Budget 2020 India: The more telcos continue the bleed, the quality of mobile internet will suffer and the entire ecosystem of internet businesses will be jeopardized.
- By Deepak Gullapalli
Union Budget 2020 India: The online gaming industry in India has witnessed a paradigm shift over the years and is set to grow by over $2 billion in revenue by 2021. While there are several dimensions to the gaming industry, the biggest revenue and employment generator in the gaming space in India is the skill-based gaming industry which has taken off with online rummy, fantasy sports and poker. The demographic population (majority of young adults) advantage of this country coupled with the ease of access of mobile internet and virtual payments have aided in the hyper-accelerated growth in this sector.
The Indian gaming sector is a largely unregulated sector and operates as most IT service companies since the primary business is to monetize the gaming technology that is built for entertainment purposes for Indian users. Therefore, some of the key things that our industry will be looking at in the short-term would be benefits to the individual tax-payer as well as the corporate.
Reviving Telecom Sector
The industry is a growing spender on media (ATL and OTT) included and any specific levy of taxes on OTTs will result in an inorganic spike in advertising costs as the OTT players will pass on these costs to advertisers and consequently hurt the profitability and growth of the gaming industry which is still relatively young.
Another critical dependency is on mobile internet and telcos. In our business today, the internet and the user is primarily mobile. Therefore, the more telcos continue the bleed, the quality of mobile internet will suffer and the entire ecosystem of internet businesses will be jeopardized as patchy internet services can ruin a user’s experience especially on gaming which takes up high levels of engagement and involvement. A bad user experience because of poor connectivity will directly result in a revenue impact for the sector. We will be hoping that the government takes the initiative to revive both the telecom and telecom infrastructure sectors for a more optimistic future of mobile internet connectivity.
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From the individual taxpayer’s point of view, who is also the customer, any decisions that will result in more liquidity to the user’s income will result in more money being recycled in the economy and on entertainment platforms such as ours. Given the potential state of the economy, it is imperative to empower the average Indian tax-payer and increase tax limits/slabs and increase the number of deductibles on taxable income so that the user has more money to spend on gaming. On a lighter vein, if there are greater taxes/cesses imposed on theatres, the likelihood of users spending more on gaming goes up!
From a corporate standpoint, the gaming business ecosystem has certain fundamental dependencies on mobile payments, payment gateways, banks/wallets. Any move that would create fiscal challenges to businesses in this space will have an indirect but significant impact on online mobile gaming.
Finally, we will be keen to see if there will be some more clarity on aspects of taxation and valuation of startups and more tax subsidies for early stage-start-ups which will help attract more foreign investment into the country at this point in time. There will be more consolidation in the gaming industry going forward and it will be good for larger businesses to evaluate inorganic opportunities that do not have pressing tax concerns on their books. Changes to capital gains slabs and dividend distribution will also be critical as investors’ strategies and exits are directly linked to returns on investment and this is something that the entire startup community and not just the gaming sector will be watching out for.
(Deepak Gullapalli is the Founder & CEO at Head Digital Works-owned Ace2three, Fanfight and Cricket.com. Views expressed are the author’s own.)