Bomb Has Been Planted: Why The Indian Gaming Sector is Set to Explode

An attempt to deep-dive into the newly emerging gaming sector in India (Part I)

With the Covid-19 induced lockdown, bored Indians appear to have turned to new avenues for entertainment. The heretofore unknown gaming sector appears to have received a fillip with the enthusiastic adoption of mobile gaming both as a form of entertainment and socialisation. Online gaming in India has seen tremendous growth of late, driven in part, by this surge in digital usage.

So, what’s fuelling this rapid rise? India has some of the most supportive demographics in the world. With a median age of just 28 years, we have amongst the youngest populations globally. Combine this with a rising GDP/capita (~$2,000), growing aspirations and an increasingly internet-savvy population and you have the perfect recipe for explosive growth. The digital Indian of today is wired into the latest trends thanks to the growing penetration of smartphones — India will have 820Mn smartphones by 2022. For context, the population of USA is only 320Mn! It doesn’t hurt to have the cheapest data costs of only $0.09/GB in the world either.

The popularity of global games such as PUBG, Call of Duty, Free Fire, domestic favourites such as Ludo King, Teen Patti, Rummy etc. and fantasy sports driven platforms like Dream11 and Mobile Premier League has left the Indian gamer with a plethora of choices.

Gaming is a $159Bn global behemoth (Source: Newzoo)

Okay, but why is gaming so exciting? Globally, the gaming industry is worth $159Bn with mobile gaming accounting for ~$77Bn of it. In India, the online gaming industry is worth $1.1Bn and expected to grow at a CAGR of 40% to hit $2.8Bn by 2022. With a colossal base of 300Mn+ online gamers, Indian gaming can no longer be ignored.

Now let’s break the sector down into its key segments for further study.

Major segments and sub-segments of Gaming and a brief description of the same

Emerging trends within the sector that are worth tracking:

1. Rise of Multi-Player Formats: Playing with friends / family now seen as opportunity for social interaction and an alternate form of entertainment.
2. Emergence of Fantasy/eSports: High engagement of sports like cricket are giving impetus to rise of fantasy sports leagues while the popularity of games like PUBG is spilling over into eSports and streaming tournaments.
3. Investor Traction & Unicorns: Increasing investments in the sector is leading to a rise of unicorns such as Dream11 for the first time ever.
4. Localisation of Content: Local companies have come up with Indian games like Rummy, Teen Patti and Ludo King or games based on characters like Chota Bheem, Bahubali and even stars like Alia Bhatt. Recently, we saw the launch of FAU-G developed by Bangalore-based nCore Games.

SWOT Analysis: What’s the real story?

Venture Monk’s view is that this sector has high tailwinds from the demographic factors. What would have otherwise been a slow adoption process, has received an unexpected push from the Covid-19 crisis exposing a significantly large segment of Indians to mobile gaming. This “first contact” may lead to greater discovery of various gaming sub-segments and convert at least some of these first timers into more permanent players. Tier 2/3 towns and vernacular games hold promising story that could further push the growth to stratospheric levels. While some segments such as RMG may face regulatory uncertainty in the near term, the laws will hopefully evolve with the efforts of local federations such as the AIGF. The key challenge for India remains on the monetisation front. Hypersensitivity of Indians to spending, especially online, may make profitability elusive making it important to focus on the same from the start. Developers will have to find novel ways of monetisation using a mix of in-game ads, in-app purchases and community-centred models such as streaming, fanclubs and merchandise (for eSports/tournaments). Developing great games with beautiful graphics that have in-built global virality also appears to be another challenge at the moment.

Making a long story short, this sector is still nascent, supremely exciting and worth tracking closely in the future. In the next part of this series we will look at the competitive landscape, key metrics like DAU/MAU, the latest transactions and the most active VC funds in this space. Stay tuned!