Well, One does not need to introduce this sector. The likes of Dota, Counterstrike, and the myriad of mobile games(Pokemon Go, FIFA) along with the devices like the Playstations, XBox have made this sector known to everyone. New professions are emerging from this sector. People are getting paid to play online games. Major media companies like ESPN, Sky Sports, BBC, etc have given their support to broadcast online games while the prices for these tournaments keep on rising every year. With the latest developments like Virtual reality and Artificial Intelligence this sector is expected to go through an uphill ride in the coming years.
Below is a brief of the global gaming sector.
- Market Size
Currently growing at a CAGR of 6.2% from 2016 to 2020 the global gaming market is expected to reach a value of USD 108.9 Bn by the end of 2017 and USD 128.5 Bn by 2020.
As shown in the schematic above smartphones dominate the global gaming market with 32% of the value coming from it. Mobile gaming (Smartphone + Tablets) together will contribute around 42% of the total revenue of the global market. The increasing number of people using smartphones and tablets for daily work and recreation has resulted in a boost on this sub sector. Currently there are around 10,825 Mn mobile devices and 280 Mn tablets being used globally. The innovation that has come in this area is quite commendable. Developers are trying to incorporate augmented reality and artificial intelligence into these games to enhance the user experience. These have also been well received by the audiences. Pokemon Go is a prime example of this.
Downloaded and boxed PC games revenue has decreased despite of the greater engagement. This is due to the increase in the mobile engagement by both users and the developers. We are all aware of the FIFA and many car games that were initially available only for the Playstations and the PC’s but in today’s scenario their mobile versions are at par in every aspect and have more benefits like available all time, easy to carry device which has led to the doom of the PC games.
China leads in the revenues for the global gaming market. China alone will generate a quarter of the global revenue amounting to USD 27.5 Bn crossing US which will cover around USD 25.1 Bn. The Asia Pacific region is expected to cover a whooping USD 51.2 Bn (47%) of the global revenue which will grow at a CAGR of 9.2%. Most of China’s growth will come from mobile gaming, with Tencent and NetEase leading the way. Mobile gaming revenues from these two companies alone reached $7.7 billion in 2016. The fastest-growing region in the coming years will be Rest of Asia (without China, Japan, and Korea), with total game revenues growing to $10.5 billion in 2020, up from $4.5 billion last year. North America is the second-largest region, with estimated revenues of $27.0 billion in 2017, a year-on-year increase of 4.0%.
Indian online gaming sector:
India has the largest youth population in the world and is poised to become a major market for the gaming sector. The Indian Gaming market valued at USD 890 million is believed to grow at 14.3% yearly with mobile Gaming taking the lead at 71% share. The following factors drive the growth of this sector in India
- rising younger population
- higher disposable incomes
- introduction of new gaming genres
- increasing number of smartphone and tablet users.
With increasing mobile and internet penetration and e-commerce solutions in place, the Indian game developers have a large amount of opportunities to innovate and provide attractive content which is key in engaging the Indian consumer. With availability of creative talent, advanced technology and low-cost, Indian markets provide the best opportunity for collaboration and development work.
The sector was initially averse to VC fundings due to the low development on the technology side; with no proper internet the barriers were great for a company in this sector to takeoff in India. However things have changed drastically, seeing the success of online games in India and the acceptance of games built by foreign developers the local ones have their confidence boosted along with considerable VC participation. In order to support Indian Gaming startups Reliance Games as a part of Reliance Entertainment in 2016 had announced funds worth USD 50,000 in marketing and technology support.
Even the foreign investors are now looking to enter the Indian gaming market. 99 Games Online Pvt. Ltd raised an undisclosed amount of funding in January this year from a Japanese investment firm Dream Incubator. The startup has already raised $9 Million to date from quality institutional investors -Kalaari Capital and Ascent Capital and Dream Incubator. Mobile gaming firm Nazara Games is looking to launch an esports league in India with an investment of INR 136 crore. Nazara is the leading mobile games publisher in emerging markets of India, Middle East and Africa .The Mumbai-based company further plans to setup an Indian esports ecosystem over the next five years.
Some important KPI’s for Online Gaming Startups:
- Freemium / Free to Play
- Virtual Goods
- Cost per Acquisition
- Cost per Engagement
- Monthly Active Users
- Daily Active users
- DAU/MAU Ratio
- Retention Rate
- Churn Rate
- Average Revenue Per User
- Average Revenue Per Daily Active User
- Average Revenue Per Paying User
- Average session time
How should the new comers approach the sector:
Well, this can be a very very competitive sector to play in. Only one thing that can get you from rags to riches and that is INNOVATION ! You will have to constantly keep on adding new dimensions to your product. Every game has a threshold time until which the users find them interesting and attracted to. They will jump to another one if you cease to be of interest to them.
Getting unique products will go a long way in sustaining your company and will decrease the burden of expenditure on expansion and marketing. The users will take care of that. Get the best developers for your team and always be up to date with the latest trends. The trends are moving towards longer gaming sessions and detailing is being done for better in app experiences. Peak time for gaming is between 6 PM to 9 PM and this can be used to devise strategies to target a specific audience. Card and Casino games have started becoming popular while arcade, casual and brain games are on a decline.
About the Author:
Karan Mehta, is an Analyst at Idein Ventures (www.ideinventures.com), a Global VC/PE firm. He is someone who constantly tries his hands on new things. Always fond of playing with numbers. An avid reader about the latest happenings in the startup world. He loves reading about influential personalities.