The Indian Gaming Industry Marketing Essay

The Indian gaming industry is at a nascent stage but is expected to grow significantly in the coming years. In the last 15 years, India has witnessed considerable economic growth. This, in addition to its demographic structure, offers immense potential for the gaming industry. An amalgamation of our culture, rising urban incomes, education, IT development and telecom growth offer the perfect platform for the gaming industry. IT and telecom considerably drive the gaming industry. One of the segments with highest growth is the console gaming industry which is capturing higher market share year on year.

While the global gaming industry is growing at 22 per cent, the Indian gaming industry is valued at Rs 13 billion and is expected to grow to Rs 38 billion by 2015 [2] . India offers a huge pool of talent in the IT and programming sector which plays a substantial role in the development of quality games at reasonably lower costs. Additionally, while the gaming industry is picking up, serious players and investors are entering into the industry, consequently facilitating its further growth.

Figure 1 – Growth Trend of the Gaming Industry in India [3] 

Recently, 3G rollout in India, an increasing number of high-end mobile phone users, and broadband and DTH penetration into homes, contributed to the strong market currents that the Indian gaming industry is now riding on. Over the years, the price of games has declined significantly, making the games more affordable to Indian gamers [4] .

High-end mobile phone consumers, for instance, a growing iPhone consumer base, point towards a promising future for the mushrooming gaming industry. These buyers thus become a very lucrative segment which includes a premium, tech-savvy population which, evidently, has higher disposable incomes.

Figure 2 – Orientation of Gaming Industry in prominent markets [5] 

Due to the rising population in urban India, more and more open fields and available lands are being converted to high rises, for commercial or residential purposes. This leaves the kids with little or no space to play, which adds on to the inclination towards indoor games. Hence, urbanization as well serves an important factor for the rise in console gaming market in India.

As per NASSCOM report, the growth drivers in the gaming industry in India are [6] :

The growth of the gaming industry from 2006 levels is primarily driven by increased consumer spending on gaming.

The services side of the business is propelled by captives set up by international publishers of mobile game development, BPO support for MMORPG games and development revenues from PC/console game production, game art, etc.

By 2012, the movement up the value chain in services, resulting in more end to end off-shoring work, is expected to contribute to the growth of revenue from development services. Domestic outsourcing is also expected to pick up, especially in the mobile and online gaming segment.

Original IP development in domestic and international markets, which is at a nascent stage, will gain in significance in coming years.

Falling console prices and increasing mobile and broadband penetration are expected to give a fillip to consumer markets.

However the growth in gaming Industry is also coupled with challenges. As per NASSCOM report [7] 

Lack of trained man power in the industry who have the skill sets to develop end to end games and have worked in advanced NGN pipelines

Infrastructure related issues like high cost of consoles, non availability of adequate bandwidth, non availability of SDKs etc

Pirated copies of gaming software and tampering of consoles in still wide spread in the country

Acclimatizing the Indian population to gaming which is relatively a newer form of entertainment and not integrated into the Indian culture.

Lack of original Indian IP and quality games with local themes which can spur the Indian market

High import duties for gaming hardware and absence of well defined policy for the growth of gaming industry

Objectives [8] 

The objectives of this MRR are as follows:

To study the potential market for console based gaming in India and to reach the potential customers in this particular segment of the gaming industry

To study the feasibility to set up experience gaming flagship stores and scale up implementing the franchise model

To study the feasibility of organizing regional league events and launching a pan-India console gaming league event leveraging upon the underlying business model

To study the feasibility of creating a virtual store model functioning as an e-commerce platform to achieve appropriate channels of merchandize distribution and social media integration

To study the feasibility of synergies between each of the business models so that it helps in strengthening the brand

Scope and Limitations of the study [9] 

Scope

Overall

A study of the current Indian Gaming Industry, focusing on the console gaming industry in India

A study of the various players in console gaming market – Retailers, Parlours

An overview of the fully integrated console gaming pan-India network comprising of stores, IT Infra-Telecom network, e-stores, vendor partners and pan-India competition

An integrated financial analysis of the business plan

Console Gaming Store

A study on the requirements for setting up a console gaming store

A study and recommendation on the business model of the store franchise/ownership

A study on local/regional popular gaming championships

A study on the experience aspect of consumer viz. – gaming merchandize, game theme-based relevant food/snack/beverage, entertainment lounges

A study on the interior design plus IT infrastructure for the store

e-Store

A study of the pre-requisites for operating an e-Store

A study of the integration of virtual and physical platforms. (demo games, league leader boards)

A study of IT resources for the e-Store. (hardware / software / network maintenance)

A study of the supply chain framework required for operating an e-commerce model

A study of social-media integration of the GOD brand through the e-platform

A detailed financial analysis for the business model

League Model

A study to explore opportunities at the various feasible levels (local, regional, national etc) to conduct the league

A study to look at the logistics and other facilities required to organize such a league

A study of marketing and sponsorship to run the league model

A study to look at the financial feasibility of organizing such a league

Limitations

The study will focus only on console gaming

The study will only focus on partnerships with console makers and console game makers and no local players

The study will not include who will be the architect and owner of the store

The study will not include where the equipment and other technical requirements will be sourced from

The study will have market research that will have limited sample size

In lieu of reliable data, interviews with experts from the company and the industry will be conducted

Who will implement the ‘technology infrastructure’, ‘supply centre’ and ‘training and development’ and the quality of implementation is not known

Approach and Methodology [10] 

Analysis

External Analysis of console gaming industry in India

Feasibility (Strategic) Analysis of each business model

Competitor Analysis

Data Gathering

Existing competitor stores in major cities

Internet

Probable supplier / partner working model

Feasible communication channels with console game publishers and vendors

Other secondary research

Survey

Three tier-1 cities (Mumbai, Delhi, Bangalore) with sample size 30

Customer questionnaire over e-mail, social media and other online channels

Study

Functional feasibility

Technical feasibility

Survey Analytics

Interview

Potential customers from sample space

Supplier / Partner FGDs

Existing game parlour owners

Note: The above might change in case we adopt the lean start-up process for this business

External Analysis – Indian Gaming Industry

Macro-Environment Analysis

Political Context

The key political factors influencing the Indian gaming industry are as follows:

High duties and taxes for console gaming [11] 

The gaming industry is growing at a very healthy rate. The introduction of all major players like Wii and the aggressive promotions of Xbox 360 have taken the Indian console gaming industry on a high growth trajectory. Even upon the high growth expectations from the Indian market, these consoles are still quite expensive as compared to the US. One of the key factors for this difference is the high duties and taxes in India. These components add as much as around 40% to the price of the consoles. This is comprised of around 27% of customs duty and more than 12% of value added taxes. This significantly increases the prices of gaming consoles in India. [12] 

Infrastructure issues for the gaming industry [13] 

India ranks quite low on the internet and broadband penetration when compared to rest of the world. The average broadband speed available in India is also quite low when compared with the developed countries. This restricts users from connecting with wide range of gamers across territories and to play as per their convenience. However, this is expected to be overcome by the advent of high speed internet at affordable rates. The technological development in the past few years would play a very important role in bringing the gaming revolution in the near future in India.

Economic Context

The economy of India is the eleventh largest (by nominal GDP) and one of the fastest growing economies in the world. The growth rate for the year 2011 – 2012 was 6.5% and is expected to grow at 6.9% in the year 2012 – 2013 (as per World Bank) [14] . This provides an opportunity for various industries to grow within the country. Maximum growth has been observed during the 2000 decade when the country touched growth rate as much as 10.6%. The per capita income has also increased steadily in the past years. It soared by 15.6% in the fiscal year 2010 – 2011 [15] . One of the key factors behind the economic development was the economic liberalization in the early 1990s. This strong economic development portrays an increase in the paying capacity of the consumers and an increased standard of living. The needs of people also grow along with prosperity and opens new opportunity for businesses. Gaming as an industry has also been growing gradually with this incremental growth trend.

For the gaming industry, the expected growth is magnificent. As per a NASSCOM (National Association of Software and Services Companies) report, a 4X growth in the Indian gaming industry is expected from the year 2010 to 2015. The same report states that the console gaming industry would grow 17X from the year 2010 to 2015 [16] .

The rising disposable income in urban India and the increasing consumerism makes a good case for growth in the console gaming segment in the next few years.

Social Context

India’s population in 2011 was more than 1.2 billion (Source: World Bank) and a growth rate of 1.41% [17] . India has more than 50% of its population below the age of 25 and more than 65% below the age of 35. It is expected that, in 2020, the average age of an Indian will be 29 years, compared to 37 for China and 48 for Japan [18] .

The increasing per capita income has largely increased the middle class population of the country. This change in the economic status, when seen along with the overall young population, it can be inferred that the paying capacity of the youth has increased in the past years.

The interests of people has also evolved including entertainment and gaming. Gaming is gradually gaining importance not only as a source of entertainment but more towards lifestyle.

The earlier modes of gaming was TV video games and small hand held devices, which has moved to online, mobile based and console gaming. This growth is also supported by the increased paying capacity of youth, who are the most important target market for gaming.

Due to the rising population in urban India, more and more open fields and available lands are being converted to high rises, for commercial or residential purposes. This leaves the kids with little or no space to play, which adds on to the inclination towards indoor games. Hence, urbanization as well serves an important factor for the rise in console gaming market in India.

Another social factor is that of safety. The anti-social elements of the society are also growing, especially in the urbanized regions, which is a cause of concern for the parents to let the kids play outdoors. The cases of kidnapping of children for ransom have become a commonplace now. To avoid such risks, parents prefer their children to go out only under their supervision, or to remain indoors, playing video games on computer or on consoles.

A change in the mindset of parents has also been observed in the past years in terms of how they perceive video games, maybe on computers, or on consoles. Earlier, these games were looked at things which would distract the children from studies, and would spoil the child. Parents were conscious that the children would get addicted to these games. But gradually this mindset has undergone a great change. The parents of today, not only allow their kids to play the games, but they themselves enjoy playing such games with them.

One of the reasons for such a change is the genre of games being developed these days. The games developed earlier were mostly racing or fight based, but now, the games include all variety and cover various fields, including education and strategy type games. These games don’t only entertain the kids but also play an important role their mental development. The motion games have taken the trend to the next level by providing means of physical exercises as well.

It has also been observed that the games developed specific to India have shown very good response in the market. Sony launched Hanuman: Boy Warrior, a PS2 game based on Indian mythology with an expectation of 3000 to 4000 unit’s uptake on the first day, though the response was 10,000 units. Indian origin social networking site Ibibo started its cover versions of social networking games with Teen Patti and Mumbai Underworld, getting tremendous response. Sony is also planning to launch games based on characters of Amar Chitra Katha. Going forward, we can expect more local developers and players to come out with similar games. [19] 

Technological Context

India has been growing stronger technologically in the past decades. The technological advancement is also one of the key factors for economic growth and prosperity. Post liberalization, in the early 1990s, a lot of investment in the country has on the technology. The advent of internet was a big leap in the field of communications globally.

The telecommunication industry in India is also quite matured. Total number of telephone subscribers in India is more than 960 million, with an overall tele-density of almost 80% [20] . But the users of broadband are still limited to less than 1% of the population [21] . This leaves a huge scope for development of the internet gaming industry. At the same time, this also signifies that the potential for console gaming market is immense.

The number of smartphones in India is currently about 30 million, and is growing at a CAGR of more than 30% [22] . This also opens up a huge market of mobile gaming in India. This is increasing trend of adoption of technology and getting closer to digital gaming, is effectively inducing the spirit of gaming in the Indian multitude, which would eventually reach to the best gaming experience which can be provided by console gaming.

Hence, we see that from a technology perspective, India is very receptive to changes and new technology, gaming being a very important dimension of this entire change process.

Environmental Context

The world has been observing strange climatic changes in the past years. A lot of these have been attributed to global warming as well. The irregular rains, amounting to much more than usual downpour during the monsoons and scorching heat during summers is cause of major concern globally. From a macro perspective, the glaciers are melting and causing danger of extension for some species. But from a micro perspective or from an individual’s point of view, such extreme climate causes day-to-day inconvenience.

One of the side effects of these extreme climatic conditions is the inconvenience to children who would want to go out and play. The parents are conscious not to send their kids out for playing in extreme heat or chilling cold, and would rather prefer to keep them in-doors and provide options to play and entertain within the house.

Such environmental changes, not good for the human populations though, are favourable for the thriving gaming industry in India. These factors add onto the influence on people to get more and more involved in the flourishing world of gaming.

Legal Context

One of the most prominent concerns for the concern for the digital world today is piracy. The creativity industry has been losing great amount of revenues due to this evil. The laws for piracy are in place but still need a more firm implementation. Piracy has been observed majorly in the music and movie industry, which has been going on for a long time now. Eventually, this evil also grew on to the world of software’s, as computing became an inevitable part of our lives.

The latest trends of piracy are being observed in the field of gaming, wherein PC gaming and console gaming are the soft targets for pirated games. The revenue being lost by these industries due to piracy is immense. The game console manufacturers like Sony are creating more robust and intelligent systems to identify and not support duplicate or pirated games, but at the same time there’s more to be done by the government towards reducing this piracy.

National Competitiveness

Gaming industry growth – Comparative Study of other economies

Gaming Industry is already a multibillion dollar industry in developed economies and is growing at a tremendous pace. The below list shows some key developed economies and emerging economies and their current growth pattern [23] .

Developed Economies:

United States – The US video game market is and has always been the largest in the world. From 2003 to 2008, it more than doubled, from $7.00 billion to $15.5 billion, respectively. Because console gaming is the most popular in the United States – and knowing the console market is declining – it is projected the US market will continue to sustain growth but at a slower rate. It is expected to reach $21.1 billion in 2013. Online gaming will be the fastest growing gaming category in the US.

Canada – Canada’s market is growing at a very fast rate. Between 2003 and 2008, it grew from a mere $0.4 billion to $1.3 billion. This number is expected to reach $2.4 billion in 2013 while the increasing mobile penetration (phones per capita) of 69% in 2008 is expected to reach 91% in 2003.

Japan – After a 30.2% growth spurt in 2007, the Japanese market declined by 20% in 2008 and is further stagnating. As in the United States, console gaming is the most popular in Japan; the significant decline of console gaming is expected to dramatically affect Japan’s growth. Even though Japan is the home of several major video game players, and even though the market size between 2003 and 2011 is projected to increase from $3.5 billion to $6 billion, the console market will disproportionately grow from $2.7 billion to $2.9 billion.

Western Europe – The analysis of Western Europe consists of the UK, France, Germany, Italy, Spain, Netherlands, Switzerland, Sweden and Finland. Similar to the US and Japan, console gaming consists of the greatest portion of the market (70%). However, Western Europe is also the largest world market for PC games. The market in Western Europe is projected to increase from $5.0 billion in 2003 to $13.9 billion in 2008 to $19.5 billion by 2013.

Emerging Economies

India – The gaming market in India has taken a huge leap in recent years. It emerged in 2006 – explaining the lack of data in the chart above. As with many other translational corporations, big video game firms (EA, Microsoft, Sony, Ubisoft and Activision Blizzard) have recently established operations in this economy. In conjunction with its growing economy, the video game market is projected to grow from $0.21bn in 2008 to $1.60bn in 2012. The short-term future of the industry lies in Zeebo – a new console launched in India – but the long-term future, like other countries, is expected to lie in online gaming. India’s video game market is growing at such a fast rate that UTV Interactive, an Indian video games publisher, recently purchased the US online gaming firm, True Games Interactive.

Brazil – In Latin American, the market expanded from $0.3bn in 2003 to $0.7bn in 2008 and is projected to reach an estimated $1.3bn in 2013. Though the market has grown about $1 billion, Brazil only comprises about 5% of the market. Though it has minute market share, Brazil is still one of the key emerging markets in the region and the world. Internet penetration is projected to significantly increase from 32.9% in 2008 to 73.2% in 2013.

Russia – Another one of the BRIC economies, Russia’s video game industry is expected to double from $0.25bn in 2007 to $0.5 in 2012. With increasing mobile penetration, mobile gaming has become a large part of the country’s market.

Porter’s Diamond Model Analysis

The below study gives a detailed analysis on national competitiveness of the gaming industry with respect to the leading economies in this industry and a focus on emerging countries like India which have a bright scope for growth in the future.

Figure 3 – Porter’s Diamond Model for gaming Industry in India [24] 

The above diagram shows the four corners that make up the national competitiveness structure of the diamond model. Government and Chance above can be attributed to as exogenous parameters.

Factor Conditions:

HR & Knowledge Pool [25] 

Given the current scenario of the video game industry, irrespective of the any particular mode that is thriving over another, e.g., online social media integrated increase in demand over conventional PC gaming, what we see is that the country’s leading rapid growth in the industry is capitalizing on a human resource platform that is developing and evolving over time.

An analysis of the video game industry value chain that will be dealt with later involves major parties like publishers, console vendors, retailers and consumers. Every stage in the chain involves extensive human resource requirements.

A recent study suggests one of the key 3 reasons why the US, Canadian, Japanese as well as emerging economies like the BRIC economies are world leaders in the gaming space, is their ability to incubate:

Skilled workforce – There is a massive requirement of programmers and game developers that are young understand the changing trends of the industry and fast in bringing our new games to the market, thanks to the shorter product S-curves of gaming companies. Leading economies like the US and Japan, and of late the BRIC nations, especially India, are breeding grounds for high quality technical talent pool, thanks to its universities, evolving scope and encouragement for fresh talent to take up rewarding careers in the gaming industry.

Supporting Industries – Another factor in steep success of game companies in these leading economies are the supporting industries that groom the industry continually, e.g. retail distribution, online marketing, global supply chain and key partnerships (Facebook and Zynaga). These supporting industries help provide employment across diverse roles and opportunities. With impressive growth projections of the video gaming industry in India, from $ 0.21 billion (2008) to $ 1.6 billion (2012) , aggressive acquisitions like UTV Interactive buying US gaming firm, True Games Interactive, rising middle class with high disposable income, social trends boosting child awareness towards latest technologies, online and brick-n-mortar retail influx, all these factors show the growth potential in supporting industries in India other than US based publishing and developing companies. Thus there’s a requirement of talent pool, both by ways of quality as well as quantity [26] .

Physical Resources & Infrastructure

The infrastructure scenario of India is congenial to the scope for growth of the video game industry. The symbiosis of the key physical resource requirements can be depicted using a diagram as below:

Figure 4 – Physical Resources & Infrastructure

Capital Resources

Financing and capital injection across all segments of the industry is crucial to the overall growth of the industry and hence increases in substantial contribution to India’s GDP. The primary underlying factors are:

High disposable income of the urban middle class segment

Entrepreneurial attitude to establish end-user delivery systems, e.g. cafes, parlours, lounges, franchises, online media tie-ups, etc.

Liberal legal and government norms encouraging domestic and foreign investment in the sector.

Presence of operations of transnational firms in the country

Based on recent research, EA, Microsoft, Sony, Ubisoft and Activision Blizzard have already established operations in India [27] 

Transnational gaming companies to encourage and invest in development of gaming software from India R&D centres which will further boost national economic outlook on a global scale

Firm Structure, Strategy & Rivalry:

If we take a look at a generic organizational structure of a game development company, we could then analyze how Indian companies are faring against the leading AAA rated ones and whether their firm structure is in accordance with their long term strategic intent and growth prospects.

Future opportunity: extrapolation of existing structure into service space for emerging economies like India

Figure 5 – Firm Structure

From the above diagram, we can see that any game development company functions in a dual structured operational model, first, a business management arm which takes care of the marketing, PR, releases, publishing and reviews of the game, and, second, a project management arm which takes care of the game development through all its technical and functional stages of development, testing and go-live. At the organizational level as well, apart from the above hierarchy, if we compare gaming companies like Electronic Arts against Indian majors like Indiagames, we would see a similar pattern. Every such game development company works in a studio format, each studio responsible for production of a particular genre or line of gaming, e.g., casual, kids, sports, action, etc. Thus, for a country like India where gaming industry growth looks positive, inculcating such a competitive and global culture sets the firm on the path of sustainable development.

As mentioned in the earlier section, based on a research by Duke University, companies like EA, Microsoft, Sony, Ubisoft and Activision Blizzard have setup operations in India. This would in turn give rise to rivalry and competition among the subsidiaries and help release games faster in the market, thus increase potential to bring more and more new and advanced games in the market. Also, the presence and growth of the local Indian gaming community like Indiagames and Zapak also adds to the rivalry, since home-grown developers and publishers would not so easily give way to transnational’s to break into the domestic market.

Now having spoken about the firm structure and rivalry in the game development and publishing end, the industry looks feasible for a new business in a country like India. However, if we