No child's play: Start-ups bet big on online gaming, but no big bucks yet

The gaming industry is witnessing a digital revolution in India but most developers are yet to make big bucks

Ten-year-old Yash Chandani is already into playing games using virtual reality glasses. Forty-seven-year-old Shamima Akhtar has spent over Rs 10,000 playing Candy Crush. The Indian online gaming industry is seeing a boom, thanks to smartphone proliferation and growing digitisation over the past two years.  

India is already one of the top five countries for mobile gaming, according to a 2018 report by POKKT, a mobile video advertising platform. The country’s gaming industry is worth over $890 million and has more than 250 game development companies, up from a mere 25 in 2010, with at least two start-ups coming up every month.

The online gaming industry is fast turning into a billion-dollar market. Not only has this space attracted investments from technology behemoths like Paytm, Tencent, Youzu and Nazara, but witnessed brand endorsements by celebrities such as Virat Kohli and Hrithik Roshan. 

Concept 

Online gaming companies are rushing to cash in on the explosive growth of smartphones, of which India is expected to have 530 million users by the end of 2018. This uptick began in 2016 with the launch of Reliance Jio, which provided easy access to low-cost 4G data plans, forcing other telecom giants like Airtel and Vodafone to slash their rates.

Mumbai-based Dream11, set-up in 2012, offers games where players manage fantasy football, cricket, basketball and kabaddi teams. Founded in 2008, Karnataka-based 99Games gained popularity with online games such as WordsWorth, Star Chef and SpellUp. Octro, established in 2006, made  popular pastime games like Teen Patti and Indian Rummy.  

While a direct comparison is difficult as the online gaming segment is vast and varied, Nazara, the maker of games Chhota Bheem, Speed Racing and Motu Patlu, is seen as the segment leader.

Founded in 2000, the firm caters for 61 countries and has 10 million active monthly users. Having raised $64 million so far, the company is planning to launch an initial public offering. It also picked up a 10 per cent stake in offline virtual reality gaming start-up InstaSportz.

Other players in this sector include Loco, Passion Gaming, PlaySimple, Flixy Games, GameXS, RedMonsterGames, Pi Interactive, Apar Games, and CreatioSoft.

Opportunity 

Global outsourcing advisory firm Tholons’ Services Globalisation Index-2018 ranked India as the top digital nation, beating the US. More than 222 million active gamers have been spending average 42 minutes playing mobile games every day in the country as of 2017, the POKK report added. Male users above the age of 15 on average spend 10-20 minutes per session, with four-five sessions every day; female users in the same age category spend 8-12 minutes per session across seven sessions on a daily basis. In terms of audience profiles in India, there are 38 million above male users above the age of 15 and 21.4 million female users in the same age group. 

This rapid growth in India and southeast Asia comes at a time when the gaming industry in the US and China is witnessing saturation. In 2017, Indians downloaded 12.1 billion apps on their phones and tablets, compared to 11.3 billion in the US, according to an annual report by App Annie, an analytics company. App downloads in India tripled between 2015 and 2017, while the US saw a 5 per cent drop in the same period, the report added. While 97 per cent of the app downloads in India are on Android’s Google Play, Apple’s iOS accounts for a larger share of consumer spends, at 75 per cent. 

Indian game developers are cashing in on the opportunity with local offerings. By offering free-to-play games, these start-ups are trying to improve user engagement.  

Ludo King, the top game from India in 2017, has crossed the 10-million daily active users (DAU) mark, while its monthly active users stand at 70 million. Subway Surfer (5 million) and Temple Run (2.5 million) are in the second and third spots, respectively. 

Revenue and road ahead 

With India projected to have 735 million internet users by 2021, the online gaming market is estimated to grow to $ 1billion by 2021 and the digital advertising industry to around Rs 190 billion by 2020, according to a 2017 study by Google KPMG. Currently, even though online games are gaining traction, most of them are yet to make big bucks, with some yet to monetise. 

Start-ups are riding on digital advertising to open revenue streams for them. With live quiz apps, contesting platforms and live video-streaming gameshows making inroads in the Indian gaming market, the country is seeing a trend in that direction. Companies such as Octro, Nazara Technologies, Moonfrog Labs, PlaySimple, Red Monster, and Six Red Guns have also leveraged their experience with gaming firms.

However, where global users are increasingly spending on in-app game purchases, Indians are still shy of spending money on games. On every popular game, less than 1 per cent daily active users opt to spend, resulting in game publishers opting for a freemium model. The nature of advertising is also undergoing a change — from traditional ad pop-ups, we now see an uptick in rewarded videos, where a user is requested to watch an advertisement instead of spending money to continue playing.

Expert Take

Challenges for gaming start-ups slowly fading

Apurva Chamaria, angel investor, and chief revenue officer of RateGain

In the past, gaming has been out of reach for a majority of Indian consumers because of three primary reasons — high cost, poor availability of quality hardware, and lack of micro e-payments infrastructure. These challenges are now disappearing. A surge in availability and demand pick-up in smartphones (India having the world’s second-largest smartphone user base), a rapidly improving payment ecosystem, and India’s insatiable appetite for consumption of popular entertainment are giving a fillip to the gaming industry.  

The Indian gaming start-up eco-system is about 18-year-old and some of the top Indian gaming start-ups are: Dream 11, 99 Games, Octro, Games2Win and Nazara Technologies. Big global layers like Apple and Google are also launching programmes to win the game developers over.