There is a game for everyone and the choices for players are virtually unlimited! The gaming landscape in India has undergone a significant transformation in recent years, witnessing a growing participation in online gaming throughout the nation. Whether it is casual gaming on mobile phones or PCs or participating in organized tournaments and leagues within the realm of esports, India is witnessing a rise of gaming culture like never before. In 2022, gaming and esports enthusiasts experienced an exceptionally thrilling year, marked by the unprecedented Commonwealth Esports Championship. The global recognition of esports reached new heights, exemplified by Indian DOTA 2 squad’s impressive achievement of a bronze medal. Building on this success, the Asian Games 2023 also hosted an esports category as an officially recognized medal event. The inclusion of online gaming as a competitive sport highlights the increasing significance of gaming and esports on the global platform.

In India, the online gaming segment is the fourth largest segment of the Indian Media & Entertainment sector. It is expected to reach INR 231 Bn by 2025, growing at a CAGR of 20%. In 2023, the number of online gamers in India soared to an impressive 442 Mn, establishing it as the second-largest gaming user base globally, surpassed only by China. Among these, approximately 90 to 100 Mn are avid and regular players. Within the esports category, the number of players touched 1 Mn across all competitive level games where 1 of 5 players were women.

Status of the Gaming Industry in India

The rise in gaming culture in India can be credited to various factors, particularly the development of broadband connectivity in Tier-II and Tier-III cities, along with cheaper data costs and affordable smartphones, broadening gaming accessibility to a diverse audience.
During the lockdown, as more people turned to virtual entertainment, online game viewing and streaming emerged as an alternative to OTT consumption and social media. The gaming sector is experiencing changes across all its verticals, including casual gaming, web3 gaming and esports.

According to the FICCI-EY report of 2022, transaction-based game revenues saw a 39% increase in 2022 from 2021, surpassing INR 100 Bn. More and more Indian players are paying for online games with India’s percentage of first-time paying users increasing to 67% in 2022. In India, every second internet user is a gamer, and every third user conducting transactions online is a paying gamer. This growth can be attributed to heightened awareness and a more favourable perception of online gaming.

The incorporation of blockchain-based technologies has further enhanced security and reliability for players. With enhanced connectivity, advanced features, and heightened data security measures, the industry is positioned for substantial growth, potentially giving rise to an increase in full-time professional gaming careers.

Innovation in Gaming Sector

Game developers have come a long way and are thoroughly leading the way in innovations taking place. Today, there are over 300 gaming platforms in India that are building innovative consumer-facing tech products with a core mission to improve fan engagement. These companies are playing a critical role in building skills in advanced fields such as AI/ML, cloud computing, and analytics, and in evolving cutting-edge business practices.  Here are some ways game developers are utilising technology:

• Integration of AR/VR Technology – The integration of Augmented Reality (AR) and Virtual Reality (VR) is set to introduce innovative gameplay mechanics that leverage physical movements and user interactions. This technology will empower players to engage with objects, manipulate virtual environments, participate in shared virtual spaces, and collaborate on gaming experiences. These games will immerse players in live and multiplayer experiences, delivering a real-life experience as if they were physically present. This fosters a stronger sense of connection and camaraderie among players.

• Cloud Gaming – Cloud gaming is set to remove the need for high-end gaming hardware, enabling users to access games across a range of devices such as smartphones, tablets, and low-spec computers without the necessity of investing in costly gaming consoles or PCs. Beyond its functionalities, players can seamlessly switch between devices without losing their progress. Cloud gaming ensures a seamless and uninterrupted gaming experience, enticing users to indulge in extended playing sessions.

• Blockchain Integration – The incorporation of blockchain technology in gaming grants players ownership of digital assets, including non-fungible tokens (NFTs), in-game items, characters, and various collectibles. This advancement empowers game developers to establish tokenized economies within the game framework. Furthermore, blockchain supports interoperability across diverse games and platforms, enabling players to utilize the same items across multiple games. This fosters increased engagement and promotes participation across different gaming experiences.

Government Support for Gaming

The Indian Government has undertaken numerous initiatives to promote the growth of the gaming industry. These efforts include advancing technological capabilities, ensuring the well-being and rights of consumers, and creating an environment conducive to investment.

• Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021 amended to add provisions for online gaming to protect online gamers from harmful content and addiction. A self-regulatory framework has been implemented by the Ministry of Electronics and Information Technology (MeitY) for the online gaming sector, wherein Self-Regulatory Bodies (SRBs) will validate games that can operate in the country. Online real money games offered by intermediaries will be regulated through these SRBs. This body will also ensure that online games that involve any kind of gambling will be prohibited. SRBs will also ensure games follow guidelines to prevent addiction and mental harm through parental controls, frequent warning messages, and age-rating systems. The gamers will have the option to opt-out after reaching their own limits for time or money spent. This amendment has been hailed by stakeholders like InMobi Group and MPL as it recognises online gaming intermediaries and distinguishes them from gambling. Clearly defining real money and permissible games will play a pivotal role in fuelling the growth of legitimate industry participants.

• The Animation, Visual Effects, Gaming, and Comics (AVGC) Promotion Task Force was established to recommend strategies for developing domestic capabilities to meet the needs of both Indian and global markets and to maximize the potential of the AVGC sector through creation of a National AVGC policy. This includes the creation of a National Centre of Excellence (COE) for the AVGC sector, with Karnataka being the inaugural state to host a COE. The objective is to establish an international standard in skilling, education, industry development, and research & innovation within the AVGC sector. Collaborative efforts with State Governments lead to the creation of Regional COEs, with India's first Centre of Excellence in Online Gaming at Shillong, facilitating local industry access and the promotion of regional talent and content.

The Government of India has authorized 100% Foreign Direct Investment (FDI) in the gaming sector, utilizing the automatic route within the Electronic System and IT & BPM sectors. This implies that foreign investors can invest in the gaming industry in India without any restrictions, provided they adhere to the conditions outlined in related laws. This opens opportunities for gaming startup founders to secure funding not only from domestic investors but also from foreign investors.

Some initiatives like the amendment in the IT Rules 2021 and AVGC Task Force were well received by stakeholders who took comfort in a centralised policy that helps reduce regulatory fragmentation at the state level. Yet, the recent imposition of a 28% tax on online games has faced backlash from startups and gaming enterprises. Critics argue that this move could potentially force smaller startups out of business. The government's justification for this decision is based on the moral standpoint that online games cannot be taxed on par with essential commodities. The impact of this decision on stakeholders remains uncertain and will be noticed in coming times.

Conclusion

The online gaming sector is projected to reach INR 231 Bn by 2025, with transaction-based gaming expected to grow at a CAGR of 21%, contributing 79% of total segment revenues at INR 183 Bn. Key growth drivers include the clarity provided by new IT rules, simplification of legislation, and regulations, fostering trust among gamers. The sector is further propelled by the ongoing growth of digital payments and emerging monetisation models like in-app branded monetisation. Brands are capitalizing on the online gaming realm for product launches, events, and innovative monetization avenues. Notable entries include United Colors of Benetton's virtual collection in Animal Crossing  and Toyota's engagement with its Asian audience through the e-Motorsport event TOYOTA GAZOO Racing GT Cup on Gran Turismo, live-streamed on Twitch, Facebook, YouTube, and Twitter, allowing gamers to race using Toyota sports cars.  Prominent startups in the gaming sector, including MPL, Dream Sports, and Games 24 Seven, have achieved unicorn status. Nazara stands out as the first listed gaming company. Noteworthy international gaming firms like Electronic Arts (FIFA), Rockstar Games (Call of Duty), Ubisoft, and Zynga also have a significant presence in India. The rise of gaming culture is undeniably shaping a new era of entertainment and the government's role in fostering innovation plays a pivotal part in this transformative journey. If stakeholders and the government collaborate effectively with trust and care, the gaming segment could become a lucrative market driving revenue and profitability.