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GAMING SECTOR ANALYSIS India
By admin
July 3, 2023

INTRODUCTION

Welcome to the world of gaming! Whether you’re playing on consoles, computers, or mobile phones, gaming is a fantastic way to dive into a world of electronic entertainment. It’s not just about pressing buttons – gaming is an art of its own, with its language and culture. While gaming used to be seen as a solitary activity, the rise of online multiplayer games has transformed it into a social experience. Now, you can team up with friends or even make new ones while exploring virtual worlds together.

Gaming has become a popular group activity, feeling excitement and camaraderie among players. In India, the gaming scene is booming. The online gaming market has experienced remarkable growth, attracting more and more gamers with each passing year. Not only are there more people embracing gaming, but the levels of engagement are soaring as well.

The Indian gaming community is vibrant and thriving, ready to embrace new adventures and challenges. So, grab your controllers, ready your devices, and get ready to immerse yourself in the exciting world of gaming! Let’s embark on epic quests, conquer virtual realms, and create unforgettable memories together.

  • From 250 mn gamers at the end of FY18, the number of gamers in India grew to 400 mn by mid of CY20, the second largest base of online gamers in the world after China. This number is expected to rise to ~650 mn by the end of FY25.
  • With around 420 million dynamic gamers and a digitally active audience of 500 million aged between 15-35, the Indian gaming industry has seen massive growth and teen involvement in recent years.

The growth potential is tremendous, and with advancements in technology and increasing interest in gaming, the future of gaming in India looks incredibly promising.

  • More Gaming friendly phones: Avg. household has 2 smartphones. The RAM of smartphones has increased by 3-4x in the past five years, enabling more advanced gaming.
  • Cheaper, faster and better internet quality: 46% of internet users connected on avg. speed of 12Mbps. Avg. monthly data usage per user in India is 14.6GB vs 11GB for the US.
  • Access to better games than ever: Prior to its ban, PubG Mobile had 50Mn MAUs in India. Indian games and platforms such as Ludo King, Dream11, and MPL have ~100Mn+ downloads.
  • Increased marketing and influencers are driving the discovery of games: Dream11 is the official sponsor of the IPL and MPL sponsors the Indian cricket team kit. 17+ Indian gaming influencers have 1Mn+ followers on YouTube.
  • Spike in digital adoption during the pandemic: Overall spike in new adopters for digital entertainment. Online gaming provides much-needed social interact.

Total Users* (in mn)

  • Per a State of India Gaming Report 2022 by Lumikai in collaboration with Amazon Web Services (AWS), women on average spend 11.2 hours per week playing games. While the time spent by men on gaming is 10.2 hours/week
  • The findings show that 98% play games on smartphones, with 23% playing on PCs/laptops and 14% on gaming consoles
  • Relaxation is the top motivator for gamers with over 50%, followed by making money (13%), killing time (12%), and socializing (11%)
  • 82% of gamers are interested in playing games based on Indian mythology, and even 43% of non-gamers are more inclined to start gaming if games are based on Indian themes like Ramayana

*KPMG report dated June 2021
** Sequoia BCG report dated Nov 2021

GAME CATEGORY SEGMENTATION

Casual Gaming
  • These games are played across devices and do not involve real money or monetary rewards
Real money games (RMG)
  • Includes any type of game played online in which real money is wagered on the outcome of the game and a monetary prize is received
Real money games (RMG)- Online Fantasy Sports
  • Players make virtual teams online and get rewards from an overall prize pool based on the points accrued for the particular match/ event
Core Gaming
  • These are serious games that are played online with multiple players and often have leagues & tournaments conducted with handsome cash prizes.

*KPMG report dated June 2021

MONETISATION

  • Ad Spends

    • Revenues are derived from displaying ads in games in various forms. Revenue received is based on the number of impressions, click-through rates or other parameters
    • Mostly present in Casual games
    • These ads incentivize a gamer to move up a level, and gain additional lives; essentially helping the gamer progress in the same; instead of watching an ad that cannot be skipped

  • In-App purchases (IAPs)

    • Revenues that are derived from the purchase of virtual goods within a game, upgrading to ad-free models, battle passes, in-game currency, advancing to further levels of the game, power-ups, cosmetics, etc. are accounted for in the IAPs.
    • They are prevalent in mid-core and hard-core games and to a certain extent in casual games

  • Subscription

    • This model involved subscribing to games through paying an initial fee which is typically considered for a fixed time (ranging from 1 year to lifetime access) which gives access to one or multiple games on a platform throughout the subscription period
    • Prevalent in cloud gaming and online adventure and RPG games

  • Commission Income

    • Users typically pay a fee to take part in a game or contest and receive monetary rewards for winning.
    • This model is typically prevalent in the RMG and OFS segments
    • These RMG and OFS platforms retain part of the entry fee pool as a commission which is their primary source of income

ADVERTISING DOMINANCE

India is a unique market where monetization for gaming is largely on the back of advertising, particularly in the casual gaming segment

Casual gaming advertising value chain

Game publishing companies

Publishers are gaming companies that create advertising inventory by providing a platform to serve advertisements on their website or mobile apps

  • Nazara
  • Jet Syntheses
  • Moonfrog Labs
  • 99 Games
  • Games2Win
Supply side platforms (SSP)

These are ad exchanges that represent publishers and help them sell their inventory. They set prices through bidding systems and aim to maximize publisher earnings

  • Google AdX
  • OpenX
  • Rubicon Project
Demand side platforms

Represent buyers and help them in making efficient purchasing decisions

  • Turn
  • The Trade Desk
  • Viant
  • AppNexus
Ad Networks

An ad network purchases ad space from publishers or SSPs and aggregates these for onward sales to advertisers.

  • ironSource(is.com)
  • Google Adsense
  • Basis Theory
Ad Agencies

Ad agency buys ad inventories on behalf of their client i.e. brands or advertisers. They plan media strategy on their behalf

Advertisers

Advertisers sell their advertisements to publishers and ad networks, they put advertisements for brand marketing and direct response marketing

  • Brands such as Coca-Cola, HUL, and Hyundai among others

GAMING ECOSYSTEM

Demand Side Factors Supply Side Factors
Gaming has become mainstream- Online gaming has gained acceptance in India with a growth in the number of players New trends such as multiplayer mobile gaming are driven by popular games such as PUBG and Ludo King. Games such as Ludo King and Candy Crush have also attracted new demography of players (45 years and above)
Growing digital and gaming sophistication Increase in supply of game developers and titles
Recognition for Esports as a standalone sub-segment Increased games such as Teen Patti and Ludo King among others provide options to play games in local languages such as Hindi, Gujarati, Marathi, etc.
Initiatives such as multiplayer modes, chat functionality, and leaderboards among others to increase gamer engagement
Investments in Indian gaming companies from various global investment firms
Recent Government Initiatives:

  • Indian Government is setting up a National Animation, Visual Effects, Gaming and Comic (AVGC) Centre of Excellence in collaboration with IIT Bombay
  • Karnataka and Telangana have dedicated state-level AVGC policies
  • The government will also set up an AVGC Taskforce to realize the sector’s potential
  • The Federation of Indian Fantasy Sports or FIFS is India’s only self-governing body for Fantasy sports in India, based in New Delhi. They support Fantasy Sports and work toward their welfare.

KEY CHALLENGES:

  • Low average revenue per paying user (ARPPU):

    • Spending on virtual purchases is considerably low in India (~ USD 5 to 10 in FY21) as compared to the global average (USD 130-140 in 2020)

  • *Regulations:

    • Per an article in Forbes India dated Sep 2022, in May 2022, the Group of Ministers (GoM) had unanimously decided to recommend increasing the goods and services tax (GST) on online gaming, casinos and race courses
    • A GST of 28 percent is applicable on games of chance, and the skill gaming industry pays 18 percent GST on the commission or gross gaming revenue (GGR), the fee charged by online gaming operators. The GoM is still in discussions if the GST should be 28 percent for both skill and chance games
    • Additionally, the debate of whether online gaming, especially involving real money, can be categorised as a “game of skill” or a “game of chance” continues in many states
    • The Supreme Court has now reaffirmed the decisions of three different high courts—Punjab & Haryana High Court (2017), the Bombay High Court (2019) and the Rajasthan High Court (2020)—that nullified laws banning fantasy sports under the pretext of gambling or betting. At present, states, including Assam, Sikkim, Odisha and Andhra Pradesh, have banned fantasy sports

  • Lack of scale for Indian studios:

    • Not many Indian studios have made a mark on the global stage due to the relative nascency of the Indian market, the low consumer spending on games, and relatively lower game design capabilities among others

https://www.forbesindia.com/article/unicorn-tracker/indias-gaming-sector-is-spawning-unicorns-but-the-future-is-uncertain/80037/1
KPMG report dated June 2021

RECENT INVESTMENTS IN INDIA

Company Name Founded year Location Business model Total investment Key Investors
Lysto 2021 Bengaluru Provider of a tool to showcase gamer credentials. It offers a blockchain protocol for verifying digital identity in games, to standardize gamer credentials and reputation across games and platforms. It also has a Metanomy gaming community. USD 15 mn (Last round USD 12 mn in Aug 2022) Square Peg Capital, Tiger Global, Better Capital, Beenext, Cloud Capital, Binny Bansal, Anupam Mittal, and Kunal Shah among others
Fanclash 2020 Mumbai Esports fantasy gaming platform. Features include e-sports tournament management, fantasy contests management, league management, and more. USD 50.5 mn (Last round USD 40 mn in Jun 2022) Alpha Wave Global, Sequoia Capital, Info Edge, Falcon Edge Capital among others
EloElo 2020 Bengaluru Provider of a social platform for video games and live streaming. It offers a live entertainment platform for users to show their talents such as from singing to dancing, stand-up comedy to fashion. Users can live stream games to play and earn rewards and creators can engage with fans by using an app. USD 16 mn (Last round USD 13 mn in May 2022) Provider of a social platform for video games and live streaming. It offers a live entertainment platform for users to show their talents such as from singing to dancing, stand-up comedy to fashion. Users can live stream games to play and earn rewards and creators can engage with fans by using an app
STAN 2022 Bengaluru Online Esports fan engagement platform. The company has developed a platform that enables gamers to collect, play and engage with esports gaming. It has features for earning rewards, collectibles, live gaming, and more USD 2.5 mn in May 2022 General Catalyst Partners, Better Capital, and Eximius Ventures among others
AltWorld 2022 Bengaluru Provider of a social metaverse gaming platform to play multiple games. It offers an immersive 3D multiverse platform where players can create, play multiple games, chill, and hang out with friends USD 3 mn in Apr 2022 Sequoia Capital, Gruhas, Qed Innovation Labs, TSM Ventures among others
Zupee 2018 Gurugram Real money-based competitive gaming platform. The platform allows users to play multiplayer and casual puzzle-based mobile games and can earn real money as a reward. USD 122 mn (Last round USD 72 mn in Jan 2022) Napean Capital, Matrix Venture Partners, Orios Venture Partners among others
LILA Games 2020 Bengaluru Developer of mobile-based shooter game. It is working on a game named Project B.L.A.C.K. It is a F2P game. The game will be available for mobile platforms USD 12.8 mn (Last round USD 10 mn in Mar 2022) Rainfall Ventures, BITKraft Ventures, Sequoia Capital, Galaxy Interactive among others
Loco 2017 Bengaluru Social platform for gamers. It offers a live game streaming app that allows users to play and watch various eSports videos. The app is available for Android users. It monetizes through in-app ads and purchases Acquired Earlier raised funding of USD 51 mn from Hashed, Makers Fund, Lumikai, Cataraman, and Hiro Capital among others

Acquired by Pocket Aces (Digital entertainment video production and social content publishing) in 2018

Bullieverse 2021 Bengaluru Online play-to-earn gaming platform. It offers a metaverse platform for users to play, connect, and earn in-game rewards. Also, it provides a blockchain-based marketplace for users to sell and buy in-game assets USD 4 mn

(Feb 2022)

C2 Ventures, Roark Capital, and Genblock Capital among others
IndiGG 2021 Bengaluru Online community-based gaming platform. It is an online community-based gaming platform for users to connect, discover, and play games. Users can play games like “Axie Infinity”, “Pegaxy”, “Nyan Heroes”, and others. They allow players to become clan chiefs and receive rewards, as well as live tournaments, quests, and games Acquired Earlier raised funding of USD 6 mn from investors such as Sequoia Capital, Lightspeed Ventures, Jump Capital, Griffin Gaming partners among others in Jan 2022.

Acquired by Kratos Studios (Provider of development services for the gaming industry) based out of the US in Jan 2023

Rooter 2016 Delhi Provider of Esports games streaming platform. The company offers game and esports streaming platforms to build a strong community of sports fans around the world. Users can create content on the platform, every month. Available on both Android and iOS platforms USD 46 mn  (Last round USD 16 mn in May 2023) Lightbox, Trifecta Capital, 9Unicorns, Pivot Ventures, Venture Catalysts, IeAD Ventures, Astarc Ventures among others

Source: Tracxn

UNICORNS & LISTED COMPANIES

Company Name Founded year Location Business model Total investment Key Investors
MPL 2018 Bengaluru E-sports and mobile gaming platform. It is a gaming platform for players to play more than 60 games with other players and win cash prizes. The winners are provided with cash prizes withdrawable on the announcement. It offers games like Ludo, Fantasy Cricket, Fruit Dart, Carroms, and Chess. Its app is available for Android and iOS users. USD 396 mn (Last round USD 155 mn in Sep 2021) Legatum, Gaingels, RTP Global, Play Ventures, Founders Circle Capital, Google Ventures among others (Last round post-money valuation was USD 2.2 Bn which was 50X of their revenue multiple)
Games 24*7 2006 Mumbai Provider of online gaming platform offering skill games. The company specializes in technology, and artificial intelligence to provide game-playing experiences across all its platforms. Also, it offers a portfolio of skill and casual games. They have games such as RummyCircle and My11Circle in their portfolio USD 107 mn (Last round USD 75 mn in Mar 2022) Tiger Global, Malabar Investments, and Raine among others (Last round post-money valuation was USD 2.5 Bn which was 20X of their revenue multiple)
Nazara Technologies 2000 Mumbai E-sports leagues and casual mobile games platform. The company has diversified gaming and sports media platform. The games published by the company include Chhota Bheem, Oggy Go, Vir the Robot Boy, and more. Listed from Mar 2021 on NSE and BSE Previously raised USD 133 mn funding from Plutus Wealth Management, GIC, Seedfund, Kae Capital, Sequoia Capital, and IIFL Asset Management among others
7Seas Entertainment 2005 Hyderabad 7Seas Entertainment Limited is an Indian game development company. The company focuses on developing PC games, mobile games, console games, and online games. Has developed multiple games including “Turbo Racer”, and “Also develops games on movie-based characters. Has been awarded “Best Browser Game – FICCI-BAF 2013” for “The Dark Man – 2” game. It generates revenue through advertisements and in-app purchases Listed from Aug 2018 on BSE Not Available
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