Overall Market Size

The over all gaming market in India is estimated at INR 6.5bn in 2008 and is Expected to grow over four-fold to reach INR 27.4bn in 2013 at a CAGR of over 33 percent. The Indian gaming market, though growing at a healthy rate, is dwarfed by the size of the gaming market in developed countries such as the US which stands at USD 37billion in 2008. Factors such as a young population, rising disposable incomes, increasing PC and wireless users are attracting domestic and international gaming companies, developers, publishers to this market.

The gaming industry can be divided into 3 separate segments – Mobile Gaming, Console Gaming and PC & Online Gaming.

Mobile Gaming

The Indian mobile gaming segment, estimated at INR 1.4 bn in 2008 in terms of end user revenues has not ived up to the potential. Enamored by its potential, a number of players had entered the market in 200304. Plagued by a number of issues such as content discovery and revenue leakages and after seeing a wave of consolidation in 2006-2007, the Indian gaming segment in India is currently dominated by a few players such as Indiagames, Nazara, Hungama Mobile and Jump Games which constitute over 80 percent of the industry revenues.

Mobile gaming in India has two main revenue streams. The first is the development, publishing and porting of mobile games by Indian games companies for distribution in Indian and overseas markets, either directly or through telecom operators. The second is development work undertaken by Indian game development companies for overseas developers/publishers. These typically range from art outsourcing and animation, to late stage development activities such as game testing and porting. More recently, Indian companies have also started getting involved in core code development activities.

While the mobile gaming segment has tremendous potential, a number of factors have historically limited the segment from achieving the growth foreseen by the industry at large.

A key catalyst to industry growth is the ability of the stakeholders to create awareness of their products to end users. Given the distribution dynamics for mobile content in India, most mobile games are downloaded off telecom operators’ decks making the availability of a mobile data connection a basic necessity. The problem with this is two fold:

• Technology: Historically, a large proportion of mobile phones in India were not capable of handling data and therefore did not form part of the addressable market for mobile content.
• Discovery: Secondly, unlike western countries, where telecom operators Bundle mobile connections with handsets, in India handsets and mobile connections are sold separately. Handsets were seldom programmed with operator settings required to access data and moreover, data packages were subscription based (even for on-deck browsing) which required activation by a subscriber. This created a multitude of problems in terms of discovery of mobile content, since only high-end evolved users could actually activate and subscribe to rich media content on their mobile phones.
• Consumer Education: Given the rate of monthly subscriber additions (average of around 9.4 mn per month in 2008), telecom operators are presently more Focused on customer acquisition than marketing of on-deck content. Lack of such marketing initiatives by the telecom operator implies that even users with data active handsets often get excluded from the addressable market since they are not aware of the existence of on-deck data content.

Console Gaming: Console gaming is the largest money churner in the global market and is gaining prominence in India too. In 2008, the Indian console gaming segment registered total revenues of INR 4.1 bn which is expected to go up to INR 9.4 bn in 2013 on the back of favourable demographics, rising urban disposable incomes and new generation consoles penetrating the Indian market. Organized marketing, which was missing some years ago, has led to a new demand among the Indian consumers for console gaming. It has gone from being a product for the cult group to a more lifestyle oriented product.

Secondly, easy availability and affordability of consoles has led to a growth in this market. The fall in console prices from approximately INR 25,000 in 2006 to Approximately INR 7,500 for older hardware and INR 13,000 – 20,000 for current Hardware makes them an attractive buy for the non-user to plug and play.

However, high customs duties and indirect taxes have made legitimate console Hardware and software approximately 40 percent more expensive than grey market imports. Secondly, the release windows in India for popular games do not coincide with global launches. Early adopters and active gamers therefore turn to grey market imports and pirated software to ensure that they get to play their favourite titles on the latest hardware.

Price point for games is very important in India. Steep prices of new games Around USD 50 in US plus a steep import duty in India make the games expensive for end user. Also, console gaming faces stiff competition from mobile and PC gaming since the latter are relatively cheaper. In India, console gaming has been more of an urban phenomenon whereas mobile gaming with its increased reach (urban and rural) and ease of access has the potential to evolve much quicker than console gaming. With a reach of over 80038 mn telecom subscribers in India in 2013, mobile gaming is expected to be a significant competitor to the console gaming market in India.

PC and Online Gaming

PC games have been around for a very long time too. In the 1980s, the high cost of console games was beyond the reach of the average Indian households. The purchase of the computer by a household meant that the father would use it to type official documents with teenagers and young adults popularizing games such as Quake, Prince of Persia, Doom, Wolfenstein 3D, etc. Today, the PC gaming market has grown to INR 978.6 mn and expected to grow at a CAGR of over 36 percent through 2013. The primary growth drivers for PC games in India are the growing broadband subscriber base, multifunctional nature of PCs and availability and price points of PC game titles.

With over 6539 mn PCs the penetration rate is increasing at 20 percent per annum thus expanding the market for PC gaming in India. Moreover, the younger Generation is getting hooked to PC gaming due to the rise in the number of gaming cafes in the neighbourhood including the entry of players such as Reliance.

The number of gaming cafes with the latest gaming PCs for playing single player as well as multiplayer games outnumbers gaming cafes that have consoles like the PS3 or Xbox 360.

PCs being far more multifunctional than consoles attract a wider user base than consoles. Moreover, the number of PC game titles available in India far outnumbers those of console games, particularly when it comes to multiplayer online games. Price points of PC game titles are lower than console titles making this segment attractive for a wider group of users across socio-economic classifications. The price point advantage, however, is partially offset by the high entry cost of PCs, especially high end gaming PCs and the obsolence factor, whereby PC’s require frequent upgrades to play the latest game titles. Consoles, on the other hand, have longer refresh cycles.

Even though the metros have seen some improvement, poor infrastructure base for high speed internet connectivity is the biggest challenge facing the online gaming community in India. Ping and Frame Per Second (FPS) are often judged by players to be deciding factors during gameplay and must therefore be optimum. ISPs and hosting servers must therefore maintain fast servers and robust infrastructure to maintain speedy connections. In the absence of a conducive gaming environment the gamer will look at alternate media to satisfy his gaming urge.

Online advertising though growing is being slowly accepted by advertisers in India. In game placement sand games focused on advertiser products are too early for this market and advertisers have not been able to monetize this feature. Advertisers are relying on banner advertisements alone but they cannot be deployed during game play since they would interfere with the gaming experience.

Communities do exist in India but they have not assumed scale similar to the Western world. In India, communities are extensions of a group of friends or Family members. The online community format where gamers with similar Interests from different geographies come together is still at a nascent stage and Will take 3-4years to develop.

Gaming Sector: Growth Drivers

• Increasing telecom base and arrival of 3G: India telecom base is expected to grow from 347 mn subscribers in 2008 to 815mn subscribers in 2013 at a CAGR of 19 percent. The expected rollout of 3G services will provide efficient, high speed data networks to mobile gamers
• Decreasing voice ARPUs: Given the declining ARPUs from voice services, mobile value added services will assume increasing significance as additional revenue sources to offset this decline

Console gaming

• Demographics and Rising Incomes: India is a young country with over two-thirds of its people aged under 35 (the primary target segment). This coupled with the rising disposable incomes in urban India and the increasing consumerism makes a good case for growth in the console gaming segment in the next few years

PC and Online Gaming

• Increasing broadband penetration: The number of broadband subscribers in India has increased from 0.7mn in 2004 to 4.942mn by September 2008 and continues to grow rapidly– this will help in driving online gaming
• Strong marketing and distribution: Mainstream advertising as well as the strong distribution network of gaming chains such as Reliance Web world has attracted many young people in urban areas to PC gaming– such chains will continue to drive growth in the PC gaming segment in the future as well

Gaming Sector: Key Challenges

Mobile Gaming

• Skewed revenue sharing agreements with mobile operators: Because of the direct billing relationship with the end user, operators in India typically get 60-70 percent of the revenues for VAS while content creators get only 15-20 percent

Console Gaming

• High customs duties and indirect taxes: These make legitimate console hardware and software about 40 percent more expensive than grey market imports.
• Release windows for popular games do not coincide with global launches: Early adopters and active gamers therefore turn to grey market imports and pirated software

PC Gaming

• Piracy: Piracy is and will continue to remain the biggest threat for PC games, because of ease of high street availability of illegal CDs at rock bottom prices. Moreover with growth of broadband, downloading of pirated games through internet and P2P networks are likely to hurt the industry.

  Courtesy: KPMG Report

  Indiabiznews, January 30, 2010