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Evolution Of Mobile Gaming In India
As our phones have become smarter over the years, the mobile gaming scenario has evolved. From the snakes game on your Nokia phone to PUBG, the mobile gaming sector has progressed manifold.
The mobile gaming market in India dates back to the late 1990s, just a few years after the introduction of mobile phones in India. While the Snakes game introduced mobile gaming in India, Console and PC gaming companies started to take interest in mobile gaming in the early 2000s and invested their money which led to the growth of the market. In 2008, the launch of Apple and Android App Stores completely changed the mobile gaming scenario as it opened the world of games to every smartphone user. Digital payments also opened opportunities for mobile gaming companies to generate revenue directly from the players by charging premiums, offering upgrades, or through in-app purchases. This incentivised the entry of many firms into the market. In 2016 alone, Indian developed games were on the top of the local download charts on GooglePlay. With the launch of the most hyped game – PUBG in 2018, led to the double-digit growth of the number of mobile players in India.
Even though the Indian Government put a ban across some of the gaming apps due to data privacy concerns, the market has continued to witness growth during the pandemic as people look for different entertainment options. The growth trajectory is expected to continue as long as e-gaming companies integrate advanced technologies into their platforms, and provide even better customer experience through user-friendly UIs.
Key Highlights of the Sector
- Key Players: Dream11, Junglee Games, Paytm First Games, WinZO, MPL
- Market Size: $1.2 Bn
- CAGR: 6.1%
- Average Revenue per User: $8.88
- Total Funding: $544 Mn (August 2020-January 2021)
- Total Mobile Gamers: 365 Million
With about 400 Indian startups working in the e-gaming sector, the market faces high levels of competition with several homegrown companies operating in the field, such as WinZO, MPL, Nazara Technologies, Gamezop,etc. There is a high degree of competition in each gaming genre. Among growing competition where companies are struggling to gain revenue, Dream 11 is ruling the Indian markets with more than 80 million users in FY 2020. The growth of the company can be attributed to the rise in fantasy gaming and its endorsement by MS Dhoni. New companies are trying to make their mark in virtual gaming by providing innovative platforms and enhanced customer experience, through the use of advanced technologies like AR and VR.
A $1.2 Bn Market, Mobile Gaming is Flourishing
The penetration of smartphones and internet in the Indian markets has led to the rapid growth of the e-gaming sector in India. On the basis of devices, mobile users constitute 85% of the industry. India is among the top ten mobile gaming markets in the world, having a market size of about $1.2 Bn as of 2020 and it is expected that the market will continue to witness growth with a CAGR of 6.1% during the period 2020-2025.
There are over 365 million mobile gamers in the country. The Covid-19 pandemic has fueled the growth of the industry as people look for alternate options for their entertainment while staying away from their friends and families. Mobile games allow people to connect with each other virtually, thereby fulfilling the social void. Moreover, some games even allow players to earn real money. By continuously adapting to new technologies and providing more localised and user-friendly customer experiences, the industry is expected to continue on its growth trajectory in the near future.
Source: Inc42Plus Report
Revenue Model of the gaming industry
The 2019 revenue estimates of major gaming and eSports companies in India was around $68 Mn. Let us look at some direct and indirect ways in which gaming companies generate their revenues.
- Free to play games – Users can play these games for free, however it comes with some in-app purchases of some additional items or in-game currencies, that may provide some incentive to the player in one form or another.
- Freemium – Similar to the Free-to-play model, Freemium games allows users to play the basic version of the game for free, and requires them to pay a premium or charge to access the upgrades. Although it is the most popular model, the Freemium model is not helping startups to generate more revenue.
- Advertising – Most games do not charge the players, but instead use advertising as a source of generating revenues. Ads may be interstitial that are placed in between level-based progressions, incentivised ads or contextual ads.
- Shareware – Shareware model enables users to first play the trial version of the game, before they pay to unlock the complete version of the game. The demo version provides the gameplay experience and encourages them to purchase the full game.
In India, most of the revenue for mobile gaming companies is generated through advertisements. A small proportion comes from in-game purchases, however this is likely to increase as disposable incomes of people are on the rise and more people take gaming more seriously. Other ways in which gaming companies generate income are through co-branding and sale of game merchandise, like t-shirts, posters etc. Some companies may also engage in strategic partnerships.
Funding and M&A Landscape – How is the Market Garnering Investor’s Interest ?
The Indian e-gaming market has started to attract investors from around the world. Looking at the history, the mobile gaming sector has raised over $306 Mn in total during 2014 and H1 of 2020. The maximum share goes to the fantasy segment, consisting of about 59% of the total share, which amounts to $180 Mn.
Source: Inc42 Plus Report
The Indian gaming market has attracted a total $544 Mn funds during the period August 2020 to January 2021. This funding amount is expected to double in the next couple of years. Moreover, in recent years, a major part of the fundings has gone to growth stage startups. For instance, Dream11 received $225 Mn in investments in September 2020, and MPL received fundings worth $90 Mn in November 2020. Although there has not been any significant M&A activity in the mobile gaming market in India, as the market is expanding domestic and international firms are on a cautious lookout for acquiring stakes and consolidations with Indian startups.
Boosters for the Mobile Gaming Sector
Technological advancements, like the use of Artificial Intelligence, Augmented Reality and Virtual Reality are expected to drive the market. The use of supporting hardware devices like headsets and mobile consoles improve the gaming experience of the players. A steady growth of more than 40% in mobile gaming equipment has been witnessed by hardware companies. Going forward, improved customer experience and customer relationship management will play an integral part in the e-gaming sector, by providing quick solutions and smooth services to the users. The growing importance of cloud-based services will also enter in the gaming world, especially with the roll out of fiber-based broadband service Jio Fiber by Reliance Jio Infocomm.
Industry Issues and Challenges
The increasing popularity of the mobile gaming industry and low entry barriers has increased the competition in the market. With several companies providing games in the similar genre, it is important for them to retain customers as the gamers have very low switching costs.
Compared to the market spread, the investments in the industry are comparatively low. As a result, most gaming companies are unable to explore the technological infrastructure for the development of the sector. Some games also require high performance hardware that may be costlier. Hence, are unable to reach higher participation rates.
Another aspect that raises concern for the e-gaming industry in India is the policy and regulatory framework of the country. The lack of well-defined laws on online games, gamble, and fantasy sports proves to be a risk for some segments of the market. Last year, several gaming apps were banned over data privacy concerns.
Outlook and Recommendations
India has surely evolved into one of the biggest markets for mobile gaming in the world, with some big firms operating in the sector such as Nazaran Technologies, Dream11, MPL,etc. Despite this the average revenue is just $8.88 per user, which is far behind the top five nations. While it is expected that with increase in disposable income, this is expected to increase in the future, companies should equally focus on other ways of generating revenue, that is through co-branding, collaborations with tech-firms. Moreover, companies should focus on attracting an audience through social media networks and gain support of online game streamers. With a major proportion of the Indian population below the age of 25 years, this seems the right time to establish e-gaming industry in India, which would generate revenue for players as well as the developers.
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This article has been co-authored by Tamanna Kapur, who is in the Research and Insights team of Torre Capital.