must be representative of the online gaming industry but must operate independently of its members, as well as a Board made up of Directors who are free from conflicts of interest and who represent all relevant stakeholders and experts, including people who play online games, educators, mental health or psychology experts, ICT experts, people who have experience in protecting children's rights, and individuals who have experience in relevant fields of public policy and administration.
  • The new guidelines now require intermediaries not to publish, share, or host fabricated, inaccurate, or misleading material about any Central Government business.
  • The laws currently require intermediaries to take reasonable measures not to host, publish, or share anything that is clearly false, inaccurate, or deceptive in nature.
• User protection measures implemented by Self-Regulatory Organisations (SROs)

  Bodies such as the Federation of Indian Fantasy Sports (FIFS), the E-Gaming Federation (EGF), and the All-India Gaming Federation (AIGF) are currently in charge of guaranteeing legal compliance and consumer protection in the online gaming business. These SROs have formed guiding principles that members must follow, such as compliance with national laws, information disclosure to users and transparent dealings, internet security, data protection, and safeguards to protect consumers from financial harm.

  • Identity verification
  • Grievance redressal
  • Independent audit of members
  • Public awareness
• Others
  • In the Union Budget 2022, the Finance Minister announced the formation of an Animation, Visual Effects, Gaming, and Comics (AVGC) taskforce.
  • An Inter-Ministerial Task Force (IMTF) was established to develop a legal framework for the online gambling sector.
  • The Finance Bill, 2023, recognised the online gaming business as a new-age industry and offered clarity to the industry by separating online gaming from gambling/betting and providing distinct provisions for taxation of winnings from online gaming.