Intellectual Thoughts by Sanjay Panda !!!!!: Indian gaming Industry. Outlook


Sunday, November 19, 2006

Indian gaming Industry. Outlook

Indian gaming industry is estimated to be $30 million in 2005, according to Nasscom. By 2009, the Indian gaming development industry is expected to grow to $300 million, at a CAGR of 78 per cent.

The numbers, while impressive, hide an important fact. For close to a decade, gaming development in India has held immense promise. Unfortunately, it still continues to do so. In the same period, the IT services industry has grown at 32 per cent from $13 billion to $17.2 billion. In the past two years, the number of gaming development companies in India has gone from 14 to just 20. It is, in fact, one of the rare software-related areas where India has not yet been able to make a significant mark globally. Not for lack of trying, though.

Gaming companies like Indiagames, Mobile2Win and Dhruva Interactive have striven long and hard for success against huge odds: lack of a gaming culture and skilled professionals, low funds and some heart-rending near misses.

For instance, a chance meeting with gaming legend and Infogrames Studios (now Atari) co-founder Eric Mottet in December 1998 offered Rao, and Dhruva, an opportunity to make a mark on the global stage. Infogrames selected Dhruva to work on parts of the PC game version of the movie Mission: Impossible. For over a year, Dhruva worked on the project, but when the time came for its release in the market, Infogrames backed out. By that time it was gunning for the licence of Mission: Impossible II and the film’s promoters didn’t want to publicise the earlier movie.

Despite the disappointment, Dhruva did not falter but took the services path and ventured into product development.” Dhruva’s fortitude is symptomatic of the industry. Pitted against the might of the Americans, Koreans and several others, and the general apathy of the Indian authorities, the Indian gaming development community has only had its passion and will power to sustain it. And while it will still take a momentous effort to attain Nasscom’s projections, things are beginning to change on the ground. Slowly.

The prospects of the gaming industry in India has been bolstered by the entry of animation companies like DQ Entertainment, Animation Bridge, Paradox Studios, ColorChips, Toonz Animation and Ittina Studios.

Why animation companies like Toonz should enter gaming in a big way is not difficult to understand. For one, it is easy for them to tweak existing resources (employees with skills in animation development) to make capital of a new opportunity. For another, the industry is slated to grow at twice the pace of animation, both in India and globally .

For both animation and gaming companies, a major source of revenues is outsourced services. For instance, it takes $6 million-7 million to develop a PC game in the US, compared to just $0.5 million-3 million in India. There is also the matter of reducing development time. A PC or console game takes two years on an average to reach the beta stage.

It, therefore, made sense for game publishers to outsource development to low cost destinations. In 2000, companies like Microsoft, Electronic Arts, UBSoft, Konami, Activision and Take 2 Interactive outsourced select modules to small firms (with teams of just 15-30 developers) in countries like the Philippines, South Korea, Singapore, India, Taiwan and China. This lowered development costs and brought down production time to 18-19 months by leveraging on the global delivery model.

For the past two years, Indian companies have also been trying to move up to the next level by developing their own intellectual property. For instance, come early 2007 and console game Archie’s Riverdale Run will hit the market. Developed by India’s FXLabs Studios, the game would have undergone its entire development lifecycle — from concept creation to final testing — in India. DQ Entertainment has formed a joint venture with French studio Onyx Films to produce three animation feature films — Skyland, Night of the Child King and The Enchanted Boy —and develop games around them for $89.5 million. The first movie, Skyland, and its game version will hit the market in early 2008.

Then, the success of Hanuman (developed by Percept Pictures and Sahara India Group), India’s first local content animation blockbuster, has spurred gaming developers to explore the rich repertoire of Indian content. Bangalore-based Ittina Solutions is likely to launch titles for mobiles and PCs in the next couple of years. Mumbai-based Indiagames, Paradox Studios and Fantasy Labs are also betting high on local content development not just for mobiles but for PCs and console games.

As mobile mania in India keeps moving north (it is the world’s fastest growing telecom market), consumers have shown a surprisingly high propensity for value-added services like game downloads. Riding this momentum, mobile gaming is expected to constitute 70 per cent of the overall gaming market by 2009 (it’s at 53 per cent now), according to Nasscom. Gaming companies have already benefited. For instance, mobile gaming constitutes 60 per cent of DQ Entertainment’s gaming revenues, and 40 per cent of Dhruva’s.

In mobile gaming, local content has already made its appearance. Thiruvananthapuram-based Toonz Animation launched its flagship animation title Tenali Raman as a mobile game and licensed it to Tata Teleservices across the circles it is operating. Going further, the company intends to launch games titles like Geeth Mahabharat and Hanuman.

Mobile gaming is also seeing new players planning to display their wares. For instance, Virgin Animation & Comics India, a JV between filmmaker Shekhar Kapoor, self-help guru Deepak Chopra and Virgin’s Richard Branson, has firmed up plans to venture into mobile gaming. Sharad Devarajan, managing director of the firm, says, “Our first phase into gaming would be through the mobile platform by end-2006, followed by other access platforms. Mobile gaming may be growing fast, and may constitute a large chunk of the industry’s revenues, but the margins for developers are wafer thin. For instance, a premium mobile game can be downloaded for Rs 150, and a standard one, Rs 50 upwards. Margins for these games can be 20-25 per cent for game developers. Indian telecom operators like Reliance have even introduced price-per-session concept, where a game could be priced as low as Rs 2 and Rs 4 per session. On the other hand, games on PCs and consoles come at a minimum Rs 350 and Rs 600, respectively. Premium PC and console games could get you down by Rs 2,500 and Rs 3,500, respectively. And margins, at 40-60 per cent, are healthy. Says FXLabs’ Garcia, who was one of six professionals who started GameStudio at Microsoft: “PC and consoles are attractive markets over mobiles both in terms of margins and to experience the game’s liveliness.” But while margins are healthy, PC and console games are far more expensive to produce. So, it may take even more time before Indian companies make a mark.

If there’s one thing that can wreck the aspirations of this budding industry, it is a shortage of skilled people. The problem has been around for ages, but not much has been done about it. India has 4,000-odd game developers right now. The demand is for 10,000 professionals in animation and 2,000 in gaming. Governments in states like West Bengal have initiated training programmes, but they produce just about 100 professionals a year. In comparison, Korea has about 60 colleges dedicated to animation education and has a game academy producing 250 professionals a year. (In 2005, it had 25,000 professionals.)

Then, the Chinese government is expected to spend up to $240 million to finance domestic game development over the next three years, according to Piper Jaffray, an investment bank and institutional securities firm. There is no such commitment from its Indian counterpart. Some companies are trying to make the best of the situation by setting up in-house training divisions. They are also trying to work with state governments to design a curriculum for gaming development. For instance, Toonz-Webel Academy in Kolkata is an animation school set up by the West Bengal government with Toonz Animation. The National Institute of Design, Ahmedabad, is also slated to introduce a game development course. Still, these efforts are far short of what is needed to propel the industry into the global league.

This is not to say that there is no hope. There is, but it will take a concerted effort from all parties involved. Of course, Indian consumers can change things themselves. Their growing numbers will give gaming companies reason to smile.


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