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Monetisation worries aside, Indian gaming sector to see steady growth

MUMBAI: The Indian digital gaming market is likely to grow at a CAGR of 13.8% from Rs 26.5 billion in 2015 to Rs 50.7 billion in 2020, according to the FICCI-KPMG report.

The Indian story is aided by mobile traffic growing by 50% in 2015 and 85% surge in 3G data traffic. However, the 2016 FICCI-KPMG report has identified challenges for the Indian gaming sector.

The battle for real estate

In this time of intense competition between apps, companies are trying to tap users to stay relevant so that they can increase usage. According to a Business Insider report, the cost-per-install on iOS soared 59% year on year in October 2014, while the cost to retain a loyal user, defined as a user who opens the app at least three times in a two-week period, was up 33% year on year.

Quettra finds that for a retailer, the Android app loses 77% daily active users within the first three days of install. Flipkart, Snapdeal and Myntra have an average retention drop of 64%, 73%, 69% and 80% respectively in the first three days.

Soft monetisation

Instead of ‘milking the whales’, the industry is gradually moving to monetisation strategies to collect money from a large number of players. As consumption of mobile gaming in India increases, advertisers are likely to continue to deliver most sophisticated ads/branded content into this ecosystem to continue to engage customers. Last year Games2win estimated that customers spend over a billion minutes on their gaming products.

Casual gaming

Gaming is becoming more casual, with users playing not just one but multiple games in the same day each from different genres. Women are playing more games in India and being the No. 1 game is not as important as having a pipeline of games to keep users engaged.

Explosion of virtual reality

Virtual reality (VR) is the most-awaited and expected wearable technology integration for avid gamers.

Cardboard’s affordability and better internet connectivity was the key reason for Cardboard’s acceptance in the Indian markets. 2016 is expected to see the entry of the three big virtual headsets—Playstation VR for Playstation 4, Oculus Rift for the PC and the HTC Vive.

However, only time will tell if these can cause a huge shift in consumption. The market is relatively small, but startups are expected to flock to VR and augmented reality. Nvidia states that there might be close to 600 companies working on VR. Presence Capital recently announced a $10 million fund to invest in VR startups.

Console gaming

Globally, over half a billion people worldwide play video and computer games on a daily basis, cumulating some three billion hours of video games played per week. ‘League of Legends’ was the most popular computer game as 2015 closed, grabbing 22.92% market share, marking a significant rise over other popular games like ‘Counter Strike’ and ‘World of Warcraft’, which had 5–6% market share globally.

The two largest console makers have been going head to head in this business for some time now, with Sony having sold over 35.4 million consoles of PS4 since its launch in 2013, which is nearly double of what Microsoft managed with its Xbox one.

However, console gaming has seen a limited market given its high price points and cost of games. While the audience for both mobile and gaming consoles remains very different, mobile gamers have been the focus of the industry simply due to increasing smartphone adoption. The PC and digital TV market is expected to shrink over the next few years as mobile takes over as the main gaming destination for casual gamers.

Gaming through mobility

One notable trend is that as with other digital segments, the Indian market is mainly a mobile phenomenon, with console gaming restricted to a small SEC A segment. The mobile gaming market is primarily advertisement driven, but in-app purchases and paid upgrades are gradually gaining traction. Both Apple and Google are expected to reduce their in-app purchase pricing tiers to approximately Rs 10.

This is expected to further enhance monetisation in this segment over the next few years.

The Indian mobile gaming market is expected to grow from $200 million today to $3 billion by 2019. Indian companies are also getting ready for what they forecast as a huge surge for gaming content due to increased smartphone penetration and a growing internet subscriber base, which was 331.5 million.