India’s gaming industry is all set to catch up

Ever since Anuj Sharma, a resident of Rohtas in Bihar, has moved to Bengaluru, he has been playing cricket tournaments on Dream 11, one of the various mobile-based real money games. He has by now won Rs 1,000, while he invested about Rs 200-300 to participate in the game. He is hoping to win more money as he continues to participate in tournaments.

“I started playing Dream11 in the hope that I will also win good money like my friend who has until now won Rs 6,000,” Sharma said.

In the last three years, real money gaming companies such as Dream 11 and Mobile Premier League (MPL) have not only got young mobile gamers hooked on to their platforms but also made them richer.

Gamers have to pay an entry fee to stand the chance of winning a significant portion of the amount collected from multiple players. Pay a paltry sum between Rs 10 and Rs 100 to play a game or cricket or rummy and hope to win Rs 30,000 to Rs 100,000.

Though lack of revenue and snail-paced user growth had for long kept investors away, the soaring popularity of real money games (RMG) on the back of affordable smartphones and cheaper mobile internet has forced investors to give it another look. Many even consider it to be the next sunshine sector.

The revenue model, which was earlier dominated by in-app purchases and advertisements, has shifted to real money games.

The decade-old gaming company Dream11, which has football, cricket and baseball on its platform, recently became India’s first gaming unicorn after an investment from Steadview Capital through the secondary route in the range of USD 60 million in April this year. Just eight months earlier, Tencent had invested USD 100 million in the company along with Kalaari Capital, its first investor.

Bengaluru-based MPL, which lists 30 real money games, raised USD 35.5 million led by Sequoia India, Times Internet, and GoVentures in April this year. The funds are expected to enable the young mobile gaming platform invest in product and user growth in India.

A prominent Mumbai-based investor who has invested in a real money gaming company is confident that online gaming is going to be a big growth category. “We think there will be at least two or three platforms which will have 100 million users. India will at least have 250 million active mobile gamers in the next couple of years,” he said on the condition of anonymity.

According to All India Gaming Federation (AIGF), the online gaming industry is anywhere between USD 500-600 million in size. While the overall industry is growing at 22%, the revenue of skill-based real money games is scaling at 30% year-on-year.

Sai Srinivas Kiran, co-founder and CEO of MPL, said the dynamic and fast-evolving nature of the mobile gaming industry is attracting investors. “Right now, it has the potential to expand and even enter foreign markets. Investors are looking at the growth and stability of online gaming industry.”

Skill-based RMGs, which typically include fantasy sports, rummy, poker and other skill-based game tournaments, constitute 55- 60% of online gaming revenues in India. “The user base opportunity here is much larger than what it was three years ago. VCs are investing in a category where you can build a large company, and that is a big shift,” the investor quoted above said.

Dream11 did not respond to The Passage’s request for a comment on the story.

The rise of digital gaming sports

Over the last few years, internet and smartphone penetration have grown exponentially in India and people have gotten used to transacting online. With cheaper data availability, adoption of e-wallets and other digital payment methods, the number of mobile gamers in India has risen, with many looking at the chance to make some money.

India is now the second largest gaming market with a total of 250 million players. China boasts of 500 million players. The US, on the other hand, has 200 million players, according to AIGF. There are 50 million registered users in real money, skill-based games’ universe in India. While 90% of users play for free, 10% of them are paid gamers.

How did Indian mobile gaming companies reach here? Ankush Gera, founder and chief executive, Junglee Games, said there hasn’t been a single inflection point. “Smartphones are getting cheaper, but that didn't happen in a year for certain. Reliance Jio was launched, which did make a little bit of difference. But I think Junglee and a few other operators like Dream11 have been consistently educating and helping the market grow. I think that's been the main force that has led us to the changes in the landscape,” he said.

Junglee Games, which currently has four major games including two skill-based games — Howzat and Junglee Rummy — enables players to earn real money. Junglee claims to rake in 90% of its revenue from these two games. MPL, on the other hand, has 30 skill-based games on its platform and runs multiple tournaments a day.

These companies have also been looking for new gaming formats that focus on skills. “A lot of people are getting attracted to RMG in the hopes of making money,” said Ramesh Srivats, founder of Fandromeda, a fantasy sports company that ran the official fantasy league for Indian Premier League (IPL) in 2015 and 2016.

According to Gera, it is a fair play. “If you play Candy Crush, and you buy something for ten dollars, then that's it, you have spent your money without gaining anything substantial. With real money game tournaments and e-sports model, you get to potentially earn money. It’s a fairer thing because at least it is a two-way street,” said Gera.

According to Roland Landers, president of AIGF, real money games like rummy and poker have been online for about a decade, but the real push in terms of revenues came in the last few years. “Fantasy sports have been able to pick up in the last 24 months, because the industry got some clarity in terms of regulation, and are now being sponsored by big-ticket sporting events. Because it sits atop of live sporting events,” Landers said.

Dream11’s monopoly

Srivats winded down operations at Fandromeda in the second half of last year, just as big name investors got interested in the online gaming segment. “We ran out of cash to run the company and decided to wrap the operations before the investment wave came,” said Srivats. “We faced some big challenges. Fantasy sports was very seasonal. Everyone plays during IPL but the interest drops once it is over. So there is a lot of fluctuation in the market.”

“Unlike in the US, where there are football leagues, baseball leagues and other regular gaming events which people have become habitual to, cricket does not have a regular calendar in India. People lose interest after IPL or T20s. It is more difficult for it to become a habit in India,” he said.

Dream11 turned it around with daily fantasy sports format that offers gamers prize money every day. “Four to five years ago, fantasy sports lasted for premier leagues which ran for a few months,” said Landers. “Now the format has changed to daily sporting events from IPL to T20 to other events since national players play year long.”

Dream 11, currently, claims to be the world’s largest fantasy cricket and football company with over 50 million users and 90% of the market in fantasy sports.

“Fantasy sports grew along with Dream11. All the circumstances became favourable to fantasy sports companies,” Srivats said. “Dream11 was at the right place, at the right time, with the right amount of money. They kept it simple with the focus on RMGs. They didn’t care about cricket fans.”

Investors also feel that Dream11 has been able to build an interesting company on top of the nation’s passion for cricket. “They have got 50 million downloads, so the valuation kind of makes sense. They have already figured out monetisation and that is really why they are where they are,” said the investor quoted above. “We would be seeing more of such unicorns.”

The rapidly growing daily fantasy sports market is worth Rs 300-400 crores now. A lot of Dream11-lookalikes are mushrooming given the new-found potential of the industry. But Dream11’s monopoly, industry experts said, is no joke.

“If there is one player with more than 90% of the market share, it leaves no room for others to grow. That company dominates the market. If any other company tries to grow, it would surely defend its market,” he said. “Dream11 has tied up with BCCI and ICC. While it is good for marketing, it also locks other competitors out of the ecosystem.”

In fact, Junglee Games recently ventured into fantasy games, pivoting its popular video cricket game Howzat into fantasy sports. MPL also recently introduced cricket fantasy game SuperTeam.

Going global

MPL has already kicked off its expansion into Southeast Asia. The seven-year-old Junglee Games, which made online rummy a household name in the country, is expanding into the US and Europe soon.

Compared to the size of the online gaming industry in US (USD 130 billion) and China (USD 43 billion), India is just beginning. However, investors are upbeat about it.

“I think USD 500 million is not small. Also, you have to look at it relatively. The entire internet advertising business is somewhere between USD 2.5 to USD 3 billion. And within that, we have Google, Facebook, Times Group, Jio and many other companies,” said the investor quoted above. “So if it is a USD 500-600 million market which is growing at 40-50% a year, it is going to be billion-dollar market in three years, and probably bigger from there on.”

He believes that Indian online gaming companies are ready to go global.

“If you look at it — the games from Indian companies are optimised for the mobile-first world, for the Indian audience and developing-market audience, which is very different from how it is happening in the US,” he said. “This is where China and India are developing a very unique ecosystem for themselves. They have the potential to go global.”

For instance, MPL embarked on its SEA expansion starting with Indonesia. “The most important thing is to invest in growth. We plan to invest in product development and user growth in both markets,” said CEO Srinivas Kiran.

“Also, we will use the current funding to grow faster by hiring the right talent to build out the right product infrastructure, which will suit not just the Indian market but also the global market. Going forward, we plan to build our revenue from skill-based, pro tournaments that we have on our app. Our plan is to scale the number of pro tournaments and the number of users participating in them, in order to grow both our revenues and prize payouts,” he said.

Junglee, which already has offices in Hong Kong and Vancouver, is ramping up its operations in Europe, US, UK and South America. So far, India has been its key market. Gera plans to launch at least three to four new skill-based games in India and overseas market soon.

“If the market forces continue to be like what they are today, there is no reason why we shouldn’t be a sunshine sector in the economy like e-commerce,” said Landers. “That’s a reason we are pushing for central regulations. We want to be considered as a mainstream industry that can be regulated under Meity (Ministry of Electronics and Information Technology) rather than have no clarity regarding regulations since we have different rules for different state.”