People love to game – be it during the commute, an office lunch break, while waiting for an appointment, or your typical Friday game night. The excitement and glee games bring to people is unparalleled. In India,
the story is no different. Over the past few years, as the interest and engagement towards gaming scaled, so have the numbers and market projections.
The numbers in India are pretty impressive too. The Indian gaming market is reportedly valued at $1bn, gathers INR 13bn in revenues annually, has 433 million users, over 400 start-ups, and a compound annual growth rate (CAGR) of 18.6%.The gaming industry as a whole attracted over $540m of investments between August 2020-January 2021 alone.
The sentiment is pretty much the same when you look at what industrialists, investors, politicians, and other stakeholders are saying. For instance, Prime Minister Narendra Modi recently said that India should take a lead in the digital gaming market and develop games based on its culture and folklore. India’s business tycoon Mukesh Ambani went even further and remarked that gaming will soon be bigger than the music, television, and film industries put together.
These are all testaments to how well the Indian market has matured. And rightly so. Today, India is (arguably) amongst the most unique gaming markets – largely because of the variety of games on offer and the diversity of users that play them. Fantasy sports have got the attention of sports enthusiasts, esports are the pick for the Gen-Z and young adults, whereas card games (like poker and rummy) see interest across age groups. During all this, the casual gaming industry in India has significantly picked up in recent yearswhich, thanks to a growing user baseand a little help from the pandemic, is poised to generate revenues of INR 169bn by itself by 2025.
The rise of casual games in India
Availability of cheap internet and affordable smartphones is a key driver for the growth of casual games in India. Reports indicate that India will have over 900 million mobile users by 2023. Out of 420 million casual gamers in India, 94% play on mobile devices. More than 43% of mobile users engage with at least one casual game (as per the report Unpacking a Billion Dollar Industry: Digital Games and Sports in India by IAMAI – 2021).
The casual gaming market is also earning noteworthy revenues for gaming companies. Companies earn an average revenue per user (“ARPU”) of INR 152 in 2021, which is poised to grow to INR 268 by 2025 (as per the report, Beyond the tipping point: A primer on casual gaming in India by KPMG, 2021).Investments in this sector are also on the rise. Companies having casual gaming in their repertoire have been attracting substantial investments. WinZO, a casual gaming application focusing on regional content, raised $65m recently. Another company, Nazara Technologies, that has a presence in over 64 countries across Asia, Africa, and Middle East, also became the first casual gaming company to release its IPO in March 2021.
The impact of Covid-19
The impact of the Covid-19 pandemic on mental health is well known to the world. In India, as with the world over, casual games provided the much-required active cognitive engagement everyone craved. Apart from being a recreational tool, casual games helped people overcome loneliness, stay connected with friends and family, and divert attention from the pandemic.
Reports suggest that since the pandemic, time spent by users playing casual games has increased by 14% and an average Indian now plays over 8.5 hours per week. 36% of gamers consider communication a crucial part of gaming, whereas 53% users said that they made new friends in the past year through gaming.
Monetisation models
Casual games are offered in India through a variety of monetisation models, depending on the nature of game, the target audience, and the platforms available for their distribution. Here are some of the most popular models thriving in India.
Advertisements: This model is most popular for free-to-play games, where the user is offered the game for free, and the publisher earns revenue by displaying advertisements. A variety of ads are used to monetise such game like banner, native, interstitial, reward, playable ads, etc. In 2020, advertisement revenues from casual games stood at INR 3600 crore viz., 60% of all casual gaming revenue. This is expected to grow to INR 9900 crore at a CAGR of 29% by 2025 (as per the report, Beyond the tipping point: A primer on casual gaming in India by KPMG, 2021).Casual games like Ludo King and Ultimate Teen Patti follow this model.
In-app purchases: This model is popular among free and freemium games. Here, users are offered the game for free, but publishers make money by selling virtual goods in the game such as access to new maps, in-game currency, battle pass, ad-free experience, power ups, costumes, and other aesthetic additions to their game play. Reports indicate that in-app purchases for games downloaded from Google Play Store and Apple Store in 2020 grew by 51% and 30% respectively (as per the report The State of Mobile Gaming 2021: An Analysis of Mobile Gaming Market Trends and Top Titles in the US, Europe, and Asia by Sensor Tower). Casual games like Candy Crush Saga, Lords Mobile, and Subway Surfers follow this model.
Commission fee: Most real-money games (RMGs) are based on this model. Users pay an entry fee to participate in a casual gaming contest with other users on the platform to win cash or other prizes. The game publisher typically charges 15-25% of this entry fee as a commission, whereas the rest of the pooled amount is distributed among the winning users (as per the report. The evolving landscape of sports gaming in India by KPMG and FIFS - 2019). Casual games offered on applications like WinZO and Mobile Premier League follow this model.
Direct purchases: The game publisher demands a one-time fee from the user which enables the user to download and play the game. Casual games such as Grand Theft Auto: Vice City, Hitman Sniper, and Minecraft are some of the games that follow this model.
Regulatory framework
India does not have a dedicated law for ‘casual games’ currently. Regulations vary depending on the content used, advertisements displayed, and monetisation model adopted by the game.
Gaming enactments
The Indian Constitution empowers each state to make its own law on ‘gambling and betting’. While some states have created their own unique laws, others have principally adopted the Public Gambling Act 1867 (a pre-independence legislation) in their jurisdiction. Overall, with a few exceptions (discussed below), ‘games of skill’ are considered outside the purview of any gambling and betting law in a state.
‘Games of skill’ are games where success predominantly depends on the user’s skill as opposed to chance. Few games recognised by Indian courts as ‘games of skill’ are rummy, poker, fantasy sports, carrom, chess, bow and arrow, and darts. The majority of Indian states have a ‘game of skill’ carve out in their gambling law, and operators can offer these games freely as a fundamental right under the Indian Constitution.
On the other hand, some states like Telangana, Karnataka, and Andhra Pradesh do not carve out ‘games of skill’ from their gambling law. All games played with money are considered ‘gambling’ in these states, and hence only free-to-play games are permitted. It is worth noting that the law in Telangana, Karnataka, and Andhra Pradesh is currently under challenge. A similar challenge to the neighbouring state of Tamil Nadu was recently upheld (in August 2021) by the Madras High Court in Junglee Games India Private Limited v. State of Tamil Nadu, W.P. No. 18022 of 2020, which removed the ban
on RMG games based on skill.
Finally, there are three Indian states (Nagaland, Sikkim, and Meghalaya) that require a game operator to procure a licence from the state government in order to offer RMG games in the state.
Laws applicable to advertisements
All advertisements in India are subject to the Consumer Protection Act 2019 and need to ensure that claims made through such advertisements are not misleading, unfair, false, or conceal important information about the product. In addition, advertisements run on television need to adhere to the guidelines of the Advertising Standards Council of India (ASCI) under the Cable Television Networks (Regulation) Act 1995. Lastly, specifically for RMG games, the Guidelines on Online Gaming issued by ASCI in 2020 need to be followed.
Laws applicable to content
Content regulations in India are spread across several laws such as the Indian Penal Code 1860, the Indecent Representation of Women (Prohibition) Act 1986, and the Prevention of Children Against Sexual Offences Act 2012 among others. The application of these laws depends on the nature of content in question. Overall, the content displayed in a game should not be explicit, sexual, obscene, hurtful, defamatory, racial, or derogatory to a caste or religion. Depiction of the national flag or national emblem in an improper manner is also a penal offence. Whether a particular content violates Indian laws is subjective and adjudged by courts on a case-to-case basis.
Laws applicable to the use of e-wallets
Most games that run on commission fees or include IAPs, offer e-wallets to users. These e-wallets are used to upload money (from bank accounts or similar sources) to the gaming application for subsequent use in the game. The Master Directions on Prepaid Instruments issued by the Reserve Bank of India (RBI) are applicable in this regard. While ‘closed wallets’ i.e., e-wallets issued and used solely vis-à-vis the issuer of the e-wallet, are exempted from following these directions, other e-wallets that enable the user to transact with third parties (other than the issuer of the e-wallet) need to take an RBI licence and follow the specific conditions regarding the e-wallet’s use.
Policy outlook
Policies in India towards gaming are still to settle, both at the central and state government level. While states have dedicated gaming policies, the central government is seeing gaming as a key enabler for other economic sectors. There have certainly been some positive policies and developments too. Below are some key initiatives that the Indian government has taken to promote the gaming industry.
App innovation challenge
The Ministry of Electronics and Information Technology has organised the App Innovation Challenge in 2020 and 2021 to identify the best Indian applications across several categories including gaming. The top three applications receive monetary award from the government, on top of receiving mentorship from government agencies. The program highlights the interest of the Indian government on gaming applications and the emphasis on building home-grown applications. The 2020 edition of the challenge saw games like Hitwicket Superstars, World Cricket Championship 2, and ScarFall: The Royale Combat emerge as winners.
Progressive state policies on gaming
- Telangana: The Information Technology, Media, Animation, Gaming and Entertainment Policy 2017 (IMAGE)aims to develop infrastructure and create employment opportunities in the animation, visual effects, gaming, and comics (AVGC) sector. A dedicated ‘IMAGE city’ in Hyderabad is proposed to be set up for providing designing, production, distribution, and marketing services for AVGC companies. Further, an AVGC Academy is also being set up for talent creation and fostering entrepreneurship in this sector.
- Karnataka: The Animation Visual Effects Gaming & Comics Policy 2017-2022 focuses on upskilling and creating a talent pool of designers, illustrators, animators, and game developers. A Centre of Excellence, a Finishing School, and a Digital Post-Production Lab for the AVGC sector is also part of the policy. Registered AVGC companies are eligible for a 20% expenditure reimbursement. The government has also emerged as an investor in the sector, with the creation of the INR 20 crore fund for the AVGC sector.
- Andhra Pradesh: The Gaming, Animation, Media, and Entertainment Policy 2014-2019 policy aims to create a 7,00,000 square feet ‘Andhra Pradesh Game City’ with world-class infrastructure that will serve as an epicentre of research and development in the AVGC sector.
National Education Policy 2020
It aims to improve the educational framework in elementary and university education across India. It focuses on all levels of primary and secondary education and proposes to use applied games to boost literacy, and teach courses through adaptive assessments and personalized learning
The road ahead
The Indian market has grown significantly over the past few years. Users in India have shown an appetite for quality casual games, as reflected in the growing ARPU companies are earning per user. Significant funding received by gaming companies and casual gaming operators coming up with IPOs is also a positive sign. With the government showing keen interest towards the sector, the market will soon become more lucrative for both domestic and foreign operators. Perhaps what India currently lacks is a robust infrastructure and talent pool to develop games. But given the traction the sector is getting; we are hopeful that the industry and its stakeholders will soon fill this gap.