The 400% GST increase is the main factor causing problems for the real money gaming (RMG) industry. This significant hike has greatly affected company margins, stalled revenue growth, and even led some early-stage companies to shrink.
Paavan Nanda, CEO and Co-Founder of WinZO explained, “The 400% GST increase has created severe challenges and an existential crisis for the gaming industry. Companies are struggling to keep existing gamers and attract new ones, leading to widespread consolidation and pushing startups out of the market.”
Nanda added, “Many startups have already closed, laid off hundreds of employees, and are facing stagnant revenues. The pay-per-play segment of the online gaming industry, which used to attract 90% of the $3 billion in FDI in gaming, has seen a complete withdrawal of investments.
In an interview with Storyboard18, Paavan Nanda, CEO and co-founder of WinZO, addresses several key issues facing the gaming industry. He discusses the challenges posed by GST increases, the impact of lower developer salaries and production costs in India compared to Western countries, and the shift of India’s gaming industry from being an importer to an exporter, among other topics.
How is WinZO navigating GST challenges to ensure profitability and continuous de-growth?
The 400 percent increase in GST has created major challenges and an existential crisis for the gaming industry. Companies are struggling to keep their current gamers and attract new ones, resulting in a wave of consolidation and driving startups out of the market. Many startups have already closed down, laid off hundreds of employees, and are dealing with stagnant revenues. The pay-per-play segment, which previously received 90 percent of the $3 billion in foreign direct investment (FDI) for gaming, has seen all investment withdrawn.
While a few large operators might survive, early-stage and emerging companies are at risk of disappearing. To help the gaming industry thrive and make a bigger impact on India’s economy, we’ve suggested that the government impose GST on GGR and platform fees, which represent the actual revenue a platform earns. This change would support the sector’s sustainability and encourage growth.
India’s lower developer salaries and production costs compared to Western countries offer several competitive advantages for Indian gaming companies on the global stage:
The presence of top global tech talent in India, available at competitive salaries, is driving the growth of online gaming in the country and boosting its impact on the global stage. While India was once not among the top 10 countries for software engineer salaries, today’s leading tech professionals in India earn salaries comparable to those in Silicon Valley.
India’s massive and expanding base of young, tech-savvy gamers provides an unmatched platform for testing and adopting new games.
With around 600 million gamers consuming content in 20 different languages and catering to various regional preferences, this extensive market allows for product refinement and establishes a strong foundation before going global. Additionally, India benefits from a highly skilled workforce, including numerous engineers, developers, and creative professionals who are well-versed in the latest gaming technologies and trends, enhancing the quality and innovation of Indian gaming products.
Can you explain the factors that are expected to cause significant margin variations in FY24?
The recent GST increase has significantly affected company margins in the gaming industry. Revenue growth has stalled, and some early-stage companies are even seeing a decline. The higher GST, which companies are currently absorbing, has led to employee layoffs and reduced hiring.
As a result, only a few companies are still profitable with lower margins compared to before the GST hike. Most businesses believe the industry should be taxed on platform fees, which reflect the actual revenue, rather than on deposits. This approach aligns with global standards.
Can you comment on India’s gaming industry shifting from being an importer to an exporter?
India’s engineering prowess, backed by over 1,168 universities and 45,473 colleges, has made it a global leader in engineering talent. Successes like Mangalyaan showcase the country’s ability to deliver high-quality results cost-effectively, unlocking significant potential for the Indian gaming industry.
India’s rich cultural heritage offers a wealth of stories, characters, and traditional games such as carrom, chess, ludo, snakes and ladders, and marble games. The global audience’s strong interest in these games has led platforms like WinZO to introduce them to international markets, highlighting India’s cultural richness and creating valuable gaming content.
With 600 million gamers, India represents 20% of the global gaming market, making it the largest market worldwide. This diverse user base, including over 80% from smaller cities and rural areas and a significant 40% of women gamers, drives continuous innovation from Indian gaming companies. This dynamic environment strengthens the global competitiveness of the Indian gaming sector.
Although India has traditionally captured only 1% of the $300 billion global gaming industry, innovative monetization strategies from Indian companies are shifting this trend. For example, WinZO, having built a large user base in India, has expanded to Brazil, helping its 100+ partner developers enter the Brazilian market.
What kind of Indian gaming content and IP are finding success in the global market?
A major driver behind the success of Indian gaming content and IP is the incorporation of local culture, folklore, and mythology into games. These elements attract niche global audiences who are interested in unique storytelling and cultural experiences. On WinZO’s platform, traditional games like Ludo, Snakes and Ladders, Carrom, and Chess have become popular worldwide.
Both global and Indian gamers show a preference for diverse content across different genres. The rich tapestry of Indian culture provides ample opportunities for creating engaging and unique games that resonate with players around the world.
How is catering to regional languages driving user growth and engagement on your platform?
At WinZO, more than 90% of our users are from Tier 2 cities and beyond, and 90% of our 200 million registered users access the platform in regional languages. We currently support game interfaces in 13 regional languages, such as Hindi, Bengali, Tamil, Telugu, Kannada, and Marathi, making the platform more accessible to users who prefer their native languages.
We’ve also infused culturally relevant themes into our games, incorporating local festivals, traditions, and folklore into game storylines and events.
Additionally, partnering with regional content creators and influencers is a crucial part of our strategy. These creators produce content in their native languages, helping to increase awareness and engagement with our games.