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More regulatory clarity will mean more investments in gaming industry: Nazara Technologies founder

Nazara Technologies founder says when there is no clarity, companies like his find it difficult to invest or build these businesses. A lot of fly-by-night operators in India or outside take advantage of it

July 02, 2022 / 04:07 PM IST
 
 
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India's online gaming industry needs clarity on regulation and taxation, said Nazara Technologies founder and joint managing director Nitish Mittersain.

He said that while there is clarity around some online games, there is uncertainty around others whether they are games of skill or chance.

"Some games like cricket, where there are a lot of reflexes required to play the game, are very clearly games of skill, like our World Cricket Championship game. Then there are games like today’s very popular Ludo, where it is a bit debatable whether it’s a game of skill or game of chance... If better guidance can come in terms of what is permitted and what is not permitted, then companies like us can aggressively invest in games of skill without worrying," said Mittersain in conversation with Anuradha Sengupta in an episode of the 'Life After Listing' show.

Skill-based real money gaming, which accounts for a significant chunk of the industry's revenues, has been in the crosshairs of several state governments, including Tamil Nadu, Andhra Pradesh, Telangana, Kerala and Karnataka, which have banned or tried to ban them since gambling is a state subject.

Many of these bans were challenged by skill-gaming startups and industry associations in the respective state courts which overturned these suspensions. The Supreme Court also upheld fantasy sports as a game of skill in July 2021.

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This year, the Union government set up an inter-ministerial taskforce to identify a nodal ministry, understand international best practices and recommend a uniform regulatory mechanism for the online skill gaming industry.

"The big push into regulatory aspects and focus has really been driven by the skill-based gaming industry in India, which has really scaled in terms of monetisation, whether it’s fantasy sports or other skill-based companies that have come up and are providing products and services to consumers," said Mittersain.

Esport and casual gaming revenues grew 32 percent from Rs 2,200 crore in 2020 to Rs 2,900 crore in 2021, according to an EY-FICCI report. Fantasy sports grew 26 percent on the back of domestic sporting events like IPL, Kabaddi, Football, hockey from Rs 2,600 crore in 2020 to Rs 3,200 crore last year.

On regulation, Nazara's founder said the government wants to make sure that there is responsible gaming and consumers are protected. "I think that’s extremely important. We would definitely want such regulations that protect consumers. What is missing and now, with the recent developments, hopefully, will emerge, is more clarity."

He added that when there is no clarity, companies like theirs find it difficult to invest or build these businesses. On the other hand, a lot of fly-by-night operators in India or outside take advantage of it, he said.

"So, you have a situation where this unclarity results in these offshore companies benefiting, consumers being exploited, the taxes not being generated. So it’s a lose-lose proposition. Clear regulation on what can be done or can’t be done, clarity on taxation, etc., will really help this industry develop in the right manner," said Mittersain.

When it comes to taxation, while the online gaming industry was worried about being put under the 28 percent tax bracket from 18 percent, the GST Council during its two-day meet that concluded on June 29 maintained status quo on taxing online gaming.

Mittersain said during the show that as the statutory clarities keep moving from black to white in the continuum, they will also get more and more comfortable in doing more capital allocation.
 "If I can put my skill to use to make money – what we call play-to-earn or play-to-participate – that’s a big market. And that market has been growing very fast and will continue to grow because it’s still 20-30 percent penetration of gaming. Or, if you look at 900 million of the smartphone or mobile user base, then you are talking about only 10-15 percent. So a huge amount of growth is going to happen," he said.
Maryam Farooqui
Anuradha SenGupta
first published: Jul 2, 2022 04:07 pm
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