‘We are short-term global, long-term India-focused:’ 99Games founder Rohith Bhat

This comes at a time when India's mobile gaming industry has experienced a boom on the back of pandemic-induced home confinement. Mobile app downloads in India increased by 50 percent and user engagement rose 20 percent, according to a recent report by consulting firm RedSeer.

India is also showing early signs of reaching maturity in the sector with people starting to spend money on mobile games in 2021, Moneycontrol reported on December 24.

In the interview, Bhat also spoke about the impact of “real money” gaming (online games in which real money is wagered on the outcome of the game) on the sector, the rise of India-specific content in games, and key challenges. He also weighed in on the technology industry's current hot topic -- war for talent. Edited excerpts:

How has the gaming sector changed over the past year?

I think there are two large trends that I have observed. On the global front, I think there is a lot more traction or rather interest in NFT gaming. We used to hear about it all through the year, but in the last three months, a lot of investment has happened in this space.

So I think the whole NFT gaming might be as big as how the shift to freemium was 10 years ago. (NFT is short for a non-fungible token, a non-interchangeable unit of data stored on the blockchain, a form of digital ledger. Freemium is a pricing strategy that offers a standard product for free and charges money for additional features)

If you remember, around 2010-11, there was a boom in mobile gaming. Until then, it was more browser and Facebook gaming. Mobile gaming started initially with a premium for a year or two, but then it went to free to play very quickly and gave birth to several unicorns at the global level. Freemium is now the mainstay of the mobile gaming space with more than $100 billion in revenues worldwide.

I think we might be in the very early stages of Blockchain and NFT-based gaming and it might be something that will become more predominant in the days to come.

At the India level, gaming has now become real money gaming only, so whatever we see as gaming in the global context is not what is gaming per se in India. For me personally, when you see that gaming is becoming all about real money gaming, it is kind of a sad thing. Regulators now club gaming slash gambling slash everything as an online game, which is a sad part of this entire story.

At a broad level, I think there is probably concern among the governments that real money gaming might be causing some issues in terms of social disorder and they are now getting increasingly cagey about this space.

I think there will be increasing regulatory challenges for that space, but in terms of interest, that segment has gotten all the interest. However, I feel there are a few very strong players now and scope for newer entrants becomes all the more challenging, one because of the existing strong players and another because of all this regulatory oversight coming into the space. That's my reading of the situation.

2021 was a banner year for gaming from an investment perspective, but I observed that most of the money has gone to real money gaming platforms.

Yes. I have not seen any real thing (investment) going into other gaming companies. There were two fantastic exits, for Moonfrog and PlaySimple. Two classical gaming companies we know. So I think that is validation that you can sit in India, build high-quality games and get global interest in them.

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

So are investors cagey about backing non-real money gaming companies? What's your sense?

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

There is increasing interest from the global funds and global gaming companies, but for them to do any transaction, the sizes of the companies here are very small. So there is an opportunity for smaller game funds that 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.

Since everything is being clubbed under gaming, do you see that impacting investments in non-real money gaming companies as well?

I think in terms of a public perception, it does impact in some way because you're trying to club everything under one. Because I am in the gaming space, I am naturally concerned whether the water is being muddied for everyone. So that concern is definitely there.

At an investor level, I don't know whether they have that concern. If you look at all the investments that’s been happening in the sector, it doesn't show that there is any concern as such. They expect the regulatory things to work themselves out.

It's a huge space and a lot of big investment has already happened. So I'm sure there are a lot of initiatives to come out with self-regulation and stuff like that. I hope they do that quickly for the greater good of the industry.

One of the big trends last year was China clamping down on gaming and other sectors, which seems to have impacted the deal flow into that market as well. Do you believe that would benefit the Indian gaming sector in any sense?

China has become a super mature market. Their gaming industry probably started 12 or 13 years ago in terms of monetization happening locally. India is just beginning to monetize in the gaming space now, probably in a small way, in the last two, three years.

The amount that was getting invested in the Chinese gaming segment was huge and the potential to have that kind of investment in India doesn't exist at the moment. It's more a funnel problem and we don't have as many companies here that can soak in so much investment.

India has traditionally been the biggest market in terms of game downloads for a couple of years now. But it has lagged significantly in terms of revenue. Do you see that improving in the future?

What I always used to feel was that in India, we have to first solve the habit of people doing transactions from their phone for real goods. So I think that habit is now built up in the country. COVID helped that.... If you look at the number of UPI (Unified Payments Interface) transactions, and all that happening on the devices, people are getting very comfortable spending from the phone now.

I think it's just a matter of time that habit kind of goes into the gaming space as well. If people are able to design products that resonate with the players, then I'm sure monetization will happen. Consumption is always followed by monetization. It has been proven across different sectors and I don't think gaming is any different.

It's a great time for 1,000 gaming startups to bloom in the country -- small teams planning to do something big. Out of the 1,000, maybe 100 might reach one particular stage and 5-10 might go on to create a billion dollar game. That's what I am betting on.

Read: How Robosoft's Rohith Bhat built a global company from a temple town in India

There seems to be an increasing focus on India-specific or India-first content in games as well. What are your thoughts on it?

It's ultimately entertainment. While our population will definitely lap up the whole Western content, which is what is happening now with Netflix and with the television market when it was liberalized from one channel to five channels back in the day. We all lapped up everything that was served on television channels like MTV and Star Movies. But if you look at MTV now, it is 100% culturalized.

So it (gaming) is just another format of entertainment where if it resonates well with people locally, the larger population will come and start lapping it up.

It's a classical India versus Bharat situation. At the moment, I think most of the monetization happens with the India part of the country. But if it (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 (intellectual property) that will last for another 10 to 20 years.

Apart from monetisation, what are the other key challenges you see in the market?

Like I said, we need 1,000 gaming startups to bloom and there should be at least 5 to 10 funds that can invest in these people. Probably small ticket sizes and letting them become big.

Ultimately, it is a content game. The platform might be there, but if there is no good content, what will the platform serve?. They can probably sell content in short bursts, but the real fun is in games that can have a life of 5-10 years.

In a nutshell, there is a potential to create some great game-based franchises in India. Over the next 5-10 years, there might be an opportunity to create some 50 gaming franchises in the country. Those IPs will last for maybe over 10 to 20 years.

What is your view on the ongoing debate over in-app commissions and app store policies?

Both Apple and Google have now reduced commissions to 15% for the first million dollar revenue. I think 15% is a fair rate to give to these platforms, because of the reach that they offer. I hope at some stage Google and Apple will roll this out to everyone.

Read: Google to reduce Play Store fee for all subscription services to 15% from Jan 1 2022

How do you see the sector evolving in India in the future?

In my opinion, if you're a new company building a game, build it for the world market and keep having an eye out for what will happen in India. If the world is your playground, why restrict it to India?

I think the bigger problem right now is companies need to build that expertise in building long-lasting games and monetizing them. Once you understand how a game genre works, how you monetize, acquire users or scale operations, you can then look at India with India-specific themes. This is a market that Indians will ultimately come to dominate at some stage, probably not in the next five years, but probably in the next 10 years.

What do you plan to do next year?

From our side, we are still short-term global, long-term India. At least at a high level, we are still focused on the global market, although we keep looking at India. I'm personally very excited about the potential opportunities in the Indian gaming market but it is a market that will take some time to build.

This doesn't mean we are sitting quiet and not doing anything. We keep building stuff, tools, and templates that will work in India as well. The moment we see an opportunity and the right kind of backers who also believe in that story, we will jump into that and try to be one of the strong players in that space.

How do you decide when you should launch a sequel to a game or continue improving an existing game?

In gaming, it's all about understanding a genre and then trying to scale it bigger. Once you understand how a particular genre works, the target group and get a sense of how a particular mechanic monetizes, then you decide whether you should go into a new genre or you want to build another game in the same genre.

My personal metric for this is, if you are able to scale a game to probably a quarter million to half a million dollars in revenue per month, then it's an opportunity for you to start looking at building another game. For some others, it might be some other metric. Typically, gaming companies have two or three teams experimenting, whereas one of them is building on their primary game which gives them most of their revenue.

A typical freemium game is also a lot about live ops, wherein you have to keep serving new events and new configurations to players (both new and old) within the game, so that they have to feel that something new is happening which keeps them interested.

Basically, you have to create a cadence of events that will allow you to serve your new players, older players and everybody who is in between. So it's a continuous cycle of creating new content and making sure that people are consuming it at different levels.

Is talent an issue in the sector?

I think talent is a favourite conversation of every company in Bengaluru. Gaming is a new industry, there's not much of an existing pre-trained talent pool, but it's ok. I think that the pool will gradually get built over a period of time and it is just as easy or as difficult as in every other sector.

Does being in Udupi help with retaining talent?

It doesn't matter anymore. If there's one thing that COVID has taught us, it is that you can operate remotely for a good part of your work.

The biggest challenge, whenever we onboard new lateral employees from other teams, was how do you get the whole cultural acclimatization, but once people are able to establish their own wavelength of interacting with one another, distance doesn't really don't matter beyond a point in time.

So the way I see it, it is going to be a hybrid in some form. At least 25-30% of our team is not in Udupi and we are not hung up about it.