A game of cat and mouse

GAMING IS ABOUT EXPLORING human fantasies, says Mark Skaggs, creator of Farmville, once a hugely popular game on Facebook. “It gives one the fantasy of saving the princess from the bad guy,” says the former game developer at U.S.-based gaming giant Zynga. Or in Farmville’s case, herding sheep and harvesting crops on a virtual farm. The fantasy keeps players engaged, and engaged players turn gaming into big business.

But creating a fantasy isn’t easy. And making money off it is even tougher. As India’s gaming industry is finding out. The country has seen many cricket- and celebrity-based action games such as Sultan hit app stores in the last few years, but the online gaming market was worth just $290 million (Rs 1,832 crore) in 2016, according to a joint report by Google and consultancy firm KPMG India. That’s way behind the near $100 billion revenue generated by global gaming last year.

Why is India so far behind? From the way people are hunched over their mobile phones playing games all the time and everywhere—in offices, metros, and malls—you’d think the country of 1.2 billion would be one of the world’s bigger gaming markets. But despite hypnotizing the masses, mobile gaming has failed to bring in the big bucks. One reason is that unlike developed economies, or even neighbouring China, India did not go through the usual evolution from gaming arcades to PCs, then to consoles, and then mobiles. Arcades never really took off in India and the high cost of gaming consoles—around Rs 40,000 today— limited lifetime sales over three decades to just around 3.5 million units, according to KPMG India. Similarly, the high prices of gaming PCs limited the market in India.

But the industry is still optimistic. It feels the world is at its fingertips with mobile gaming growing by leaps and bounds in the country. In many ways, the mobile is India’s first mass-market gaming device. It’s a bit like following T20 cricket before being introduced to the test or one-day formats. Though India’s gaming industry is not expected to rival China’s revenue of $24 billion, KPMG estimates it could be worth at least $1 billion in another five years. “We don’t have a hangover from the past,” says Rajesh Rao, CEO of Bengaluru-based game art company Dhruva Interactive and chairman of Nasscom Gaming Forum. “Five years down the line, if we say we [the gaming industry] are a $1 billion industry, it will not be because of PCs or consoles, it will be predominantly due to mobile gaming.”

Why is the business so hopeful? One of the key driving factors is the expected 176 million new smartphone users by 2021, taking the total close to a massive half a billion, according to KPMG India. This would more than double the number of gamers to over 300 million. Increasing Internet usage, an improving payments ecosystem, cheaper 4G data, more local content, and an uptick in the country’s disposable income are other drivers cited by analysts. “India has a history of bypassing the past of the developed nations,” says Sreedhar Prasad, partner, Internet business, e-commerce and startups, KPMG India. He cites the example of how the majority of Indians skipped landlines and went straight to mobiles.

THE SIGNS OF WHAT’S AROUND the corner are already visible. Analytics firm App Annie says the revenue from mobile games touched $14.6 million in the first quarter of 2017. That's a 46% increase from the year before.

India’s established game publishers from Mumbai-based Nazara Technologies to younger and well-funded startups like Bengaluru-based Moonfrog Labs, are gearing up for an expected boom in gaming. The challenge, though, is for them to keep pace with larger international gaming companies. According to App Annie, Indians spent more time last year on international titles such as Clash of Clans, a strategy game by Finnish firm Supercell; China-made strategy game Clash of Kings; and Candy Crush Saga, a puzzle-game made by U.S. firm Activision Blizzard. These games also topped revenue charts in India, while locally developed games struggled to catch up.

But what Indian developers lack in experience and financial muscle, they can compensate with a deeper understanding of the market, says Skaggs. They can develop games that are easier on local phones compared with many global games, which at around 1GB are too heavy for India where data, from a gaming perspective, is still costly. For instance, though Reliance Jio has brought the cost of 4G down significantly, its most popular package offers only 1 GB of data a day, barely enough to cover a gamer’s data consumption.

Local developers can also move up a level by focussing on themes that resonate with Indians, such as cricket, movies, and mythology. Today, there is a dearth of quality Indian games. To be clear, there are games based on popular animation characters such as Chhota Bheem, but most of them get few downloads. The exception is one of Nazara’s Chhota Bheem games, Jungle Run, which has over 10 million downloads on Google Play, the Android app store.

THE RECENT SUCCESS OF INDIAN CARD GAMES such as Teen Patti, made by Noida-based Octro, Play Games24x7’s Ultimate Teen Patti, and Moonfrog Labs’ Teen Patti Gold—the only three Indian games on App Annie’s top 10 revenue list—shows that games related to traditional social leisure activities do well. “Indians love Indian content,” says Rao.

Localisation, however, has to go hand-in-hand with quality, warns Rao. “It is true that there are many poor-quality games out there. But they (developers) will learn their lessons the hard way.” He says the situation will improve with some gaming startups in India being founded by those who gained experience at global companies.

KPMG’s Prasad says increasing investment from venture capitalists will give developers the wherewithal to develop better games. A case in point is Moonfrog Labs, founded by former Zynga employers Tanay Tayal, Ankit Jain, Kumar Puspesh, and Dimpal Maisuriya. Last year, Moonfrog, which raised $16 million in funding from Tiger Global and Sequoia Capital in 2015, brought in Farmville creator Mark Skaggs as director and board member to create more advanced games.

This May it launched a strategy game akin to Clash of Clans—but based on the blockbuster fictional epic film Bãhubali. Already, Baahubali-The Game—which is available in English, Hindi, Tamil, and Telugu—has garnered over 5 million downloads on Google Play. The game allows people to play the character Baahubali, the rightful heir of a fictional kingdom, and establish an empire, build forts, recruit an army, and wage wars along the way.

Baahubali-The Game is among the top 15 grossers in gaming on Google Play. And it’s one of the few Indian games that’s making money through what the industry calls in-app purchases. The game requires players to buy assets such as virtual army barracks, weapons, or statues of Baahubali to move to a higher level. Moonfrog did not disclose the value of such in-app purchases, saying it is too early.

According to the KPMG-Google report, such a model of offering games for free, but persuading the gamer to spend on assets like weapons or virtual treasure to continue playing is better suited to India’s cost-sensitive market. Prasad says the fact that the top 100 free-to-download games generated 22 times the revenue made by the top 100 pay-to-download shows the Indian market supports the “freemium model” under which the game is free but you have to pay for more advanced features. Strategy and puzzle games tend to attract more in-app purchases.

BUT IN-APP PURCHASES are still rare in India. Most Indian developers, save for a few like Moonfrog, have so far focussed on casual gaming and thus their main source of revenue is largely advertisements. They could be banner ads, brand placements within a game’s storyline, or video ads between stages.

Nazara has made a mark with unique brand placements in its games. For instance, in one of its games, the character boosts his power by consuming Real Fruit Power, Dabur’s brand of fruit juice. Similarly, Chhota Bheem urges players to use Dettol sanitiser before continuing on his adventure. “Advergaming is the most non-intrusive media format for the brand to communicate with the players by becoming a part of game play,” says Manish Agarwal, CEO of Nazara Technologies.

But Gaming Forum’s Rao says such sources of income are only a temporary solution. “It is the money you earn at the time of making the game; it is a one-time income,” he says. Though a game publisher can change the brand by updating the mobile app, Rao says revenue from brand placements or in-app purchases “has no linkage to the growth of the game”. He says developers need to adopt what he calls a “sachet model” to popularise in-app purchases. Players are more likely to buy a game asset priced Rs 5 or less than one for Rs 100. “More smaller value purchases would result in a higher revenue than fewer high-value purchases,” he adds.

Mass adoption of technologies like augmented reality (AR) and virtual reality (VR) will also help gamers make money. Pokémon Go, developed by U.S.-based Niantic, is a classic example of how AR games can take a gamer into parks or open spaces in search of a virtual asset, significantly improving the gaming experience and bumping up revenues in the bargain.

Device makers are responding to such trends. Taiwanese smartphone maker ASUS recently showcased an AR-focussed phone called the ZenFone AR at a global conference. The gaming-focussed phone could also make its way to India. “Without any doubt, India is a very big future market for the company and we are looking forward to launch the futuristic smartphone in the coming months,” says Peter Chang, regional head, South Asia and country manager, system business group, ASUS India.

Indian mobile gaming is also hoping to make money by clambering aboard the messaging app platform. The model of integrating games with chatting apps has been a success in China at one of the country’s top messaging apps, WeChat, owned by technology company Tencent. That WeChat users can play with or against their friends improves the social aspect of games, and the integration of payment service with the app benefits monetisation. Indian messaging app Hike, founded by Kavin Bharti Mittal, offers games you can download within the app. Hike, however, refused to comment on the programme. (Tencent is an investor in Hike.) Some of the games available on Hike are Smash Racing, a car-race game, Chess, and Cricket. Nazara's Agarwal says Hike could be a valuable platform for games, once it introduces a payment service within the app.

CLOSE TO 90% OF INDIA’S ONLINE GAMERS might be on their mobiles but that does not mean there’s no space for console and PC gaming in India. Sector experts see them as the gaming equivalent of high-street fashion—low in volume, but high in value. Already, U.S. graphics processing unit (GPU) maker Nvidia and ASUS—which also makes Republic of Gamers branded laptops and PCs—are engaged in organising gaming competitions and conferences to bring more Indians under the tent.

Nvidia is also playing gaming evangelist by engaging with real estate players and commercial centres to set up gaming cafés across the country. Its vision of a café isn’t just a space with powerful gaming PCs that customers use per hour, but an experience centre that offers other amenities like food and beverages—a social paradise for hardcore gamers. “China has over 140,000 cafés catering to gamers. There is no such infrastructure here,” says Vishal Dhupar, managing director, South Asia, Nvidia. He says Internet cafés have had a negative image in India, “with terrorism and such activities”.

But the situation is changing. Two years after launching the programme in Bengaluru, more than 50 Nvidiabranded cafés have sprouted across the country. Nvidia does not sell its products directly to the cafés, but more gaming PCs translate into better sales of GPUs. “Gaming cafés provide commercial centres an additional revenue over the usual cinemas and restaurants,” says Dhupar.

But at the end of the day, cafés will only be a niche experience. The true game changer for the industry will be mobile games.