India’s Digital Economy: Why Online Gaming Is A New Growth Driver In The Making

A recent report published by Federation of Indian Fantasy Sports along with the global consulting firm KPMG pegged the Indian fantasy sports market at 90 million users.

Almost 20 per cent of these users pay for playing fantasy games and a third of the users are players on multiple platforms.

The user base itself has shown a cumulative average growth rate (CAGR) of 212 per cent over the last four years, as per the report.

The online gaming industry has captured the imagination of not just users but also content creators and entrepreneurs alike.

The industry has largely evolved as a homegrown one, with new businesses and gamers creating jobs at a scorching pace.

This is also an area where user monetisation has not been an issue.

India’s home-grown online gaming industry stood at an estimated $290 million in 2016.

This market is expected to hit the $1-billion mark by 2021 and projected to be valued at $3.7-billion by 2024.

In fact, the coronavirus pandemic has spurred a growth in the user base, like it has for all online content-oriented industries.

This sunrise industry has also been a major destination of investor funding in the recent years.

Almost 400+ gaming start-ups in India are currently working in this space, having cumulatively attracted approximately $448 million in investor funding between 2014 and 2020, according to DataLabs by Inc42+.

Some of the firms which have attracted investor capital include Dream11 with funding from Tencent and Steadview Capital, Mobile Premier League (MPL) with backing from unicorn spotter Sequoia India and Times Internet, and Paytm Games funded by One97 and AG Tech Holdings.

These are staggering numbers and yet another pointer to India’s increasing digital ecosystem.

The broad category of online gaming is quite vast and full of possibilities.

In fact, online gaming and the general idea of gamification can be yet another area of propelling India’s digital economy, fuelled by cheap data access and a young society willing to embrace a mobile-first life experience.

Professional sportspersons as well as gamers have themselves made creative use of this new avenue.

VS Rathnavel, a chess Grand Master at the age of 10, was struggling to get sponsors to participate in tournaments in global forums. In July 2019, he participated in an online tournament on the MPL platform, winning 253 chess games in a 12-hour period and won Rs. 5 lakh in prize money.

Recently, Indian football team striker Jeje Lalpekhlua gathered a group of mobile gamers from Mizoram and participated in an online gaming event, raising funds for the family of a Corona Warrior. Eighteen-year-old H Lalvenmawaii from the state had died due to malaria while trying to enforce the lockdown in the state.

The larger area of gamification and digital tools to help aid learning is now finding common acceptance in various walks of life already.

Take any online learning platform and it is clear that gamification is the common theme universities, instructors and content creators are focussing on. The importance of digital aids in making even formal education more accessible has been talked about in India’s New Education Policy too.

The government bodies do recognise the potential of the online gaming industry.

NITI Aayog CEO Amitabh Kant had mentioned online gaming as one of the areas of potential digital economy growth in a discussion with Hindu Business Line last year.

In fact, online gaming is one industry which has already been the showcase for Aatmanirbhar Bharat — an ambition Prime Minister Modi spoke about in May this year.

India Inc. has a big opportunity and is incubating and leveraging this industry, which also means the big players can take a lead role in capital infusion in the times to come.

However, one key issue that the industry is grappling with is the difference between online gaming and online gambling.

While gaming is an area of skills, gambling can be broadly called an area of chance.

Indian gaming firms have to tread this path carefully and they have been ensuring that the skills of the users remain the pivot to determine the outcomes of their playing and participation.

While globally, online gambling has become legal in many countries, which then allows online firms to tie up with sports leagues and other betting providers, this is explicitly prohibited in India.

The difference is quite clear, but even in India, some states continue to mix gaming with gambling while regulating this space.

The best way to ensure that these discrepancies do not exist is to ensure there is a national law to regulate such activities. The Central government should lead the legislation rather than letting states make their own disparate laws.

Rules and regulations to govern digital businesses anyway are difficult to implement within state boundaries and hence leave room open for rent- seeking behaviour.

It is quite clear that skill-based gaming played for money in a multiplayer, competitive format is the way to go for the online gaming industry.

An enabling regulatory environment including defined rules for the use of skills as well as a proper taxation structure definition should be part of such a regulatory intervention.

Online gaming is pretty much the future of entertainment. As per a FICCI report on online gaming released in March this year, in the United States, the growth in revenues from online gaming is far outpacing Hollywood box office receipts.

India may not lag far behind, given that Indian digital infrastructure has grown by leaps and bounds.

Economists generally agree that, to become an export powerhouse, a country needs to have a big domestic market.

Online gaming comes across as an area where this duality is perfectly poised right now.

Indian domestic market is the main target for content creators who may eventually also start creating content for the global market. MPL has recently branched out into sports apparel under the brand name of MPL Sports.

If India gets its regulatory impulse right on online gaming, this could be a big component of a self-reliant, digital India in the coming era of 5G and globalisation of digital services.