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Why India is still playing catch-up in developing online games

Inability to create premium products, quality issues, funding, hardware and software woes have kept the Indian gaming industry from playing in the big league

August 31, 2020 / 04:26 PM IST

On an average day, Gin Vaiphei, a 22-year-old gamer based in Bengaluru, plugs in his Playstation 4 (PS4) and turtle beach headphones and streams to his audience for about two hours. “I’m trying to build a community essentially where people can relate to the kinds of things I talk about,” he says.

Online games have attracted a scrum of first-timers like Vaiphei during the ongoing pandemic, with many companies seeing an uptick in the number of downloads, the amount of time spent as well as engagement, according to a report titled Gaming Market – Growth, Trends, Forecasts, by Research and Markets.com.

Globally, the gaming industry, which is dominated by the likes of Sony, Microsoft, Nintendo, EA and Ubisoft, is expected to grow at over 9 percent every year and surpass $250 billion in revenue by 2025.

Broadly speaking, the industry is divided into three segments: Consoles, Mobiles (smartphones and tablets) and PCs (boxed/downloaded and browser).

While all the game segments experienced an increase in engagement and revenues due to the coronavirus lockdown, mobile gaming was the biggest beneficiary drawing users who were bored from being closeted indoors. Indeed, mobile games will generate revenues of $77.2 billion in 2020, according to games and e-sports analytics and market research company Newzoo.

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Data from Newzoo shows that mobile gaming will outpace the rest of the industry, generating $77.2 billion in 2020 and growing 13.3 percent year-on-year.

India remains the epicentre of the mobile gaming trend. It recently overtook the United States and China to become the world’s largest mobile gaming market, with upwards of 5 billion downloads.

Long way to go

But when it comes to playing more traditional games on desktops or popular platforms such as those offered by Nintendo and Xbox, India is still playing catch up.

According to the latest data by Statista, the Indian gaming market is valued at about $890 million, a fraction of the leader in the space, the United States, where revenue is expected to touch $20.86 billion in 2020.

“While it is getting better, one reason why we have not been able to become as popular as other games is that they have looked beyond the game and turned it into a spectator sport,” says Abhishek Sayan, who represented India in e-sports at the Asian Games Qualifier. “So, the game and the user interface (UI) have to be done in such a way that you are able to watch someone play it,” he adds.

These are some of the standard requisites of AAA games, which are what top companies like US-based Riot Games and Blizzard Entertainment, as well as Chinese companies such as Tencent are known to make.

Games are rated on various parameters, with AAA, the highest rating, representing a video game that has both high-quality production and a high selling point. Riot Games’ League of Legends, which generated $1.5 billion last year, is a popular AAA game and is frequently used in e-sports competitions.

The freemium ticket

Rohith Bhat, chief executive officer of 99 Games, said games are monetised in two ways: either by showing ads or through in-app purchases within the game itself, which is more commonly referred to as the “freemium model”.

“Freemium means that you offer the game for free, but you charge for a subscription or other assets within the game,” Bhat explained. It offers the user a pack of goods to progress through the model faster. Developers encourage people to make these purchases by creating friction within the game, wherein free users will find the going difficult and will be compelled to make a purchase in order to overcome a difficult hurdle. After the purchase, the user progresses much faster, he said.

Tencent’s most popular titles in India, PUBG Mobile and Call of Duty: Mobile, are known to apply this model quite frequently. For a certain price, players can purchase a set of guns or personalise their character within the game.

Bhat, using an example, illustrated how this freemium model operates globally. In the United States, for every 1,000 people playing the game, there might be around 100 people paying money, he said. This changes in the Indian context, where only ten in every 1,000 people make a purchase. As a consequence of much of the Indian market being new to making purchases in the virtual world, most of the monetisation happens through ads, Bhat said.

“So while most global companies say that their maximum daily active users come from India when it comes to monetisation, they rank it 50th or 60th  compared to the rest of the world.”

Why India is way behind

“Our culture of being a country that is more service-oriented has diminished our ability to create premium products,” said game developer Zainuddeen ‘Zain’ Fahadh, a 10-year gaming veteran, who runs Ogrehead Studios in Hyderabad. “One of our significant disadvantages is that we have spent so much time catering to companies outside that we currently do not have the leadership to make such a product,” he said.  India is not directly comparable with countries such as the US because the game development scene here is not yet ready to compete globally, he added.

Speaking about quality and its determiners, Zain said there is a distinct difference when you play a globally developed game versus one made indigenously, especially across categories like crispness of the image or the gameplay. “When you play a game, you can pretty much tell whether this is a game developed by India or not,” he said.

Sucker Punch Production’s title Ghosts of Tsushima is the highest-rated game in the world currently. “A game like Ghost of Tsushima has a high level of production quality and narrative design,” said Divya Dias, a game writer and narrative designer, adding that it’s not just the words but also the environments, art, sounds and mechanics that tell the story to the player. “I've yet to see a game of Indian origin, that compares to this in quality.”

Time and Money challenge

Using Ghosts of Tsushima as an example, Dias detailed how long it takes to develop an AAA game. “It took more than five years to make — you’re talking about a team, all that time, all the salaries, hardware and software needed to develop that game. If a game becomes successful, you're lucky. But if not, all the time and funds have gone down the drain,” she said.

Whether a game becomes massive depends on your ability to handle risk, said Dias. “Currently, we do not have this set-up in India, so we tend to make games that take about four to six weeks — if those costs are sunk, and we do not recover them if the game is not a success, we can still bear those losses,” she said.

“We cannot import any development kits officially for consoles,” says Himanshu of Xigma Games, an indie studio based in Bengaluru. He recounts that even after being in talks with Nintendo to bring over a kit, it wasn’t possible due to government regulations. The only way to purchase these is through a publisher, “Platforms take 30 percent of the cut, after which publishers collect 50 to 60 percent of the amount taken by the platform. This leaves very little room for growth,” he says.

In 2017, Indian Big Bull Rakesh Jhunjhunwala invested Rs 180 crore in India-based game studio Nazara Technologies.

From an investment perspective, however, the sector would require strategic investors who specialise in gaming, says Bhat of 99 games, as compared to financial investors who have a designated entry and exit time frame. “Investors in this segment need to be a lot more long-term in their thinking because gaming will be an opportunity for the next 10 years,” he said.

What is the way forward?

Shruti Verma, a member of the India Game Developer Conference (IGDC), says that thanks to the advent of the internet accessibility, games are being played not just in Tier I or Tier-II cities, but also in villages, towns and remote areas. “We were always waiting for that big bang to happen, and this time might be our opportunity to enter the local market,” she adds.

With over 400 game developers operating in the country, going by Maple Capital Advisors’ report, interest in gaming is definitely picking up.

When it was released in 2018, Ogrehead Studio’s ASURA, which is in the same segment as popular game titles such as Diablo and Warcraft, was popular not just in India but also globally, including in hyper-competitive markets such as the United States, China and Japan. It also won Indian and international awards the year it was released.

“Personally I am very bullish on the segment,” Bhat says, adding that the opportunity to become massive will arrive in the next ten years.​
Akanksha Sarma
first published: Aug 18, 2020 01:01 pm
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