Draft rules | Don't keep video games, real-money ones under same regulatory purview: Gaming studios tell MeitY

Illustration: Suneesh K

A consortium of over 40 Indian video game studios and esports firms including prominent ones such as SuperGaming, Loco, Bombay Play, Ncore, and Outlier Games, have requested the Ministry of Electronics and Information Technology (MeitY) to create a regulatory distinction between video games and real-money games (RMG) in the country's proposed online gaming rules, in line with global best practices.

This move comes at a time when MeitY is conducting a public consultation on these draft rules that are expected to end on January 17, 2023.

On January 2, 2023, MeitY proposed a self-regulatory mechanism, mandatory verification of players through Know-Your-Customer (KYC) norms and grievance redressal methods as draft amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 with the aim of safeguarding users against potential harm from skill-based games and also ensure these games conform with Indian laws.

However, these rules combine “video games” and “online games played for stakes” into the same regulatory purview, unlike other markets where real-money games and fantasy sports are governed by separate online gambling legislation of the respective nations.

This risks "derailing the extensive vision and goals" set forth by the government initiatives at the central and state level, these firms said in their submission to the ministry.

"The Indian industry is making ambitious bets as many video game companies in India have started developing original Intellectual Property (IP) video games based on the Indian cultural ethos and packaging them as export-oriented software products," the submission read.

Read: Indian gaming studios see big action in 2022; take bolder, ambitious bets

The consortium which also includes Ludo King maker Gametion, game streaming firm Rooter, and Nodding Heads Games, was organized by Outlier Games.

It noted that to make world-class video games in India for a global audience, it is crucial to have a suitable framework which respects the nuances of the industry and aligns with global best practices.

"This will go a long way to attract capital, enhance market access, increase foreign technology collaboration, build talent pools and help develop India’s global champions," it said.

In December, Moneycontrol had reported that Indian gaming studios have started attempting ambitious projects in the country, as consumers warm up to spending money on mobile games.

Video gaming SRB

The consortium has sought that video games be regulated through an India-specific age and content rating mechanism by setting up a video games industry-specific self-regulatory body (SRB), in line with global standards such as PEGI in the European Union and ESRB in North America.

They have also sought to create a robust framework to deal with issues such as children’s addiction to video games, their exposure to in-game purchases, age-inappropriate content and online harm, which will be regulated by video games industry-specific self-regulatory body in line with global standards such as COPPA in the USA and GDPR in the European Union.

Several gaming founders have previously raised concerns to Moneycontrol over the lack of distinction between RMG and non-RMG games, which they believe could drive more attention and investments to other non-RMG gaming companies as well.

Real-money games are currently the largest revenue source for the burgeoning industry, accounting for about 57 percent of the overall industry revenues, according to a report by gaming and interactive media venture fund Lumikai.

Read: India's paid gamer base hits 120 million in FY22; in-app purchases to drive future growth: Report

That said, midcore video games will be the biggest driver of revenue going forward, increasing at 32 percent year on year (yoy), according to Lumikai general partner Justin Keeling. This in turn is driving in-app purchases as the fastest-growing revenue channel, growing at 34 percent annually, he said.

Midcore games typically offer a more complex gaming experience than casual games, requiring players to use their skill and strategy to progress, due to which they are invested for a longer duration, ranging from several months to years.

India is the fastest-growing games market in Asia, both in terms of revenue and gamers, with its mobile and PC gaming revenue projected to reach $704.5 million in 2022, 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 of 21.1 percent to touch $1.4 billion in 2026. This does not include revenue generated by real money games.

If you include real-money games, the gaming sector revenues in India increased from $2 billion in FY21 to $2.6 billion in FY22 and are expected to expand at a compound annual growth rate of 27 percent to $8.6 billion in FY27.