09 April 2007

Online Gaming in India

Internet and Gaming are still in nascent stages in India. Internet in India is yet to catchup with the rest of the world with estimated 42 million "ever users" as of March 2007 (28 million "active users"). Surprise! surprise! Internet and Mobile Association of India predicts the number would grow to 54 million "ever" users and 43 million "active" users next year. According to this research (pdf),

"Active user" is defined as someone who has used the Internet at least once in the last 30 days, while "ever user" is someone who has used the Internet at least once.

Who came up with that term "ever user" ? Anyway, the report identifies that college students and young men (?!) make 50% of the total internet users. Cyber cafes play significant role and serve as the most popular access point for 40% of the active users. Most of these cafes double as gaming zones and this particular role is growing. The gaming industry is betting on them to become cash-cows. Internet access from home has increased from 22% to 31%. As of today, broadband has only 30%; dialup is the king with 70% of the market. But this scene will change rapidly as broadband rates tumble every month. The report predicts broadband to takeover by 70% in next two years.

All these trends set very good conditions for online gaming boom. Console gaming is a very expensive deal for an average Indian - Rs 40,000 for Sony PS3 - are you kidding me? Thats more than the average monthly salary of a game loving IT guy/gal in Bangalore. Only crazy gamers will buy it - if they have that money (More on this later). The Gaming report for 2007 (pdf) covers online or downloaded single or multi-player PC games.

These are the current gaming trends:

"The current revenue streams for the online gaming industry in India are from three sources:

Advertising: These include Advergames, In-Game placements & On-Site advertising

Subscriptions: These include Monthly subscriptions paid for MMORPG’s available through Indian publishers, subscriptions paid directly to international players for MMORPG’s such as World of Warcraft and for digital distribution of games through broadband service providers

Organised Cyber Café: These include Revenue accruing to Reliance & Sify from online gaming activities at Web Worlds & Game Dromes"

As of January 2007, it estimates the online gaming in India is worth 21 Crores ($4.6 million).
Of the total revenue generated by online gaming, the report says: a large chunk - almost Rs 12.17 crores - is from organized cyber cafes; about Rs 6.6 crores comes from subscriptions; with advertising accounting for only around Rs 2.24 crores.

It is interesting to note that nearly 20 percent of the total revenue generated by online gaming accrues directly to international players based out of India. Currently, most Indian gaming portals are based on a free model, with plans to introduce monthly/higher level subscriptions at a later stage. The report rightly predicts:

"We believe that choosing the right monetization strategy would be the single biggest determinant to the growth of industry revenues. It is easy to get swayed by the success of online gaming in markets like China & Korea and assume a similar natural progression for the Indian market."

Realizing cyber cafes would play a big role in initial growth of gaming by attracting 97% casual gaming population, the report also suggests following developed south-east Asian markets like South korea.

Sify has already started transforming its network of iWay cyber cafes into game zones. Content providers like Zapak, Indiagames, Games2win are rapidly adding new games and services. Mobile platform is also helping as easy payment gateways and run contests. Recently, Games2win got $5 million venture capital from Clearstone venture partners. It also signed up a professional gamers to play tournaments in India and abroad. EA is also hunting for partners in the booming market. I'm not sure if they had any success. If you hear about it, please let me know.

As issues facing the consumer (gamer), the report lists the following:

  • Prevalence of anti-gaming culture
  • Poor enabling Infrastructure
  • Lack of advanced courses on game development

Anti-gaming culture?!! I'm not sure what they mean by that. The point is half-true but not many Indian kids listen to their parents nowadays :) and they know that there is a thing called Internet where they can play games. If the kids keep it moderate, I think Indian parents are not going to say "No".

It also sights few issues with the gaming industry in India:

  • No Localization of content
  • Slow growth of online advertising
  • Lack of online communities

I'll definitely agree with "no localization". Most of the games are cheap knock-offs of games developed elsewhere. Who cares to play MLB and Tombraider, huh? How about some Gilli?

Oh, they also identify what they have to do to milk some cash:

  1. Feeding the hen that lays the golden eggs ??!!
  2. Gaming for education
  3. Focus on beyond Tier I & II towns- Rural India
  4. Not just localization: Simplicity too
  5. Converting Mobile Users- Potential online gamers

Who wants to play some linerider?


An interview from vccircle with Rahul Khanna, Director, Clearstone Venture Advisors, who has invested $5 million in Games2win