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Board of Directors 06.19.07 Austin Game Conference Indias Gaming Market Potential: Challenges & Opportunities Austin, TX Tuesday, September 18, 2008.

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Presentation on theme: "Board of Directors 06.19.07 Austin Game Conference Indias Gaming Market Potential: Challenges & Opportunities Austin, TX Tuesday, September 18, 2008."— Presentation transcript:

1 Board of Directors Austin Game Conference Indias Gaming Market Potential: Challenges & Opportunities Austin, TX Tuesday, September 18, 2008

2 Why India?

3 Indians are not gamers There are several preconceptions and views: Questions/Concerns about India What is the holdback? Infrastructure and policy Indians will not spend for games There is no money in gaming in India Is it really the 1 BILLION population argument? no and yes

4 Overall economic growth will create a large user base with spend potential PC placements are at a record level each year (3%) Broadband & internet penetration, though fragmented, will increase with better government policy, lower prices, and last-mile competition M, M, and 2008E 46 active internet users E-commerce growth and spend is growing exponentially YoY Indian market is poised to be a significant gaming market in 2-3 years time Macro factors: India Macro Views GDP PC Growth Broadband E-commerce

5 Proliferation of interest in games throughout the country Rise of PC gaming cafes Increasing participation in tournaments throughout the country Ad spending from many upcoming upstarts Xbox Live and Sony PS3 launchings (CAVEAT) Many entrants into the market, VC and corporate investment dwarfs revenues Indian market is poised to be a significant gaming market in 2-3 years time Micro factors: India Micro Views

6 Indias pace of reform will be much larger than most other countries. Indian Demographics

7 As a result, India will have sizeable, young population with spending power. Indian Demographics: Internet About 50% of the population is below the age of 30 and with the Internet… 15 million internet using School going children and college students (those below age 30), currently represent 35% of the internet audience in top 30 cities 13 million non-school attending men (employed or non-employed men) aged 35 or below represent another 33%, or about (13 million) True middle class is about 300 million and growing, with incomes up 6- 7% p.a. in 2006 and 2007 Sources: India government websties, I-Cube (Indian research firm)

8 Indias PC placements and internet connections are increasingly rapidly to the point of becoming interdependent or near 1:1 PC Penetration and Internet Adoption Online population grew from 60 M Dec (www.internetworldstats.com) Indian PC shipments crossed 6.5 M in Dec. 2007, >20% growth (IDC) Internet connection points in India increased by 32% from includes cafes and homes (most café owners obtain home BB connections) Fluctuations in the gap are due to uneven growth in Tier II and Tier III cities Sources: IDC, 2007 I-cube Internet in India Report with IMRB International

9 The number of HH broadband penetrations will increase radically. Hence, by , India will become a sizeable market for many applications. Broadband Penetration Rising Currently (Jan 2008), 3.24 mm BB subs (256k/512k +) By 2010, the number of households with bb will exceed that of Korea Estimate currently 315 mm total households in India Sources vary, but >20 mm HH connections by 2012 is consistent (Govt of India projects 20 MM by 2010) Sources: IDC, 2007 India Infoonline, India Govt Estimates % Penetration of Households 1% 1.9% 2.8% 6.1% 9% Millions 4.4 mm, 5.5% monthly Growth 6/30/08

10 E-commerce growth has been phenomenal, with online subscriptions and digital downloads leading the growth E-commerce Spend e-commerce revenues only $142 M, almost 13x growth in 3 years will double to $4.6 Billion of which online gaming is expected to hit $200M + !!!! Sources: IMRB, IAMAI Figures in millions % YoY Online Travel Industry1,375.01, % Online Non-Travel Industry % - eTailing % - Online Classifieds % -Pain Content Subscription % - Digital Downloads % Total B2C/ C2C E-Commerce Market1,770.02, % Highest Growth

11 General Market Gaming Opportunity Data points to the Indian online gaming, while nascent, is poised to explode. IAMAI, Pearl Research, IDC; NASSCOM predicts $300 m in 2009 & $424 m in 2010, about 72% CAGR over $ mm 2010* Overall Games Industry $200 MM Online! Videogame Piracy * thus the impetus for online gaming (ala Korea in the late 90s, The Financial Times, India) $ 1.3 Billion in 2007 (Financial Times) Growth of Internet Gaming Cafes Despite fast growth in PC/home internet, cafes will be main point of access 200k total internet cafes in India; expect 10k to be gaming in next 2-3 years average seat capacity 8 to 25 café will be main mode of access No. Online Gamers & Revenues Millions of Online Gamers in India Subscription revenue $1.7mm 2006 $3 mm 2007 $6 mm 2008 $72 mm 2011

12 Show me the money! From the café sector alone, there is potential, in 2010: Cafes10,000 Seats per café10 Total Seats100,000 per hour$1$2 hours/day44 days/year300 % spending extra50% Year$120,000,000$180,000,000

13 Player Base (mostly male, shifting to female (SevenSeas) 400k+ FPS, 4-5 mm general online gamers; in MMOs; historically A3 and Ragnarok (peak CCUs) Web based or flash games will be most successful to reach the masses 200,000 internet cafes, but gaming cafes maybe 5,000 (but growing) LAN Based games, NFS, Counterstrike, Warcraft III (DOTA) Will be the primary distribution method Consoles: 37% tax, still a luxury good (PS2 is not, though) Mobiles: carriers eat 70% of the revenue Competition: many entrants (Zapak, Sify, Indiagames, Games2win) +many other funded startups Sony, Virgin, EA and others all active in Mumbai, Hyderabad Indian Market Outlook: Gaming

14 Zapak.com (2008) ? Zapak.com (2008) ? CricketParty.com Current Online Layout Casual Serious Gamer Simple Games Multiplayer Persistence/ MMO Persistence/ MMO In general most players are offering portals and MMOs to the casual sector Spend Online $$$0 $ Circles represent approximate subscriber base Dying IndiaGames Games2win Zapak.com portal Indyarocks SIFY Portal IndiaGames Games2win Zapak.com portal Indyarocks SIFY Portal CT Race CT Race Dance Mela Dance Mela A3 Rag narok Rag narok War Rock KOL KrazyCarts Nostale (SIFY) Nostale (SIFY)

15 + Too many adv ergames + F2P + Micropricing + Web/Flash + Many MMOGs Evolution of the Indian Landscape The industry is on the verge of takeoff. + Casual (mostly males) + Subscription + 2 MMORPGS + Free2Play + Advergaming + 5 MMOGs most casual PastPresent Future

16 + Too many adv ergames + Micro$, F2P + Web/Flash + Many MMOGs Evolution of the Indian Landscape The industry is on the verge of takeoff Industry Catalysts Offerings for Gamers Funding Game Dvlprs Game Dvlprs New Entrants New Entrants BBand Penetrat. BBand Penetrat. Advance Models (Rev. Share) Advance Models (Rev. Share) Casual Games Casual Games Game Portals Game Portals Aware ness Aware ness Localized Content Localized Content Rise of Gaming Cafes. Rise of Gaming Cafes. New Gaming Genres New Gaming Genres + Casual (mostly males) + Subscription + 2 MMORPGS + Free2Play + Advergaming + 5 MMOGs most casual Underlying graph from IDC 2007 PastPresent Future

17 Target Demographic: India is wide open Wider because very little Distractions (Consoles AGE Low End Gaming exposure unknown First stage: casual games Low ARPU Low End Gaming exposure unknown First stage: casual games Low ARPU High End Habits are forming Higher ARPU Loves quality graphic Loves community High End Habits are forming Higher ARPU Loves quality graphic Loves community EMERGING MARKET (INDIA) Low End Popular casual game for 35+ Low End Popular casual game for 35+

18 Pricing Toothpaste, cigarettes, shampoo 30%-40% extra margin!!! Success in India will come from the ability to price in small increments Hindustan Unilever is one of the jewels in the company's emerging-market operations. It is India's biggest consumer-goods company and biggest advertiser. One of its strengths is its ability to cater to all segments of the population by adapting products and prices. In laundry detergents, for instance, it makes Surf Excel for the affluent, Rin for the aspiring class and Wheel for poorer people, the vast majority of whom live in the countryside. It sells 70% of its shampoo in one-use sachets for the equivalent of a couple of cents. The Economist Jan

19 Pricing and Payment Prepaid cards ATM Debit cards Credit cards (the Indian youth: in one generation have become like Americans) ITZ cash Mobile Payments (in India effective payment methods Oxygen, Paymate) Cash via collection centres: internet cafes or other shops How do I get paid? India is a cash society, though…

20 Biggest Challenges Power, power, power; roads, roads, roads Pune example during WR India just does not have enough power to fuel GDP growth in some states, though many projects scheduled to come online in 5 years time (it will get worse before it gets better) Reliable internet (both industry and government) Connection speeds (1:4); Yes even DSL is shared unwittingly to consumers Connections improving, but still lag and latency within India is spaghetti Fiber is everywhere in metros, but noone can connect; LAST MILE ownership Weather? Yes. Monsoon season creates more havoc than anything Local government regulations or political actions Smashing of cafes because of bad posting on Orkut Chennai – café regulations How does one best collect cash payments? Factors

21 India Map India is a vast place and a very complex country. + state differences + cultural + structural + infrastructure + gamer (café vs. home)

22 India Map: Cafe Cities Mumbai (suburbs) Pune Bangalore Mysore Chennai Kolkata Ahmedabad Baroda Hyderabad Indore Gwalior Also Tier II/Tier III cities, and numerous university towns Cite differences

23 Graphical Journey

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26 Photos Leave with this fact: the kid with no shoes and the construction worker at a Tier III café in India

27 Graphical Journey

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37 Graphical Journey: End

38 End Note Thank You!!!

39 Consists largely of casual gamers who are mostly male ages 15-25; however this factor is shifting; many young males looking towards advanced games over 400k First Person shooter players in India university and college festivals of several thousands all have an advanced gaming focus most games largely LAN focused – Need For Speed, DOTA, Counterstrike Gaming tournaments are immensely popular in India, but still focus on old games – Counter Strike, racing, Warcraft III) Competitors and investments – until date about $150 mm in Indian market space Zapak has about has 3 mm registered users in about 8 months for its casual zapak.com portal Plans to launch Zapak cafes throughout the country and 2 MMOs this year (I from Shanda, other undisclosed) Level Up success of $15K/month on CCUs; after $millions invested; revenues largely increased in switch from high subscription to lower item purchases for Ragnorak Online SIFY is aggressively retooling its cafes with better BB and plans to launch its own portal Games2win has 2mm+ registered users for its portal Handful (Indyarocks –mobile and casual), Cricketparty.com, Seven Seas, Jump (mobile & casual games) 1) Indian Market Outlook: Appendix

40 Competitive Landscape: Appendix Competition in Online Games (Services and Publishing)


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