GAMING INDUSTRY ANALYSIS

Company:
Nazara
Technologie
s Ltd.
Contents:
 Gaming
Industry in
India
 Past and
Present
industry
dynamics
 Competitive
environmen
t of the
industry
 Investment
Team Name: MNR
in the T M NIKHIL SAI
industry MADHURI V
RISHITHA REDDY
GAMING INDUSTRY IN INDIA

India is one of the top five mobile gaming markets in the world, with a 13% share of global
game sessions, and is expected to add 40 million online gamers during 2020−22. India has
over 560 million internet users, making it the second-largest internet consumer. The first
nine months of 2020 saw India rise to the number one spot in mobile game downloads
worldwide, clocking 7.3 billion installs and raking in a 17% market share of the installs
volume, as per Sensor Tower’s data. Over 50% of India’s population is below the age of 25,
and 60% of the nation's gamers are under 25 years of age too. The gaming userbase
surpassed 365 million in March 2020 as per KPMG’s media and entertainment report.

Mobile gaming takes the largest chunk of the gaming market thanks to access to affordable
smartphones growing at 15% year-on-year for the past five years in India, high-speed 4G
internet penetration and the world’s lowest data tariffs. Together with the rise of mobile
games, these factors feed into India’s youth having a growing appetite for content.

At its peak, PUBG Mobile had an estimated 34 million Indians playing daily. Indians alone
were responsible for downloading the battle royale genre title a whopping 175 million
times.

A greater willingness to pay for services comes from improved disposable incomes at
purchasing power parity (25% over 2016 levels) and wider adoption of digital payments as
per Deloitte’s Telecom, Media and Telecommunications Predications report.

PAST and PRESENT INDSUTRY DYNAMICS

Gaming firms are also gradually moving from a model dependent on download volumes and
advertisements to one with diversified revenue streams built on consumer engagement and
elevated experience levels. In-game revenue streams, such as chargeable expansion packs
or virtual coin packs as well as subscriptions, are gradually picking pace. Increased internet
penetration, 5G network and broadband proliferation will revolutionize the gaming sector,
with more people joining online gaming cohorts and a rise of game streaming providing
opportunities to monetize their passion.

Indian gaming platforms have attracted more than $450 million in the last six years. Some
recent investments include those in Mobile Premier League, that raised $90 million in 2020
from Pegasus Tech Ventures and others, JetSynthesys (raised $40 million from DSG, Jetline,
and Triveni Engineering & Industries) and Reliance Jio that invested in mobile gaming
startup Krikey among others.

In terms of gaming segments, real money gaming (RMG) is expected to grow at a CAGR of
40% from 2020−22. E-sports revenue is expected to rise at a CAGR of 36% over the next
three years. Gamers now spend more time watching other people play video games than
they do watching traditional sports on TV. An Indian gamer spends, on an average, 3.6 hours
per week in watching e-sport tournaments. Meanwhile, fantasy sports revenue increased
nine times in the pre-pandemic years between 2017−18 and 2019−20, reaching ₹16,500
crore.

COMPETITIVE ENVIRONMENT OF THE INDUSTRY

HARD TO PENETARTE: Gaming market is highly competitive as everyone wants a piece of

the gaming cake and this has seen the number of gaming applications that are available to
consumers increase remarkably and this represents the competition that developers face.
Consumers, therefore, have a wide variety of games to choose from and this makes the
gaming industry a buyers/gamers market as opposed to a developer’s one. They can choose
from a variety of games and drop those that are not impressive without blinking an eye. This
makes penetrating the market difficult as you will have to compete with millions of other
games that are just as impressive.

OTHER FORMS OF ENTERTAINMENT: Games, however, are not just competing with other
games for the market share. They are also competing with other forms of entertainment
that usually take up people’s spare time including socializing, attending festivals, watching
movies, reading novels and more. The game that you develop should, therefore, be
interesting and captivating enough for it to make it at the top of the list of the spare time
activities that people opt for.

INVESTMENT IN THE INDUSTRY

MERITS:

 Exposure in one of the fastest growing industries in the world

 Exposure to innovation
 Opportunities for capital gains and achieve non-financial goals
 Opportunities for passive profitability in the form of dividends
 Opportunities for diversification of a portfolio of assets
 Opportunities to save or retire
 Inflation protection
 High liquidity, as some game stocks are among the most traded in the world

DEMERITS:

 Sudden changes in the industry such as the disappearance/replacement of some

products with the introduction of newer ones
 Potential government regulations on the gaming industry
 Higher volatility in stock prices compared to most other industries
 Higher valuation of companies in this high-tech industry (higher price/profit ratio)