Reliance Jio, Airtel preparing to cash in on online gaming boom in India

Online gaming, that was a $1.9 billion industry in India in 2019, can well be on track to grow at a 35 per cent compounded rate (CAGR) to hit $8.4 billion by 2024

The Covid-19 pandemic induced nation-wide lockdown has not only redefined how India Inc works and children study, but has also opened up more avenues how these netizens can unwind after a hard day’s work.

Online gaming, that was a $1.9 billion industry in India in 2019, according to Redseer estimates – a Bengaluru-based consulting firm – can well be on track to grow at a 35 per cent compounded rate (CAGR) to hit $8.4 billion by 2024. This, according to Bofa Securities estimates, spells boon for Indian telecom companies, especially Reliance Jio and Bharti Airtel, which are waiting to capitalise on the opportunity.

According to a July 6 note by BofA Securities, unlike other Asian economies (like China, Korea etc), though India till now has not shown major uptake in online gaming, but with improving telecom infrastructure, evolving gaming eco-system & with huge Millennial / Gen Z base now, they expect growth to gain momentum.

Those at Jefferies, too, share a similar view. “New catalysts are likely to come with behavioral change post Covid-19. The online games sector is expected to speed up in paying ratio and ARPU as people are more willing to pay, while remote office becomes a new norm to the space,” wrote Thomas Chong, an equity analyst at Jefferies in a July 7 co-authored note.

Usage on the rise
 

Globally, weekly mobile game downloads spiked as high as 1.2 billion, a new world record, reports suggest. “Due to lockdown in various countries, users were on average downloading 30 per cent more mobile games per week in April 2020 versus January 2020. In categories, simulation and board games surged in downloads and usage share,” the BofA report said.

 

In India, too, there was a spike in gaming downloads, BofA said. Popularity of Ludo King boomed with a 142 per cent jump in downloads between February and April, says the BofA report citing news articles. Nazara saw an increase of 20 per cent in time spent on its network and five-fold increase of 'In-app' purchases. PayTM First Games witnessed a 200 per cent increase in the user base and spent anywhere between 30 to 45 minutes per day.

“However Fantasy gamers got impacted as sporting events were either cancelled or postponed due to Covid-19 threat. In the interim, Fantasy players focused on newer games – both skill & console based games,” BofA said.

Indians, the report mentions, were already spending 662 million hours collectively on playing games on mobiles in 2019 and the activity ranked among the top five with time spent on social media leading the charts. BofA forecasts India’s gaming user base to hit 486 million by 2022 from 365 million in 2019 and 409 million (estimated) in 2020.

Advantage Jio, Airtel

Among telecom companies, Reliance Jio and Bharti Airtel, they believe, are aggressive in building an ecosystem around this and should reap benefits in the long run.

“Recent lockdown led to a strong uptake in online gaming. Monetization though may take time given nascent stage of the market. Rather than being just the pipe, telcos like Jio (Reliance Industries-owned) and Bharti Airtel are focusing on gaming as an incremental source of ad/subscription revenue. In fact, RIL believes that gaming in India will be bigger than music, movies and television shows put together,” suggests the BofA Securities report.

Similar to their content strategy, both telcos, BofA says, are tying with gaming-companies instead of developing in-house games and expect cloud gaming picking up post 5G/fixed broadband rollout.

“Rather than casual gaming, telcos are focusing more on high bandwidth requirement games. But they are looking to eliminate the need of hardware (as it limits addressable market) and instead offer games on Pay TV Set-top box. We find current strategies of Jio & Bharti towards gaming different. While Jio is offering more casual games, Bharti appears more focused on e-sports,” BofA said.