REPORT ON GAMING IN INDIA December 2009

Research conducted by:

Research conducted for:

Executive Summary We have witnessed a rise in digital forms of gaming in India. This rise is mainly attributed to the growth in digital medium in the country. The ownership and usage of digital devices and applications have been on the rise. For instance, PC-ownership in houselholds has increased to 7.8 Mn, active Internet using population to 36 Mn (Source: I Cube 2008) and mobile subscribers to more than 471 Mn (Source: TRAI Sep. 2009). An involved user of these digital formats is young; belonging to the 18-25 years of age. As a result, services offered on these formats are generally focused towards youth. With the assumption of continued growth in such usage and dissemination of digitized options; digital gaming industry provides a promising future for India.

Presently, the gaming genres are primarily derived from various sporting themes – such as cricket, racing, shooting and the like. These genres are immediate markets as Indians seem fanatics of such kinds of sports. Lately, however, there has been a shift in attitude of gamers towards enjoying role-playing games and other online games that provide an option of socialising. There is also a predilection towards platforms that offer “on-the-move” gaming due to which some forms of console and mobile gaming are popular.

Based on our research, the ecosystem of the gaming domain, in India, has grown to include certain divergent stakeholders which did not exist in the recent past. Further, there have also been concrete changes in the existing structure. India, with its recognised abilities, is poised to be an important centre for offshore gaming development. Another avenue that could present a fundamental shift is through . Using the model of In-game placement of online advertisements, game developers or publishers can monetize their offerings.

Distribution has always been a challenge for digital game providers in India for offline gaming – the bone of contention being the piracy market. To dissuade piracy practices, better distribution and pricing models need to be developed. For online gaming, newer distribution models are emerging: through portals, dedicated gaming sites, or gaming centers.

Similar to past trends, there are barriers that continue to present obstacles towards seamless growth in the industry; which include any number of infrastructural impediments, industry limitations as well as cultural issues with consumers. Nonetheless, there are certain factors that could facilitate the growth of the industry. These include monetizing online and offline games through advertisements, innovating gaming content, marketing and distribution as well as differentiating overall appeal so that gamers are hooked on to it.

Given the high potential of the market in terms of demand, Indian Gaming Industry is still at its nascent stage. Innovations in various aspects of the ecosystem are required to ensure that it is self-sustaining. The weighing scale remains tilted towards demand side with a growing gaming segment staying underserved.

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Research Methodology

The research team at eTechnology Group with IMRB International adopted a combination of research approaches for this report. Given below is the research methodology used for the report:

Quantitative Research

Relevant datapoints were extracted from 'I-Cube 2008' reports , an annual syndication of eTechnology Group, IMRB International

The syndicated research is based upon primary survey covering 20,000 households, 90,000 individuals, 1000 SMEs and 500 Cyber Cafes

Secondary Research

Secondary research was done using information from various published and private sources and other research bodies to triangulate our findings

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Table of Contents

1.0 Introduction to Gaming in India ...... 5

2.0 Internet: Driving the gaming market in India ...... 8 2.1 Internet and Broadband penetration in India ...... 8 2.2 Internet Users in India ...... 9

3.0 Understanding the Indian Gamers ...... 12 3.1 A typical Indian Gamer ...... 12 3.2 Gaming Genres played by Indian Gamers ...... 13 3.3 Likes and Dislikes of Gamers ...... 14

4.0 Gaming Ecosystem and Business Models ...... 15 4.1 Defining the Gaming Ecosystem...... 15 4.2 Distribution Model – reaching the gamers ...... 16 4.3 Gaming Revenue Models ...... 18 4.4 Type of Gaming Platforms ...... 19 4.5 Emerging Gaming Formats ...... 22

5.0 Barriers and Drivers for Gaming in India ...... 26 5.1 Barriers for Gaming in India ...... 26 5.2 Main Drivers of Online Gaming in India ...... 28

6.0 Market Size ...... 30

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1.0 Introduction to Gaming in India

Indians are obsessed with entertainment and various media vehicles delivering entertainment are seeing enormous growth in the country. There have been a spate of Television channels like Real, NDTV Imagine, Colours, etc. which are broadcasting content to Indian audience. Several new newspapers and supplements have emerged. Spicy magazines with gloss covers are hounding for attention of the Indian consumers.

Not to be outdone, even the Indian Internet industry has embraced entertainment as one of the key offerings. A few years ago, Internet in India was dominated with functional content catering to news updates, reviews, classifieds, etc. However, re-packaging of the content to deliver more entertainment value is clearly visible now. The blogs have employed celebrities to give regular updates from their lives. Movie reviews and discussion related to movies appear much earlier than the actual movie hitting the silver screen.

Several Internet companies have been experimenting with gaming in the past, but with little success. Way back during start of the decade, players like Contests2Win, Hungama, etc. began with an excellent business model – of merging brand experience with gaming. And why not! Gaming offers one of the best ways to reach audiences of all ages. With gaming, technological sophistication is not really a factor because games come in a host of forms, ranging from simple casual card and arcade games to sophisticated flight simulations. Further, Gaming requires a player to pay attention, minimizing multitasking and hence the clutter, which has been bane of the traditional media (TV and Print) for quite long.

However, somewhere along the way, the companies were not able to capitalize the audience. Or should we say, were going slow on the innovation. Or probably both, and in effect getting caught in the viscous circle of innovation and monetization. As a gaming publisher, if I am not able to monetize, I won‟t have necessary resources and investments to innovate. And, if there is no innovation, monetization would be harder to come by.

A couple of years back the circle was shattered by domestic and international companies. These companies identified the right opportunity and put huge investment behind creating content and delivering it to the right audience. These gaming companies did not limit themselves to one or two genres of games and having 5-6 games in each genre. They actually made themselves present across multiple genres, with a plethora of games in each genre – offering an unprecedented choice to gamers. was one such company which burst into

-5- the scene with huge number of games developed in-house and sourced from other publishers.

And the Internet community in India responded very well. The percentage of gamers amongst the Active Internet users increased from 25.3% to 41.2% at a massive growth rate of 89%. This was further projected in ranking of applications accessed online by users and Gaming move to a Rank 5 from a Rank 7 last year (see table below).

All Applications accessed 2008 2007 Base: Active Internet users in 30 cities 17.94 Mn 15.4 Mn Email 91% 93% General Information Search 76% 58% Educational Information Search 49% 47% Text Chat/ IM 46% 58% Online Gaming 41% 25% Online Jobs 37% 31% Online music/ videos 32% 29% Financial Information Search 21% 19%

Source: I-cube 2007 and 2008

In the social scene as well, a lot of Internet users have started to go beyond the regulars like Orkut, , iBiBo, BigAdda, etc. Virtual worlds have been in the news quite a bit in the last year. The Virtual Worlds also known as Metaverses or Massively Multiplayer Universes are attracting a lot of attention. The most popular ones are the World of Warcraft and Second Life accounting for more than 20 million worldwide “residents”. The numbers from India have not been that high, but all the same, Internet users are sitting up and noticing these. Recently, Travian, a browser-based game that enables users to play games with others has caught Indian gamers‟ interest. With 3 servers (3rd server launched in 29th June 2009), it has a user registered base of nearly 60,000.

The above was coupled with high profile launches of Microsoft Xbox 360 and Sony‟s PS3 in India. These two brought in a new dimension to gaming altogether. The jittery gameplay and graphics gave way to movie-like story line with super cool graphics and animations. The real-life simulation games, looked less like simulation and more real life, making the game play more engrossing and captivating. However, the high-priced consoles have still not reached the Indian masses. Couple of years back Sony had lowered its PS2 prices which have seen revival since then – maybe a learning that a console needs to be lower than $100 in India.

Encouraged with the above, EA, Zapak and several other game publishers entered the Indian shores allowing for easier availability of their software. While the PC gaming industry has been plagued with piracy, there has been a

-6- tremendous growth nevertheless with correct pricing, better support and easily availability of games in various branded and non branded outlets.

The other thing going right for the Indian gaming industry is the high growth of mobile subscriptions in India. India already has more than 300 million mobile subscribers and still going strong. Most of the mobile users in India are either teens or in their early twenties, making mobiles that they own a big platform for proliferating gaming related content.

In the last few years, it has been observed that two biggest entertainment formats in India – Cricket and Cinema are keen to integrate gaming in their offering. There is unconfirmed news that IPL would feature in EA Sports‟ Cricket ‟09 version expected to release in late 2009. The movies Hanuman and Ghajini had a presence in the gaming arena. In fact, with the Ghajini game, Eros Entertainment, a popular film distribution and marketing house has made a foray in the gaming industry as well. The gaming industry has experimented with Bollywood games in the past as well including games based on movies Dhoom, Shaheed Bhagat Singh and Agni. However, the results of these initiatives have not really been there.

All the same, the times are great for the Indian gaming industry. It has a mass of users coming the online and mobile way. The console and offline PC games are bringing in the hardcore gamers. And then with the new emerging formats Massively Multiplayer Online Games (MMOG), Social gaming (gaming on social platforms like Facebook and Orkut) and Bollywood games the gaming industry is likely to see another good year ahead. Browser-based MMOGs such as Wanted by Zapak.com are recent introductions in the Indian online gaming market.

In this report we capture details of the current scenario of the Internet and Gaming industry in India. Further we analyse the entire gaming ecosystem such as the stakeholders in this industry, types of models being used, indepth analysis of gaming platforms, types of games being played, attitudes and behaviour of gamers, etc. Additionally we point out the drivers and issues facing the industry at the moment and ways to move forward successfully. We try to analyse all the factors playing a role in this industry, how they shape the future and what makes India such a strong bet for Gaming glory in the future.

Game on!!

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2.0 Internet: Driving the gaming market in India

Gaming in India got an impetus from Internet. With Internet, international content was available easily to Indian users. This exposed them to various gaming formats and the new titles and versions available in the market. This has definitely increased appetite of gamers in the country.

Thus, to understand the adoption and potential of online gaming it is essential to assess the overall environment for Internet usage and the penetration of PC hardware in the country. These variables have a direct impact on gaming in India. Some of the key variables that need to be understood are the total number of PCs, Internet connections, size of the Internet user base, affluence levels of users, enabling infrastructure and trends in adoption of other applications.

2.1 Internet and Broadband penetration in India

To begin with, I-Cube 2008, a syndicated research conducted by IMRB International estimated the number of PC Owning Households in the country at 7.8 Million (growth of 36% over last year). Out of these households 62% of them (4.85 Million) have subscribed to Internet. Out of these 76% are broadband subscribers while 24% are still on the dialup.

Fig: Break up of Broadband and Dial up owning homes in India

Se… 57 Ma… 50 Se… 46 Ma… 42 20… 32 20… 16 20… 12 20… 9 20… 5 Source: I-cube 2008

While the above scenario looks positive especially from the point of view of downloading heavy applications like gaming, the picture may not be completely rosy. TRAI defines broadband in India as 256 kbps (much lower than the global definition of 2 mbps). Further, the Indian ISPs are offering high speed Internet even at 64 kbps and 128 kbps under the garb of broadband. More so, most of the Internet connections are actually on a shared platform of DSL and Cable. Hence, even 256 kbps is the highest browsing speed that is promised. In reality a user may be getting much lesser, given that the contention ratio of various ISPs exceeds 70 in most of the cafes.

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Another worrying issue from the gaming point of view is that the limited data download packs are very popular in India. Incidentally, they also happen to be the cheapest. The unlimited data download tariffs are much higher (upwards of Rs. 1500 p.m. for a 256 kbps connection). The gaming users are thus not allowed to freely experience true online gaming and in the online formats it is the simple flash games that are gaining more popularity. Some publishers like Indiagames are defying this by entering into direct agreements with various ISPs. However, there is a dire need for the ISPs to look into this issue.

2.2 Internet Users in India

I-Cube 2008 estimates put in that there are around 85 million individuals who know how to use PC. Out of these 85 million individual around 57 million individuals have ever accessed Internet (recall having accessed Internet in the past). From these, there are around 42 million Active internet users as on September 2008. An Active Internet User is defined as someone who has Internet at least once in last one month and hence are regular users of Internet.

Computer Literates Claimed Internet Users

Sep -08 Sep-08 85 57 50 Mar -08 72 Mar-08

Sep -07 65 Sep-07 46

Mar -07 62 Mar-07 42

2006 59 2006 32

2004 53 2004 16 2003 42 2003 12 2001 31 2001 9 2000 16 2000 5

Active Internet Users

Sep-08 42 Mar-08 36 Sep-07 32 Mar-07 29 2006 21 2004 11 2003 8 2001 4 2000 2 Source: I-cube 2008

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Currently the penetration of Internet in India is still around 5% of the country‟s population. However, if we consider the 300 million urban population of India, then the Internet users are a significant 20% of the population. Thus, the mass is there on the Internet. Further, the school going kids, College going and Young Men form 70% of the Internet user population in India.

Further point of interest is that Internet in India has got rather addictive with users accessing it at least 2-3 times a week. Even the number of hours accessed per week has increased from less than 7 hours per week in 2007 to almost 9.3 hours a week in 2008.

Hence the internet user audience today is young, accesses Internet more often and is spending more time on the Internet ever. This has naturally helped witness growth in many applications being accessed online, gaming being one of the frontrunners of this phenomena. The breakup of applications accessed in 2008 by demographics is depicted below:

MAIN APPLICATIONS ACCESSED ONLINE – BY DEMOGRAPHICS

17.9 Mn 2.2 Mn 4.8 Mn 5.4 Mn 2.5 Mn 2.1 Mn 1 Mn Base: 1% 5% 7% 6% 9% 8% 9% 30 cities in 2008 20% 10% 5% 2% 6% 9% 5% E-Commerce 18% 18% 20% 27% 24% 17.9 Mn 31% 4% 7% 5% Entertainment 7% 39% 5% 9% Information

8% 65% 61% 62% 56% 53% Chat 44% 31%

E-mail

Men

Men

kids

Older Older

cities

All 30 All

Non

going

Young Young

School

going

Women

College College Women

working

Working students

Source: I-cube 2008

The above chart depicts the primary application that drives various demographics to connect to the Internet. While the School Going Kids and College Going Students continue using Internet for information related content, the proportion of entertainment as an application is highest among school going kids (20%) and college going students (10%).

The need of the hour is to capitalize on the above population and derive applications which are well suited to them. Also given the fact that they are more into communication and information related applications, some applications need

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A case in point here is Facebook which has very effectively integrated several applications including gaming applications in its stream. Popular ones here include Mafia Wars, Street racing, Dragon Wars, etc. Even the traditional games like scrabble, chess, etc. can be found as Facebook applications. Users can use these applications to play with their friends or connect with other users on Facebook.

Similarly, QQ a well known communication platform from the Chinese giant Tencent has quite effectively integrated gaming applications with its messenger platform. QQGame is a gaming platform that has a wide assortment of games, including basic games such as chess and poker--which are free--to more intensive games such as massive multiplayer online role playing games, which cost money. In game advertising in QQ has contributed significantly to Tencent‟s revenues. QQ is not available outside China as of now, but still has 250 million user base. Interestingly, QQ‟s revenues are at least three times that of Baidu, the largest search engine in China.

With such patterns, it is quite evident that online services such as portals and social networking could be effective avenues in attracting persistent Internet users. These users are likely to stay on and indulge in engaging applications such as online gaming. Portals and SNS can actually have a larger and more attentive audience if they are able to integrate gaming formats that their audiences are likely to relate with and like. Online gaming is an application which when integrated well with the offerings can increase the unique visitors and time spent manifold. However, it is important to understand the gamers first.

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3.0 Understanding the Indian Gamers

3.1 A typical Indian Gamer

A typical India gamer is a Male from the Top 8 metros, has an average age of 26 years and belongs to the affluent SEC A.

Demographics Age ~ 26 Years SEC A Houshold College-Going Student

Typical Indian Gamer

Gaming Behaviour Plays games mainly from home Gaming Orientation Plays for 1 hour in a session Spends less than Rs. 150 per Plays 3 times a week month Playing since last 18 months

Source: I-Cube 2008

The average gamer has been playing on an average since 18 months now. He plays mainly from home rather than from a cyber café. He pays games 3 times a week and his usual gaming sessions last an hour in length. He also spends less than Rs 150 per month on gaming.

Roughly 80% of gamers still come from the Top 8 metros. The top 4 metros especially account for 59% of these gamers which indicates that availability of games and reach to target audience is still limited. Gamers from SEC A household have gone down to 41% from 44% last year at the hands of a corresponding increase in SEC C households starting gaming.

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There has been a significant shift in demographics of gamers as shown below. Proportion of college going students gaming on any platform has increased from 20% to 32%. And now account for almost 50% of the gaming users.

Base - 3.9 Mn (Online Gamers in 30 cities in Base- 3.9 Mn (Online Gamers in 30 cities in 2007) 2008)

School Going kids 4% 5% 8% 9% College going 18% 10% 26% students 11% Young men

Older men 30% 20% 27% 32%

Working women

Non-working women

Source: I-cube2007 and 2008

Another interesting change has been the decreasing influence of cyber café‟s as a prime source for gaming. Last year the percentage gamer using unbranded cyber cafes was as high as 53% while that number has dropped drastically to 35%. To compensate for this decrease the total number of gamers playing from home has increased from 34% to 47%.

3.2 Gaming Genres played by Indian Gamers Racing, Sports games and Shooting games make up the Top 3 Genres for Gaming in India on both Online and Console platforms. Games such as road rash and NFS are the most popular racing games. All Sports games involving Cricket are extremely popular in India owing to which sports are second in the list. The main difference in genres played online and console is the preference for flash and arcade games online whereas the average gamer prefers fighting games on the console.

Source: I-Cube 2008

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3.3 Likes and Dislikes of Gamers

The various attitudes of all types of gamers which have been captured through I- Cube 2008 are shown below. Base: 9.9 Mn Gamers across 15 cities

95% 5% Enjoy role playing games 89% 12% Online gaming helps explore a game thoroughly

80% 20% Like online games due to the socialising aspect

79% 21% Enjoy playing in teams

73% 27% Like games which allow customisation

69% 31% Enjoy competing with others

69% 31% Enjoy games to break monotony of routine

68% 31% Enjoy games which are complex in gameplay

Agree Disagree

Source: I-Cube 2008

Primarily, the average gamer is extremely keen on role playing games and loves to explore games thoroughly which suggests the need for a strong storyline along with the gameplay. Additionally, a significant 80% of active gamers like gaming for its socializing aspect. The gamer is quite inclined towards team games and games which allow customization of characters are also strongly liked.

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4.0 Gaming Ecosystem and Business Models

4.1 Defining the Gaming Ecosystem

The Gaming ecosystem consists of the following five main players. Each player has their own specific role to play in the development of this industry. Some of these roles and interactions are enlisted below.

Game Developer

Public Access Points Game Publisher Gaming Ecosystem

Hardware and Component Advertisers Manufacturers

 Game developers: These individuals actually create the game. They design the features, program the software and test the game before actually launching it. These are the technical brains behind the game. It is these developers who help enhance features such as gameplay, sound, etc with their valuable modifications. Recently, outsourcing development work to countries like India, China, Russia and Eastern Europe has been found to be an emerging phenomenon.

 Game publishers: They are the ones who promote and market online games, educate users and create awareness. These publishers can be stand alone or part of the developers as well.

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 Telecom and PC hardware manufacturers: These are the infrastructure providers for the industry. They design the hardware equipment with which the game is essentially played. This consists mainly of console manufacturers, mobile device makers, computer components, etc

 Advertisers: These are one of the prominent revenue sources for this industry. They look to attract and appeal to the growing urban and tech savvy gamer

 Cyber café owners: In a country like India with low PC penetration in homes, they play a vital role in the development of gaming in India. The cyber café owners are always on the lookout for addictive games which can attract large number of users to the café and also utilize plenty of hours making it a great revenue driver.

4.2 Distribution Model – reaching the gamers

Now that we have witnessed the players of the industry, it is time to see how the games are actually made available. The distribution model adopted plays a major role in how fast the game actually reaches the gamer. Distribution model chosen also plays a crucial role in dissuading piracy by making games more affordable and more conveniently available. The four main models used currently in India are depicted in the diagram below.

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Internet Portals

E- Dedicated Commerce Distribution Gaming Websites Models Sites

Retail Stores / Branded Outlets

 Distribution through Gaming Portals: Portals such as Zapak.com, Indiagames.com and Yahoo! generally provide the greatest possible distribution, particularly for mass market content, by showcasing the game on their service. These sites score high on advertising spots and hits offering the greatest exposure to the game. Additionally, such portals are capable of handling online technical development issues on their own.

 Dedicated Online Game Site: Online gaming companies offer websites that are designed specifically for a particular game. Examples include WorldofWarcraft.com by Blizzard Entertainment, and Runescape.com from Jagex Limited. In these sites, gamers are expected to register, make their avatar or character and play games. These sites tend to generate substantial traffic, often as a result of their agreements with portals, ISPs, or other sites. Additionally, dedicated online game sites provide more targeted marketing. These sites often deliberately seek professional online users who are more likely to be interested in games.

 Ecommerce Sites: Certain eCommerce sites sell gaming CDs/DVDs through their websites. As of now, this is not an effective avenue to distribute gaming software due to lower adoption of eCommerce services.

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 Retail Shop: In this method, the game manufacturer simply stocks the game in regular shops. The gamer purchases the game in the shop and goes and plays it online using the CD/DVD purchased. This is method ranks high for convenience factor and is slowly gaining popularity now. Quite a few branded electronic retail outlets are now stocking game titles.

 Other Forms of Distribution: There are certain alternative forms of distribution that are emerging in the gaming market. They have achieved some measurable success till now. The jury is still out on arriving at a concrete decision regarding their acceptance.

o In case the game is linked to an event such as movies, music, etc. the distribution could be largely influenced by the offline occurrence. For example, the case of “Ghajini” game it made more sense to distribute CDs outside movie theatres itself and then expect the buyer to go play the game online. Such kind of distribution could be simply through promotions or a fee could also be charged.

4.3 Gaming Revenue Models

Revenue Models

Subscription based Advertising based models models

Micro transactions In game placement On site advertising Time based pricing Flat Fee pricing

i) Subscription based pricing model: These are a very common and popular model where the user generally pay a monthly fee that entitles them to unlimited usage during that month.

Time based pricing: In this type of subscription model, users pay an hourly/ monthly fee depending totally on the number of hours actually being used

Flat fee pricing: Here the user is charged once for downloading the game, then is allowed to play the game for free henceforth

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Microtransactions/Item Purchase: Coupled with the above pricing, incremental revenue for gaming companies is generated in numerous ways. For example, subscription content may be combined with additional payment for special services, such as participation in an event or in-game ownership of a specific object. Also, some providers charge extra for downloading the same game to play on multiple platforms such as online and mobile. ii) Advertising based pricing model: These generally rely on some sort of sponsorship or advertising. Games derive their revenue from the sponsoring company which pays for the development of the game and generally recognizes value in messaging provided by the game. Other games may be supported through general advertising; revenue is generated through sales of banner ads, interstitial advertisements, rotating sponsorships, or other types of online advertising. Within the advertising model, developers further build saleable advertising opportunities through the following:

In game placement: A brand is placed in a game such that it becomes an integral part of the game and creates many opportunities for the consumer to interact with it. A good example is the logo of Nike placed on the sidelines of a football match in FIFA. The advertiser pays a fee for this in-game placement.

On-site advertising: Internationally the most common revenue model, though not the largest source of revenue. In this model the advertiser‟s pay for placing their advertisement (usually banner ads) on the . Games are monetized by advertising units sold around the game

4.4 Type of Gaming Platforms

Currently there are 4 main Gaming platforms in India namely PC- Offline, PC- online, Consoles and Mobiles. According to a leading game publisher in the country, the total PC and console market in India can be estimated to be around the 20 million dollar mark out of which the breakup in terms of revenues will be split equally into PC and Console. Hence it comes as no surprise that all the game developers are vying for the console space which is still very nascent in India in terms of number of gamers. (see chart below)

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Base: 9.9 Mn Internet using gamers across 15 Online cities from SEC A and B (Source: I-cube 2008) Gaming

7.2 Mn

Offline Console 9.8 Mn 1.1 Mn PC Gaming Gaming

6.1 Mn

Mobile Gaming

If we consider the above, it is the PC gaming and online gaming which has got maximum number of users. Considering that the PC gaming industry has been present since the time PCs have been here, it would be interesting to look at the emerging online gaming industry in more detail.

The various types of games available online are as follows:

Browser based games: These are nothing but your web based games. They use simple keyboard controls or mouse with hardly any need to even read the instructions before starting to play. Examples of these are the vast variety of games found on sites such as Zapak.com, Yahoo! games, miniclip.com, etc.

Downloadable single player games: These games are downloaded onto one‟s computer and then played by one player alone usually against the computer. These games have to be small in file size in order to entice the gamer to make the download and try to play the game. Arcade games and puzzle games are rather popular for this category.

Downloadable Online Multiplayer Games: These games are usually downloaded from the Internet either as the full game itself or as client software is installed the person has to simply log in and play against many players online itself. Examples include Multiplayer games in Zapak.com, FIFA Online.

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PC CD-ROM Games with Online Components: Such games include hardware purchases with the game loaded on it. This hardware such as CD/ DVD contains a product key which when loaded during installation allows the user to play online after competing a simple registration process. E.g. Battle.net by Blizzard Entertainment.

Console Games with Online Components: These games enable the gamer to play via console with many players via an Internet connection at very little extra cost. This attracts gamers due to the possibility of playing with people who are available at any moment online and also using their preferred console. Xbox Live (http://www.xbox.com/hi-IN/live) has created such a community for gamers in India.

All types of games can be classified into 3 main game playing modes as shown in a pyramid in the next page. Each level denotes the most likely progression shown by a gamer during his life. Initially all gamers start at the base of the pyramid playing alone and independent sessions. As the gamer gets more confident of his abilities he tends to reach the middle where he interacts with other gamers and friends while gaming. Finally once a good skill level has been developed by the gamer he starts with Multiplayer games with persistent worlds.

Currently in India, Single player games dominate the market with 80% of the active Internet using gamers playing such games. This accounts for 5.8 Million people who form the base of the pyramid.

The next level of the pyramid are those who play games with other counterparts but play either on LAN or Online in virtual worlds which cease to exist once the game finishes. These gamers have grown significantly over the last year to reach 63% of all gamers across the country.

MMOGs form the apex and the ultimate gaming experience for the passionate gamer as the gamer gets to play with multiple players with different levels, customizable options and that too in a world which never ceases to exist. These form 27% of all gamers currently, up significantly from last year‟s 19%, which does shows the popularity of the MMOGs now.

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Base: 7.2 Mn Online gamers across 15 cities from SEC A and 27% B (Source: I-cube 2008) MMOG

63% Multi Player Single Session Games

80%

Single Player Single Session Games

Single player- single session games: This represents the largest category of Online games played in India with 80% of gamers playing it and 46% preferring it the most. Such games emphasize the need for good levels, simplicity of play and strong addiction in order to keep the gamer playing alone for long periods. Card games, arcade games are very popular in this category.

Multiple players- single session games: All games which allow two or more players to play against each other or against the machine falls in this category. Here there is no continuation between gaming sessions which means every time it gives both gamers a fresh start unlike persistent worlds which save information even while not gaming. All genres of games usually have representation in this type of games with Sports and fighting games being very popular for this category

Multiple players – persistent session games: These games are relatively more complex in gameplay and technologically far more advanced. Persistent gaming worlds have some real benefits like continuation even after disconnecting from the server, they offer the ultimate global gaming experience and have maximum interaction within the gamers. Names like World of Warcraft, EverQuest and Sims Online are synonymous with MMOGs.

4.5 Emerging Gaming Formats

These days, the avid gamer is not easily satisfied with one type of content, one type of game or any kind of monotony, that‟s why the great attraction to gaming.

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Game developers are always on the look out for the answer to this one question- What does the hardcore gamer actually want? How to make my content applicable for all? The answer to these lies in innovation at every step of the gaming ecosystem- game design, platforms, distribution, marketing, etc. Or simply newer formats for gaming are required. Some of the most popular emerging formats have been briefly touched upon below:

Digital Downloads: Is the latest phenomenon to hit the Indian Gaming market wherein users are allowed to download the games directly using the Internet for a fee. This technique has its many advantages such as reduced distribution time from game development to final usage, lesser cost burden on end user, greater profit margin per game for developers and most importantly tries to tackle the flourishing grey market for games. Another very popular feature observed in this format is the global availability of the game for simultaneous launches in different countries becomes much easier. As per Icube downloads of games from Internet is already done by 48% of gamers which indicates this methodology has some promise for the future.

Social Gaming: Social networking and games go hand in hand. Social gaming is a new genre of gaming which adds the „Social‟ factor to the games. Whether it's taking advantage of the relationship data in social networks to build novel gameplay or building community among people who play games, game developers are discovering clever ways to build real communities around the games they're developing. Social networking sites such as Orkut and Facebook have multiple applications and games to play for their registered users,

India too, has its very own for casual gamers- Nunook which allows users to play games without signing up but also provides lot of exclusive content to those who do sign up and gain sufficient points gaming. Now people can play and socialize at the same time on their already well established social networks.

MMOGs: Massively multiplayer online game are simply video games where thousands of players simultaneously in a virtual world. The last year has seen a rapid increase in the number of gamers trying out MMOG‟s, up from 19% last year to 27% this year. (Source: I-cube 2008).

There are a number of factors shared by most MMOGs that make them unique. Firstly they allow users to play among millions of others thus encouraging community. Secondly they allow you to continue playing from where you left off last. Thirdly they let you create a new identity or become someone else which especially appeals to those users who idolize someone. According to a leading publisher there are already around 50,000 Indians in such communities and judging by the growth rate of this format this number could well double over the next year.

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Conclave Gaming/ Gaming tournaments: This kind of format has already become very popular in western nations with gaming championships where many gamers compete to see who is the best gamer for a selected list of games. Such competitions are recently being carried out in certain institutes across the country and are bound to increase in popularity in the near future due to the great prizes being dished out and large number of advertisers already ready to promote such events.

Fantasy Gaming / Real Life simulations: These games are almost like simulation games or role playing games, multiplayer in nature and existing in a persistent virtual world. An example of one such game is stock market or share simulation games where a person gets to experience the real life scenario in a stock market. Other popular games among Indians were Cricket super selector and EPL Fantasy league where the user gets to become a manager of a team and select his own players and earn points based on their performances in matches played in real life. Players can form leagues of their own and compete among each other and against the rest of the world. Such games bring together large number of followers of the sport itself and also help all demographics play a part in the gaming experience.

Mixed environment gaming/ Motion sensing games: These games primarily comprise of video games which include physical activity as part of the gameplay. These games emphasize listening, repetition and rhythm into gameplay. Such games make the person perform life like activities to simulate tasks such as playing a DJ, playing a musical instrument, learning to dance, etc. Some very popular examples which have succeeded in Japan are Guitar freaks, drum mania, parappa the rapper and dance dance revolution (DDR) which has also been praised for its innate ability to help people lose weight while gaming. DDR, the game, consists of a floor pad controller with four directional arrows, leads players to dance along with the music, stepping on the floor arrows that correspond with increasingly rapid onscreen commands. As games continue to develop it is apparent that gamers will be interested in a variety of different interactive formats, including those that rely on physical activity. Nintendo‟s Wii is a real life example of this

Educational Games: are games that have been specifically designed to teach people about a certain subject, expand concepts, reinforce development, understand a historical event or culture, or assist them in learning a skill as they play. They include board and card games, and video games. These games are also quite often referred as edugames or edutainment due to their intrinsic values. Math blaster, treasure quest, reader rabbit are some examples of this type of games.

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Interactive Games: A large number of DTH providers in India have started the concept of Interactive TV gaming where the user can enjoy extremely easy to play casual games on television itself with the remote. Word jumbles, hangman, 2D sports games are some of the most popular categories played.

Multiplatform Games: Finally to reach out to the large mobile subscriber base who is already playing games but is not totally satisfied with these games certain developers are keen to introduce games which can be downloaded for a fee on multiple platforms.

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5.0 Barriers and Drivers for Gaming in India

5.1 Barriers for Gaming in India

Although India has huge potential to become a gaming superpower in the future, several roadblocks exist which may restrain the industry from reaching full potential. Each of these roadblocks is connected to various aspects of the consumers, industry and the environment forces. A few stakeholders believe that the content being developed for the domestic consumption lacks quality and innovation and most games are copies of famous overseas games. For some, the major challenges in the online gaming space are issues like PC, Internet and Broadband penetration; access to right content while others blame the consumer mentality towards games and their price sensitivity.

Given the situation, all stakeholders need to work together to address each roadblock and enable the domestic market to grow. These roadblocks have been clubbed into three heads and elaborated as follows:

Infrastructure Consumer Barriers related Barriers

Industry related

Barriers

Infrastructure issues:

 Very Low PC Penetration: Only 7.8 Mn households all across India own at least one PC which accounts for less than 5% of all households in the country. It is already known that majority of the gamers start of as either casual offline PC gamers and then move on to Online and console gaming so not having a PC to start with inhibits the growth of gaming in the country

 Low Internet and Broadband penetration: The total number of Internet subscribers comes to a mere 4.8 Mn out of which the number of

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broadband subscribers is a paltry 3.7 Mn which provides a very low base for capability to play Online games of any type let alone more complex MMOGs. Due to this lack of penetration of broadband, Internet speeds are very low which makes the gameplay experience quite non enjoyable and causes frustration due to “lag” in screen frames

 Network setting up costs: Cost of setting up a network for Internet and Broadband connectivity across the nation is very high. This barrier can be overcome only with the support of all stakeholders in the gaming ecosystem by means such as sharing of costs through innovative business models

Consumer related barriers:

 Cultural barrier to games: Many restaurants, cinema theatres and malls are already hugely popular among the public for entertainment purposes hence they see no benefit in Gaming and perceive it as fun they can do without. Long term benefits in terms of wide career options are also not visible due to lot of expatriates talent being preferred for jobs. This makes parents strongly discourage their children from such activities especially at the cost of their studies or even physical activity.

 Price sensitive customers: One major factor which affects the game developers‟ incentive to make new better games is the consumers‟ price sensitivity in India. This could be possibly due to affordability problems faced as well as customers willingness to pay for a game is seen as much lesser due to it being a luxury/ unnecessary item. After effects of this is that most developers need to lower their prices at lower profit margins which in turn stunts the innovations in game designs in the market

 Customer perception of gaming: Another perception of gaming in India is “meant for kids” which automatically eliminates half the potential demographic candidates from even trying to do such activities. Thus the base for gamers becomes very limited.

Industry related issues:

 Piracy issues: Existence of a thriving grey market in the country with almost 70-80% of games sold being through this channel severely affects the growth of gaming in India. Further, there is high customs duty on the gaming consoles (approx. 25%), making the consoles out of reach for the consumers. The high duty has also encouraged the grey market as they are able to sell the consoles cheaper after avoiding the duties and taxes

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 Lack of experienced game developers: Most of the game development is being done through foreign developers being brought to India for work from other countries which shows there is a dearth of home grown developers which could act as a barrier to growth in the industry. After Software and BPOs, India has the potential to emerge as the next gaming software developing destination. The development of console based video games is amongst the few areas of software development in which India still has a long way to go.

5.2 Main Drivers of Online Gaming in India

Many factors are associated with driving the growth of gaming market in India. They have been broadly classified below:

Heavy advertising: This advertising will be required to achieve two purposes. One, to increase the awareness of gaming and two, to remove the anti-gaming perception which exists among Indian culture. This has been successfully undertaken by Zapak.com. To drive traffic and build awareness levels, a lot of advertising will be required to generate interest among the non-playing population. Besides the advertising, developers on their part will be required to create more sticky applications which would get these new users hooked to gaming and searching for more.

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Games with relevant content: Currently majority of the developers are focusing on making games for the global audience while it is evident from the genres of games played by the Indian public that they prefer playing games which give them something to identify with. For eg. Having an Indian Formula One team competing helps enhance the racing genre in popularity. Similarly cricket being like a religion in India, it is not surprising to see it Top the list of sports games played. According to I-Cube 2008, 80% gamers prefer Online games as it allows them to play with other people and 85% overall preferred Online games over Offline games due to wider variety of games and it being free.

Innovative distribution models: India is in desperate need to find new and innovative distribution models which will help reduce if not eliminate piracy of games in the market. If such a technique comes to the fore such as digital downloads or social gaming, then it is sure to trigger more people to simply buy the game online instead of the grey market. Also, social networks in India such as Orkut, Facebook, etc are already attracting a large number of users. Now when these sites come up with innovative games they indirectly attract the social person to gaming as well which in turn shall trigger a whole new set of online gamers.

Increasing broadband speeds: With every passing day the consumer especially the hard core gamer is getting more eager for advanced graphics, more interaction and faster gameplay. All these require high amount of bandwidth and hence great Internet speeds. Broadband in India is currently hovering around the >64 kbps limit only, once this gets converted to speeds of at least 256 Kbps and more, then this will most likely trigger a gaming desire in Internet users.

Large potential segment: The large youth segment (12-25 years) which forms the bulk of Online Gamers in India is driving the demand for games on multiple platforms. This segment also will form the largest segment of Internet users in the future and shall be more technology savvy than their predecessors which will make them ideal bearers for accepting new technologies. However this segment is also very fickle in their tastes and yearns for wider variety of games coupled with super cool graphics which shall make them very difficult to please.

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6.0 Market Size

Estimating market size of the gaming industry has proved to be a difficult undertaking due to the existence of unaccountable parallel offerings in the guise of pirated devices and gaming CDs/DVDs. Any amount of product development by gaming companies will not foster the industry unless prohibitions are levied on illegal duplications. While conducting research for this study the participants, specifically game developers and promoters in console and PC industry, categorically reflected on this limitation. Below, however, are the estimates based on secondary as well as certain past research studies.

Console Games

Based on our primary research study conducted in 2007, the annual revenue across consoles and handhelds was arrived at INR 800 Million. In these revenues, the volume share of PSP® (Play Station Portable) was higher (55%) compared to other console devices. This was followed by the share of Xbox 360 ® – 23%. Play Station 2 (PS2) and Play Station 3 (PS3) comprised 21% of the volumes. The parallel or grey market selling was higher than the authorized buys at INR 900 Million. The volume share in this market seemed highly skewed towards PS2 with more than 50% followed by Xbox 360. Considering India as a price sensitive market, with the gradual decrease in prices in the authorized sales, we expect that the grey market could be overshadowed. The game providers, however, have not been liberal in their price cuts. Apart from price cut on PS2 in 2007, there has not been any significant attractive offering on new products in the console gaming devices.

Hardware sales of Console devices, including parallel grey market for PS2, PS3, PSP, Xbox360 and Nintendo) is estimated at INR 2650 Million in 2008 and INR 4050 Million – rate of growth of 57% and 52% respectively. The sales of this hardware will continue to grow at 41% and reach INR 5750 Million in 2010.

Mobile Gaming

Mobile subscription has been on an upswing since past few years in India. With a monthly growth of more than 10 Million subscribers, wireless subscribers have crossed 400 Million. Ranked second in the global subscribership, India‟s mobile market is soundly placed to grow at an exponential rate in the Value-Added Services (VAS) – including gaming. Further, gaming options over mobile are less mired with piracy and duplicity issues than other platforms.

A recent Mobile VAS report by IAMAI and IMRB International estimated the mobile gaming industry at INR 2,890 Million (5% of overall mobile VAS industry)

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Desktop Offline Games and Online Games

The share of offline PC games has been dwindling over the years. It constitutes around 12% of the overall gaming market. Online games, however, is a growing market in India. Although with a similar share as offline games, it is expected to grow at a very high rate in the coming years. Unlike offline gaming which has been marred by grey markets, online gaming offers providers the facility of distributing their games through efficient and secured channels. With increasing usage of social media and emergence of wide variety of online games, Internet users are gradually getting hooked to casual as well as serious gaming.

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About eTech Group | IMRB eTech Group | IMRB (a specialist unit of IMRB International) is a research based consultancy offering insights into IT, Internet, Telecom & emerging technology space.

Our continuous link with industry and a constant eye on the pulse of the consumer ensures that we can decode the movements of technology markets & consumers. To our clients we offer an understanding of the present market environment and a roadmap for the future.

Contact Details: Research team for this report: eTech Group | IMRB Balendu Shrivastava, Group Business Director

IMRB International Tarun Abhichandani, Insights Director „A‟ Wing, Mhatre Pen Building Senapati Bapat Marg, Tel : (91)-22-24233902 Contact us: Fax: (91)-22-24323900 balendu.shrivastava @ imrbint.com www.imrbint.com

About Internet and Mobile Association of India (IAMAI)

The Internet & Mobile Association of India (IAMAI) is a not-for-profit industry body registered under the Societies Act, 1896. Its mandate is to expand and enhance the online and mobile value added services sectors. It is dedicated to presenting a unified voice of the businesses it represents to the government, investors, consumers and other stakeholders. The association addresses the issues, concerns and challenges of the Internet and Mobile economy and takes a leading role in its development. The association‟s activities include promoting the inherent strengths of the digital economy, evaluating and recommending standards and practices to the industry, conducting research, creating platforms for its members, communicating on behalf of the industry and creating a favorable business environment for the industry. Founded in January 2004 by leading portals in India, IAMAI in the only specialized industry body in India representing the interests of online and mobile value added services industry.

Contact Details:

Dr. Subho Ray, President, IAMAI 406, Ready Money Terrace, 167, Dr Annie Besant Road, Mumbai - 400 018 Tel : +91-22-24954574 | Fax : +91-22-24935945 | http://www.iamai.in

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Published By: Dr Subho Ray, President, on behalf of Internet and Mobile Association of India, 406 Ready Money Terrace, 167, Dr Annie Besant Road, Worli, Mumbai 400018

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