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2021 was the year people in India started spending money on mobile games

A key reason for the trend is that the gaming habits of consumers are maturing and they are moving beyond casual games to those that offer deeper experiences or provide them a way to socialize with friends and family.

December 24, 2021 / 12:32 PM IST
Illustration: Suneesh K

Illustration: Suneesh K

For years, India has been one of the biggest markets for mobile game downloads on Google Play and Apple App Store, but revenue didn’t match the pace. That is now beginning to change.

"A big change from 2020 to 2021 was that people have started spending more on existing games. After witnessing major growth in terms of engagement and user base in 2020, the general consensus was that it will settle down but instead, it just rapidly accelerated,” said Anuj Tandon, head (India and MENA), Corporate Development, Krafton Inc. MENA is short for Middle East and North Africa.

“You will see even more monetization happening through in-app purchases and more user engagement in 2022" added Tandon.

At least four to five games are making more than $100 million from in-app purchases in India, spearheaded by Battle Royale, Tandon reckons. "This was unheard of earlier and indicates that consumer spending is reaching substantial levels. 2022 is only going to accelerate that, leading to a thriving in-app purchase economy in the country."

To be sure, this doesn't include “real-money” games that are not available on app marketplaces, but have become significantly bigger than other gaming genres in the country. Real money games accounted for about 51 percent of the overall industry revenue reached around $1.8 billion in financial year 2020, according to a recent report by gaming and interactive media venture fund Lumikai and consulting firm Redseer.

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Gaming Revenue Breakup

Beyond casual gaming

A key reason for this improvement is that the gaming habits of consumers are maturing and they are moving beyond casual games to those that offer deeper experiences or provide them a way to socialize with their friends and family.

"If you are playing a simple game or a hyper casual game, which you are going to play for a few days, you will obviously not want to invest money in it. But if you want to play something for months altogether, then you're happy to upgrade yourself, since it is a good investment" said Sanket Nadhani, cofounder of game development firm Super Gaming.

For the company's flagship title MaskGun, which is a shooting game with more than 50 million downloads across the world, India used to be one of the top 10 geographies prior to the pandemic, but over the last year and a half, the country has become the top geography, Nadhani said.

The firm's real-time social multiplayer game Silly Royale has become its fastest growing game ever, having clocked over 10 million installs within four to five months. The Pune-based startup is also building a Battle Royale game called Indus, which is expected to debut next year.

That said, Nadhani noted that while monetization is improving for mobile games in the country, it is still at a nascent stage. "Monetization at scale in India is still a year or two away, if not more. If you want to build a small indie company, that can still happen but if you are only relying on an Indian user base to monetize, you're probably not going to be able to build a large company" he said.

Gaming Segments

Fastest-growing Asian market

India is the fastest growing games market in Asia, with its mobile and PC gaming revenue projected to reach $534.1 million in 2021, according to Niko Partners, a market research and consulting firm that covers video games, e-sports, and streaming in the continent. This is set to grow at a five-year compound annual growth rate (CAGR) of 29.8% to touch $1.49 billion in 2025. This does not include revenue generated by real money games.

The firm also noted that India currently has the lowest average revenue per user (ARPU) but will grow at the fastest rate through 2025.

Video Games

Nazara Technologies chief executive Manish Agarwal had told Moneycontrol earlier that in-app purchases are almost crossing $500 million in India on Google Play and Apple App Store, a 10x growth from $50 million three years back, driven by imported competitive multiplayer games like Battlegrounds Mobile India, Free Fire, and Call of Duty mobile.

ReadWe are now looking at larger deals as our scale is increasing: Nazara Technologies CEO

Big cash exits

The gaming sector also saw two large cash exits this year, with word games developer PlaySimple being acquired by Swedish gaming giant Modern Times Group for up to $510 million in July and board and social card games maker Moonfrog purchased by Sweden's Stillfront for over $90 million in February.

99Games founder Rohith Bhat said these exits provide validation that one can be based in India, build high-quality games and attract global interest in them.

That said, these games haven't received the same investor attention as compared to its real-money peers. While the sector witnessed a record investments of more than $1.7 billion during the year, real money games and fantasy sports firms bagged about 85-90% of the total financing, according to industry estimates.

Tandon said there is a chicken and egg problem in terms of early-stage investments, since people are still not able to invest in game development studios and other startups.

Bhat said: "While investors keep saying that gaming seems to be interesting and all, I don't see a lot of investments happening from the typical financial investors in the Indian space as much as you see in other sectors like edtech, fintech, and e-commerce. The activity out here is far and few between."

While there is an increasing interest from global funds and gaming companies, the company sizes are very small for them to do any transaction, he noted.

"There is an opportunity for smaller game funds which can invest at seed or pre-seed stages. Unless that ecosystem gets built up and a number of investments happen in that space, there will be very less for typical financial investors to come and make a play." Bhat said.

Justin Keeling, general partner at Lumikai, however, said investors had woken up to the massive tailwinds across India's entire gaming value chain.

"With India's gamers now monetising faster than any other country, this opens up a lot of white space investment opportunities, especially for high quality domestic content. We've seen this inflection point in every other major gaming market and we'll be seeing more of this shift domestically in 2022," he said.

Lumikai, which is the country's first gaming and interactive media-focused fund, has led seven gaming investments in India in 2021 and Keeling claims that all of them were "oversubscribed". Among its portfolio firms are Bombay Play, All Star Games, Loco, Eloelo, and Studio Sirah.

ReadIndia's paid gamer base to touch 235 million in 2025, driven by in-app purchases

What's in store in 2022

Games based on Indian stories and mythology are likely to debut next year, paving the way for localization of mobile games and better monetization.

"India has beautiful stories and Indian mythology has a lot to offer. Not just India, I think the world over has been interested in Indian mythology. I think games based on that will definitely come up next year," Nadhani said.

Preference for games with India-first content are increasing due to its relevance and familiarity, with more than 60% of gamers willing to play games with an Indian central theme or characters from mythology or celebrities, the recent report by gaming and interactive media venture fund Lumikai and firm Redseer stated.

"Gaming is ultimately entertainment and if it resonates well with people locally, the larger population will come and start lapping it up. If (a game) has to go mass market, then I think cultural resonance has to be there. That's where the opportunity is for gaming companies to build the IP that will last for another 10 to 20 years," Bhat said.

Another key trend will be the emergence of blockchain-based and NFT-based gaming firms. NFT is short for Non-Fungible Tokens, which are unique digital assets built on blockchain technology.

"I think we will see at least one or two interesting NFT gaming startups coming out from India. Gaming is the first industry to start going after the Web3 world because gamers understand buying virtual gifts, virtual skins, in-game economies, the power of avatars and what its significance can be," Tandon said.

Bhat echoed the sentiment, saying that we are likely in the nascent stages of Blockchain and NFT-based gaming, but it might become as big as the shift to freemium games 10 years ago. Freemium is now the mainstay of the mobile gaming space, with more than $100 billion in revenue worldwide.

ReadDream11, other Indian gaming companies look to launch NFTs

Talent the biggest challenge

One thing all companies seem to agree on is the challenge to get experienced talent, with several founders pointing out that is no massive pre-trained talent pool since the game development industry is still relatively new in the country.

"Getting talent who have the experience to scale things up is hard to find in India. The way to solve for that is by consulting with people who have built larger games outside India," Nadhani said.

Keeling said more capital and opportunity across the domestic gaming sector should help companies to invest in upskilling hires, as well as attract top quality talent from adjacent creative industries.



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Vikas SN
first published: Dec 24, 2021 12:04 pm
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