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The Gaming Industry Is Set To Be an Investor's Dream In 2021 With more than 500 million smartphone users as of December 2019, mobile gaming has taken center stage by claiming 85 per cent of the online gaming landscape in the country

By Nitesh Salvi

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We all know that social distancing is vital now, but staying home for longer can make one feel isolated. This is where online video games have proven a valuable way to socialize with friends and family when you're at home all the time. Due to the pandemic, there has been an influx of online gamers, making the industry appealing to investors looking to cash in on the demand.

India's gaming industry has attracted around $350 million in investments from venture capital firms, growing at a CAGR of 22 per cent, between 2014 and the first few months of 2020. Currently, there are around 400 gaming startups in India. And with more than 500 million smartphone users as of December 2019, mobile gaming has taken center stage by claiming 85 per cent of the online gaming landscape in the country. Thus, it is evident that many gaming developers are bound to capitalize on the increasing number of users. To get a clearer picture we need to look at it in the following way.

There are three key segments of online gaming, namely: real money games, casual games, and e-sports. With gamers in India showing interest in all three segments, the Indian gaming market is now the fastest-growing in the world. Games such as rummy, poker have been the top-performing online games so far. In 2019 alone, there were 357 million gamers in the country, and that number is constantly on the rise. When other businesses shut down due to the pandemic, the gaming industry received hordes of new users, with further growth expected in 2021. Here are a few factors making it a hot investment segment in the country:

Key drivers for market growth in India

  • India is a young country: With nearly half of the population under the age of 25, gamers are everywhere.
  • Smartphones are affordable: For this reason, smartphone users are expected to reach the 859 million mark by 2022 which is an 84 percent growth when compared to the 468 million in 2017.
  • Deep Internet penetration: India is only second to China in terms of internet users. Plus, the number of active users recorded as 451 million in 2019, are expected to reach 829 million by 2021.
  • Booming IT sector: With rapid technological advancements, the number of online game developers rose to 275 in 2019 from a meager 25 in 2010. Thanks to a growing pool of IT engineers, India is on the fast track to becoming a development center for gaming companies.
  • Adoption of digital payment methods: Digital payment platforms are expected to grow from 100 million users recorded in 2019 to 300 million users in 2022. This has contributed to an increase in online payments on gaming portals.
  • Foreign investments: International companies investing in the Indian gaming industry. These investors include big names such as Rockstar Games, an American-based gaming company. In 2019, Rockstar acquired an Indian video game development company in Bengaluru. Another American firm, Sequoia Capital, has made numerous investments in Indian gaming companies as well.

Games are highly engrossing, which makes them ideal to earn revenues. If the content and graphics are good, the gamer will not mind waiting a few seconds for an ad before continuing with their game. Smart monetizing strategies are further making the online gaming sector a hit business.

Monetization strategies in the online gaming sector

Free-to-play: In this method, the game is made available as a free download. However, revenue is earned when users opt for add-on's in the game, such as virtual goods and other premium features. In some popular online action games, full-access to the game is provided to users from the start, but if users want specialized outfits for their character, they'll have to pay for them.

In-game advertising: Advertisement in a game can be annoying to users but it serves as one way to earn revenue. Some puzzle games often display ads whenever a user clears one level and jumps to the next. In some, a user can watch ads to earn extra battle coins or rewards, that can be used for in-game purchases.

Demo and full version: Gaming companies often release a free trial or demo version of a game. This is done to give users a taste and hook them into purchasing the full version.

Play-to-win: With this model, gamers who pay for premium items or features get an advantage over free gamers. This means that free gamers may be required to spend a considerable amount of time trying to unlock these premium items.

Pay to play: Gamers can use actual money to buy in-game coins or tokens, which in turn, enables them to play the game. On some popular casino-themed games, users can use actual money to buy chips, which would allow them to play paid tournaments.

Merchandise: Other ways to earn revenue include co-branding within a game and selling game merchandise. This includes items such as keychains, clothing, posters, etc.

In conclusion, the statistics paired with the numerous revenue-generating opportunities make the online gaming industry in India, more than appealing to investors. It is no surprise that VCs and large corporations are showing an interest in online gaming startups. As the online gaming industry continues to display growth, a large number of investors are looking at cashing in on these new opportunities and maximizing their profits.

Nitesh Salvi

Co-founder and CEO, Pocket52


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