By Prashanth Rao, Vidyasagar Prabakar and Anirudh Rao
The global video game market is forecast to be worth $159 billion in 2020, surpassing the global box office and recorded music industry revenues of $42.2 billion and $20.2 billion, respectively, in 2019. The ability to play a video game online on any new-age computing device offers better immersive experience to users. Online gaming opens up possibilities to engage with real gamers worldwide, attend in-game events, complete rewarding tasks, and post accomplishments on social media. The Indian e-gaming industry was estimated at $91 million in 2019; it is expected to grow at a CAGR of 43% year on year.
The pandemic has altered consumer behaviour, but e-gaming is not complaining. During March−April 2020, global spending on games rose by 17% to $10.5 billion. In India, the industry grew at a CAGR of 21% during the lockdown, with a steadily increasing customer base crossing 300 million users. The pandemic is contributing to the normalisation and adoption of e-gaming. For instance, a leading Indian gaming company has witnessed a 200% increase in its user base during the lockdown, with about 1,00,000 new users joining the platform every day.
In India, 85% of the online gaming takes place on mobile. Convenience and flexibility have made mobile gaming extremely popular – especially amongst amateur and casual gamers. Gaming saw an increase in consumption in 2019, and was amongst the top five activities carried out on a mobile device. Time spent on gaming has increased by 21% during the lockdown. The reasons for this could be the presence of a young tech-savvy population (with 75% aged under 45), increased internet penetration, improved affordability of high-spec smartphones, and rising disposable income.
The e-gaming business model has transitioned from a model dependent on download volumes and advertisements to something with diversified revenue streams built on consumer engagement and elevated experience levels:
- New in-game revenue streams, such as chargeable expansion packs, exclusive customisable avatars, virtual coin packs, and advanced features
- Virtual real estate has not gone unnoticed as studios seek to bring in ad revenue from banners, multimedia, and product placements
- Subscription-based models, such as those of Apple Arcade, Xbox Game Pass, PlayStation Plus, Google Play Pass, EA Access, and EA
- Play, are gaining popularity; players paying a monthly fee in exchange for access to ad-free and exciting game titles; subscription models reported to increase gaming time by 40% in addition to providing a recurring revenue stream
Similar to the growth story of any industry, the e-gaming industry’s growth relies on well-rounded development of the larger ecosystem. This would include game development studios, device manufacturers, internet connectivity providers, digital payment operators, and gaming peripheral companies. On the content front, gaming studios are stepping up their development capability by incorporating artificial intelligence (AI) and machine learning (ML) to create adaptive experiences. They are also bringing in mixed reality technologies (such as AR/VR), making them multi-dimensional. In addition to an attractive local market, India is seen as a leading exporter of game development talent, with many studios involved in designing popular titles.
In India, e-gaming is witnessing a surge in domestic and foreign direct investments, attracting more than $450 million from 2014−20 and over 400 active start-ups. Demand for e-gaming is increasing in smaller towns and rural areas across the country, driven by a growing catalogue of games with an Indian connect (such as Teen Patti, Kabaddi, and Rummy).
We are witnessing an emerging global trend of collaboration/partnerships across sectors such as e-gaming, music, television, over-the-top media, e-commerce, and telecom operators, making it one-stop destination for consumers. Corporates are also using gamification for training, teambuilding, and customer loyalty. Edutainment-based games are witnessing high growth and adoption.
Recent regulatory interventions in India have led to a ban on major international games, providing opportunities for indigenous alternatives to grow and expand. The industry is aiming to boost visibility and improve conversions, with gaming companies bidding for sponsorship rights of mainstream sporting leagues, such as the IPL, which were typically out-bid by large established corporations.
Given the right level of nurturing, the Indian e-gaming industry has the potential to be seen as a global power to reckon with. The central government has recognised this industry’s importance. The prime minister is encouraging the development of digital games inspired from the Indian culture, and the Union Ministry of Education is taking initiatives to create jobs in the digital gaming industry. On the policy front, the recently announced drafting of a national Animation, Visual effect, Gaming and Comic (AVGC) policy is expected to give the industry the much needed regulatory support, encouraging investment and expansion. One has to wait and see if gaming companies will be able to hold the demand for e-gaming in the post pandemic era. Until then, the game goes on.
The authors are Prashanth Rao, Partner; Vidyasagar Prabakar, Manager and Anirudh Rao, Analyst, Deloitte India.