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Indian gaming industry to grow at 18% CAGR to reach Rs 71 bn in 2021

MUMBAI: First, the good news. The Indian gaming industry has realised the latent critical volumes. Then, the bad news. The value is still elusive.

The gaming industry in India has grown from Rs 26.5 billion in 2015 to Rs 30.8 billion in 2016 and is on a path of steady growth with an estimated CAGR of 18.1% to reach Rs 71 billion in 2021, according to the 2017 FICCI-KPMG Media and Entertainment industry report.

India’s gaming industry, 2016 (INR billion)

The report noted that in the context of exponential success of gaming in the developing Asian region, the Indian gaming industry has realised the latent critical volumes; however, the value still eludes the ecosystem.

Yet, games have found acceptance as a means of ‘entertainment’ in the everyday life of an urban Indian. A fact better understood by the success of ‘movie-based games’, although free for consumers, provide ‘Bollywood’ an accepted engaging channel to reach the masses through smartphones.

This trend is primarily derived from the rise of mobile gaming due to the rapid proliferation of internet-enabled mobile phones, better internet connectivity and evolving gaming supply chain.

Improved quality and affordability of internet-enabled mobile phones has proven to be a boon to the Indian gaming industry as it has changed the mindset of consumers. In the mind space of an average Indian consumer, the industry has moved from ‘time waste and expensive’ to ‘casual and convenient’ on which mobile gaming is growing rapidly, engaging all age groups.

Console gaming continues to struggle

When it comes to console gaming, the Indian market has not been able to achieve similar success as that of the global markets. Social acceptance of gaming as entertainment, high console and game costs have been the barriers to adoption. With an estimated 3–3.5 million lifetime sales of consoles in the country, console gaming is expected to grow slower than mobile gaming.

In the Indian market, the revenue for console gaming is through pay per purchase model. Taking cue from the Personal Computer (PC) games market, console players are starting to look at online as a channel to sell games on the back of improved connectivity and cloud technologies. This is fuelled by the rising number of games and their adoption on subscription-based streaming platforms such as ‘Steam’.

Mobile gaming see upsurge but monetisation an issue

India’s mobile gaming market has significantly increased not only in terms of game downloads but also in revenue generation. Nearly 1.6 billion games were downloaded in 2016, which is a 58% increase from 2015 on both iOS and Android platforms combined. However, in terms of revenue generated, India’s market is still at a nascent stage with much of the revenue generated from the advertisements unlike global markets where revenue is from in-application purchases. This trend, however, is expected to change on the back of better payment methods, changing in-application spending behaviours and reduced pricing tiers.

Racing and arcade games dominate downloads

As performance and graphics of internet-enabled mobile phones are constantly improving, more titles are being developed by the publishers for compact screens. However, in the Indian context, most of the games downloaded are casual games, with racing and arcade genres topping the charts. However, in terms of revenues generated, global-origin strategy games such as ‘Clash of Clans’ and Indian-origin social card games such as Teen Patti are leading the list.

Indianised game content is reaching masses and seeing adoption

Games contextual to the Indian audience are proving to be dark horses on the list dominated by the global gaming majors. ‘Teen Patti’, a popular offline social game in Indian households, when developed into a mobile game by Octro gaming enjoyed significant success garnering over 32 million users.

It has regional-language support which helped reach more audience. Games adopted from the entertainment industry, such as ‘Sultan’, ‘Dhoom 3’ and ‘Chhota Bheem’, have significant traction in terms of downloads and game time. For instance, ‘Sultan: The Game’ remained on top charts as one of the most downloaded games during the release week of the movie ‘Sultan’.

Beyond the obvious demand–supply gap of localised content

Only one out of top 10 mobile games by downloads and three out of top 10 by revenue generations are from Indian developers, which for most part is contributed by casino games category. Such lack of gaming content developed by Indian developers limits the appeal of gaming options for Indian consumers, which again would restrict monetisation opportunities. Hence, there is a greater need for domestic players to keep abreast with global competition in bringing high-quality content across channels.

Social media games

In the history of technology advancement, communication possibilities have peaked globally like never before and at the heart of this development is the social media. It has a significant impact across the digital ecosystem, and for gaming it enabled adoption even beyond digital champions (19–25 years old). Social media games such as ‘Farmville’ and ‘Mafia Wars’, and real money games such as ‘Rummy’ and ‘Teen Patti’ experienced unprecedented popularity across age and gender.

The Indian gaming market is now largely dominated by casual gaming, which generated Rs 16 billion revenue out of the total revenue of Rs 30.8 billion of the Indian gaming industry.

AR making headways

As a proven concept, the pure functional approach of augmented reality is changing the way gamers are interacting with the world around. After the viral success of ‘Pokémon Go’, AR is a proven success and is expected to see more adoption. The game, which boasted 21 million daily users in nearly 40 countries, with Rs 650 million revenue per day during its peak, has shown a new dimension of gaming when mixed with the physical reality.

These new-age technologies are enhancing the way a gamer interacts with the gaming content and they are likely to prove as a differentiator for the industry in the coming years.

Monetisation challenges

The Indian gaming market has one of the lowest payment trends as only 18% of the gamers in India pay for the games. However, the Indian gaming ecosystem is coming together to create a conducive environment to tackle these challenges.

As compared to only five developers during the pre-2005 era, there are more than 200 developers and service providers today in India. Out of this, at least 25% are primarily focusing on the local market.

With reducing voice revenue, telecom operators are investing in data to drive ARPU higher.

Funding an issue

Investors remain sceptical of backing the developers. There has, in fact, been a drop in external funding. While in FY15 the gaming sector received about Rs 4.8 billion in private equity and venture capital funding, this remained just a small portion of the Rs 200 billion invested in e-commerce in the same year.