The $2.8 Billion Gaming Dream

It is time we address the elephant in the room — India’s thriving gaming industry and its runaway growth. If a report by Deloitte India is to be believed, the industry is expected to grow at a CAGR of 40 per cent and reach around $2.8 billion by 2022, up from $1.1 billion in 2019.

A KPMG report paints an equally bullish picture — it expects the elephant to grow 113 per cent from $1.83 billion this fiscal year to $3.91 billion in FY2025.

The gaming juggernaut has begun rolling, with the number of online gamers increasing from close to 300 million in 2019 to 433 million in FY20-21. Also, the revenue of the industry has more than doubled from Rs 6,200 crore in FY19-20 to Rs 13,600 crore in FY20-21. Casual gaming accounted for 44 per cent of the country’s total online gaming industry in FY21 and its share is likely to touch 58 per cent by FY25, as per the KPMG report.

STRONG NUMBERS
Last year’s investments in gaming companies have attracted more investors to gaming this year. The sector attracted $544 million in investments during the August 2020-January 2021 period, and this is set to double over the next 12-18 months, anticipating a huge growth of the gaming industry in the immediate future, as per a Maple Capital Advisors report.

The investor community’s newfound interest in the gaming industry has led to a spate of investments in the sector recently, including a $225 million investment in Dream Sports, $90 million in Mobile Premier League, and $68 million in Nazara Technologies.

The esports segment has been seeing a lot of funding activity lately. Nodwin Gaming raised $22.4 million in equity investment from gaming giant Krafton in March 2021. Likewise, startup Revenant Esports received a $1 million investment from investor and adman Sajan Raj Kurup. Kwalee, a UK-based game developer and publisher, is all set to pump $30 million in its India operations over the next five years. Moreover, interest in cross-border mergers and acquisitions has palpably increased and there are indications that multiple companies could achieve unicorn status in the next within two years, says the Maple report.

Among others that have attracted funding include fantasy sports platform HalaPlay which drew investments from Milan Ganatra, Dangal Games which secured $1 million in series A funding, Winzo that closed its series B funding last year, and fantasy gaming startup Playerzpot which raised $3 million. According to Tracxn, a firm that tracks investments and financials of private companies and startups, $131.1 million was invested in the Indian online gaming sector last year, the highest in the last six years.

THE RISE OF INDIAN GAMING
2020 turned out to be a watershed year for online gaming in the country. Aided by the pandemic and the lockdown, online gaming became the number one source of entertainment in the country for the people confined to their homes, overshadowing all other forms of entertainment.

Almost overnight, the gaming industry shed the tag of casual entertainment and became mainstream, marking a paradigm shift. This was evident as India ended the year at the top position globally in terms mobile game downloads.

One of the early movers in online gaming was Nazara Technologies that recently went public. Nazara’s IPO can signify a good omen for the industry as more and more big players may look at listing their stock on the bourses.

Speaking about how Nazara is sustaining its success, Nitish Mittersain, Founder & Joint Managing Director, Nazara Technologies says, “Our industry is so dynamic or fast-moving that you have to continuously innovate, evolve, and be paranoid to sustain yourself. We cannot get complacent. Our IPO was successful; we received a lot of support and confidence from the investors but for us, it’s a new beginning. We have to double the efforts, be more paranoid about the few things we do, and bring in new products and services to the market.”

As the ecosystem matures, gaming is expected to subsume sports and entertainment of all kinds. “The VC interests in gaming are natural. In India, where gaming unicorns are yet to emerge, we will see a lot of foreign investments in the gaming industry as more gaming studios from India embark on creating global IPs that can be taken to 200 markets globally and be localised in 20 foreign languages. Octro has grown more than 100 per cent YoY both from player point of view and overall,” says Manav Sethi, CMO, Octro Inc.

Pranav Panpalia, Founder, OpraahFx and OP Gaming, thinks that it would have taken the gaming companies three to five years to reach where they are today.

“Once seen as a hobby, gaming evolved to be one of the most prominent cultures in the world today. Gamers, esport players, and gaming content creators have seized the opportunity to create a unique value proposition in the conventional market of careers. Internationally, gaming has grown rapidly over the last few years, whereas India saw a quick growth only after last year’s lockdown.”

“The Indian gaming industry is here to boom, with brands willing to invest in gaming and gamers,” he adds. The online gaming industry in India boasts a wide portfolio consisting of multiplayer online battle arena (MOBA) games, board games, card games, action and adventure games, hypercasual and casual games, and much more.

However, Parth Chadha, who founded Ewar Games that raised a pre-series A funding last year, says, “One of the most notable contributors towards the prolific growth of online gaming in the recent past has been various types of real money games.”

OPPORTUNITIES GALORE
Described as the dark horse of the world’s thirdlargest startup ecosystem, India’s gaming sector, while establishing itself, is gaining traction from budding entrepreneurs and investors alike. While the investors have been making a beeline for sectors such as edtech and healthcare, gaming is becoming a favourite too.

Sajan Raj, Founder & Chairman, Kurup Creativeland Asia, who invested in Revenant Esports, shares the reason for choosing esports over other viable options. “From a business sense, investment in gaming is not just limited to one thing. The media is going to be big and I can invest in anything that creates a positive environment at this juncture. Gaming sounded like a great mix. It brings in entertainment, sports, skill, media, IP, and broadcast,” he says.

Milan Ganatra, who invested in Halaplay, believes the sector is bursting at the seams with too many players coming in especially in the RMG segment. The growth of the industry is attractive. “The potential in gaming excites me as an investor. If you have a billion-dollar industry growing at a CAGR of 40 per cent, it calls for participation. This is the reason I have chosen to be a part of the gaming industry,” he says.

TRENDS IN GAMING
Some of the biggest tech transformations in the gaming world include the cloud-based technology that has made online games accessible to everyone without having to invest in PCs, laptops, or consoles. Mandar Navare, CEO, Flentas Technologies, a cloud company, states, “As millions of new gamers are added, it becomes more important for any gaming studio to have a strong backend team or provider. It has huge potential as all the top gaming studios have their custom backend and need a strong team of solution architects to manage their cloud infrastructure.”

Streaming app Rooter’s founder Piyush Kumar thinks that one of the fastest ways for gaming companies to grow their user base is through game streaming, by creating more content and onboarding more streamers. “In any market, when the gaming category grows, several games foray into the market to build a substantial base of gamers. This leads to the formation of two derivative industries — game streaming and esports. Essentially, game streaming can be attributed as the most significant affiliate category in any gaming market,” he elaborates.

“The only way for India to capture a chunk of the global gaming industry is through game streaming platforms. After all, Indians are hungry for content and the emergence of many game streaming unicorns over the last one year is a testimony to that,” adds Kumar.

The service providers too are seeing gaming as an industry with immense growth opportunities. Sanjoy Bhattacharya, Head – IT Business, ViewSonic believes that it requires a community to address the gaming segment.

“The ecosystem partners and processing unit companies such as Intel, NVidia, AMD are driving the system, while the component players like cabinet, gadgets, high-speed monitors, and RGB lighting are building the block vendor.”

Bhattacharya thinks that gaming has become more entertaining with 4G and 5G adoption. “That is the reason why hardware, title, and internet are becoming a winning trio for gaming or esports,” he says.

LEGISLATION & REGULATION
India does not have laws to regulate online real money games yet. According to Sethi of Octro, there is a latent need for harmonisation of state and central laws along with policy measures to create a predictable regime that allows a level playing field for all players in the ecosystem.

One of the key factors that make a league like IPL successful is the government’s recognition of esports as a sport, believes Lokesh Suji, Director, Esports Federation of India & Vice President, Asian Esports Federation.

“The challenge is that people here in India confuse esports with fantasy, gambling, betting, RMGs, or even video games for that matter. People are trying to create their definitions for esports despite the clarity given by the Esports Federation. This is hampering Indian esports to reach its true potential,” Suji says. He, however, is confident that these issues will be resolved soon.

Legal consultant Altatmish Siddiki believes that the government has somehow failed to treat the online gaming industry as a market with huge potential wherein regulation can lead to an increase in state revenues by imposing appropriate tax regime and helping the state exchequer.

“Due to the largely unregulated form that exists, several legal problems like online security, harassment, copyright infringement, and piracy have occurred. We require a comprehensive mechanism to deal with the incidental legal issues apart from the regulatory mechanism,” says Siddiki.

The NITI Aayog has proposed some guidelines for fantasy sport platforms to reduce multiple interpretations, uncertainty, and unethical practices from offshore firms.

“The recommendation of a singular national policy and self-regulatory organisation for online fantasy platform operators will provide clarity to regulators and users. This policy will streamline the way states view fantasy gaming and will fill in the loopholes that were caused due to a lack of regulations. Hopefully, the guidelines will reduce legal ambiguity around fantasy gaming and encourage people to participate in the same,” says Navkiran Singh, Founder & CEO, Baazi Games.

Amit Kushwaha, Head Brand Strategy, Gameskraft, calls for measures to fix trust issues. “With the current users having access to and experience of ultra-modern international gaming, their expectations from games have also increased considerably. Factors such as low trust due to the negativity around the gaming segment have also been an issue,” he says.

Kushwaha, however, believes that through various technical interventions, it would be possible to ensure that the online gaming experience is 100 per cent safe for all the players.

A LIMITLESS OPPORTUNITY
The future of the gaming industry looks bright, with the steady growth of existing gaming companies, startups, service providers, streaming apps, and influencers on one hand and investors willing to back them on the other.

The gaming tournaments shortly will come as a big business opportunity. Such tournaments have been handy during the pandemic in providing the excitement, competitiveness, and recognition that traditional sports are usually associated with.

“During isolation, people were forced to seek interactive entertainment from homes. Online gaming tournaments became a suitable alternative. Even post-pandemic, such tournaments will stay on. It is going to supplement, rather than rival the traditional sports in future,” says Dilsher Singh Malhi, Founder & CEO, Zupee.

Tarun Gupta, Founder, Ultimate Battle says, “As esports is growing substantially into spectator sports and gaining eyeballs, big brands are now getting more comfortable with spending their marketing budget on esport events.” Soon cloud technology will also jump on the gaming bandwagon giving exponential rise to the subscription model. The cloud service providers will help multiple gaming studios to build, migrate, and manage their core gaming backend on the cloud.

Also, live game streaming, with a unique combination of gaming and content in-game streaming, will bolster two major macro trends, gaming growth and content growth. And it is in these two domains that new unicorns will emerge from.