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Can Too Many Gaming Startups Spoil The Broth?
Once deglamourised under the glory of mainstream entertainment sources, India’s online gaming sector turned up as the dark horse of the world’s third-largest startup ecosystem. In the process of becoming mainstream, gaming surely is gaining traction from budding entrepreneurs and investors alike. However, to grow the economic pie, would there be equal slices for the new entrants or too many of them can spoil the broth?
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The elephant in the room is already addressed with the credence been given to the growth story of the gaming industry which is expected to grow at a CAGR of 40 per cent and reach around USD 2.8 billion by 2022 up from USD 1.1 billion in 2019 – the Deloitte India said in its report earlier this year. Even though the increase will be fuelled by the growth of digital infrastructure, substantial rise in quality, and engaging content, the dubiety occurs on the availability of opportunities to the new entrants for exploring the gaming space, which has started to get jam-packed.
The number of game development firms has whoppingly increased at an unprecedented rate in India. Firms operating in the gaming industry in the country have grown from a mere 25 in 2010 to 275 in 2019, almost 10 times in 10 years, according to a report by KPMG. The penetration of investments and startups in gaming – be it esports, fantasy, or casual gaming, is evident. Investor Milan Ganatra, who recently invested in a fantasy sports platform Halaplay, believes that gaming was never as crowded as much as it is becoming now with too many players coming in especially in the real money gaming space.
“It will be the survival of the fittest especially the people, who specialise in several verticals,” the entrepreneur adds.
To Start Over
Ample government schemes under the flagship of Startup India and easy credit availability from banks are two of the drivers leading to the setup of startups in India. The gaming startups are also making the most of such opportunities. Playerzpot, one of the early entrants in the gaming startup ecosystem, also enrolled for the Mudra Yojna Scheme, which helped them reduce the initial expenses. The company also enrolled in the startup India programme, which helped them save tax and expand further.
The awakened interest of investors has increased the inclination of the budding entrepreneurs, who are willing to start a gaming company. Madhur Singhal, Managing Partner and Practice Leader – Technology and Internet, Praxis Global Alliance said, “Investor’s interest is visibly high in new-age fast-growing sub-segments vs well-cemented gaming companies led by high growth potential and need for capital. Successful IPO of Nazara Technologies has given confidence to investors about the appetite of public market investors for gaming businesses.”
“Primarily investors always look for the products market fit and the innovations carried along with. If it’s a new company or early-stage startups, the stability of the product and team dynamics, founders’ vision, and the initial traction play an important role. If it’s a well-established company, the management team along with founders, the revenue vs expenses, breakeven point of the company and future expansions are the key areas which investors look into,” Playerzpot’s Co-Founder and Director, Mitesh Gangar shares what worked during the initial days of his startup.
Saturation Or Space?
Startups have seen an evolution right from game development studios like Moonfrog to fantasy league startups like Dream 11 and MPL, streaming platforms like Rooter and Turnip, and live social gaming like Eloelo. The landscape and opportunities for startups have increased manifold. There is room for everything new in the industry, however, different. Eloelo’s Co-Founder and CEO Saurabh Pandey is confident of India’s massive market potential, which is waiting to be tapped. The gaming market will soon cross USD 1 billion and is poised to go 10x in the next few years, he says. “The explosion of data has boosted game adoption which will lead to a lot of startups being built in this space and newer formats coming in,” Pandey speaks.
Aditya Gupta, Leadership at Innopark takes gaming synonymous with entertainment. If you look at it from that lens, we still have a huge market to tap. “A young market, active internet users, localised content are the differentiators, which the different providers are going to focus on going forward. We are also seeing some extremely innovative and new formats of games coming out of the Indian ecosystem. I don't think there's any kind of saturation or fatigue expected in the near future since the geography is vast and possibilities are endless.”
Speaking on who will survive, Ganatra thinks that consolidation not saturation will ultimately come into space. Every industry which is doing well will always have a lot of many players, who eventually consolidate, Ganatra propounds. He thinks that everyone will fit their kind of interest in gaming, depending on the generation the gaming companies are catering to. “Someone like me would be interested in fantasy while there can be different age groups keen on doing esports. Therefore, I think all of them would exist. Gaming formats are like movie genres. A comedy would also work and so as a horror or family drama. I don’t see a reason why a particular gaming category would do better than the other. But all of them will survive for sure,” he concludes.
Room For More?
The gaming start-up scenario in the country in the last few years has seen great action. The category gained tremendous traction as well as investor interest since the pandemic hit us and confined all of us homebound, Shivanand Pare, CEO of The Gaussian Network states. He further adds that quick penetration would not lead to saturation any time soon in online gaming. “We are a growing young mobile-first economy. From a pure penetration perspective, I think we are still scratching the surface. Thus, saturation is far off.”
Pare compares the gaming industry with the Indian film industry. “It’s already bigger than the Indian film industry. Going by the overall trend, we will only see this industry scaling and creating new highs for itself in the future. Each investor invests based on their mandate and risk appetite. I can say companies in every stage of the lifecycle as long as they have consumer traction and a product which gives a differential experience will attract investor attention,” he opines.
Gangar adds his opinion on the future and growth of Indian gaming startups. He says that overall if we consider the gaming sector in India, it has been finding its recognition now, but still to completely organise the sector many vacuums are to be taken care of, where new start-ups can identify the opportunities and can immerse themselves with those products in the gaming sector.
According to Pandey, the future and growth of the Indian startup game sum up in one word – social. The walls between what is gaming and what is social media will truly thin. “If you think about it, whether it is at a society party or with friends and family or while playing massively multiplayer games online - gaming is becoming truly social,” he comments. The potential of games and platforms built in Indian languages is well known and the success that indigenous games like ludo, carrom, teen patti, etc have seen is there for everyone to see. Thus, Pandey sees a huge potential in the Indian social gaming landscape, which is literally just getting started and will unlock tremendous value.