Will homegrown titles redefine India's burgeoning gaming industry?

The Indian gaming market, currently valued at $3.1 bn, is expected to reach a valuation of $7.5 bn by FY28

Last week, Mayhem Studios, a Mobile Premier League (MPL)-backed game developer, announced the closed beta launch of its battle royale game, Underworld Gang Wars.

The game, in development for the past 18 months and having already amassed seven million pre-registrations, will be India's first-ever AAA game—a classification signifying high-budget, high-profile games typically distributed and produced by large publishers.

Popular AAA games include titles like Minecraft, GTA 5, Call of Duty, and Fortnite, among others.

This development is particularly notable at a time when India's gaming sector is grappling with a newly imposed 28 per cent goods and services tax.

The Goods and Services Tax Council, in July last year, decided to impose a blanket tax of 28 per cent on online gaming. Skill gaming platforms earlier paid 18 per cent GST on the platform fees, also known as Gross Gaming Revenue (GGR).

While the margins of gaming firms operating in the real money gaming (RMG) space have been significantly affected, the release of a homegrown AAA game signals a potential paradigm shift for the industry.

"We need to see more studios build in India for India. This is a step in the right direction in terms of fostering homegrown content. We need more local content and that is, in fact, what India's users want," said Salone Sehgal, Founding General Partner at Lumikai—a gaming-focused venture capital fund.

RMG found initial success in India's nascent gaming market due to its high margins. As of financial year 2023 (FY23), the real money gaming segment held a market share of 84 per cent in the online gaming industry, according to a report by consulting firm EY.

However, this is expected to decrease to 75 per cent by financial year 2028 (FY28) as a consequence of the new tax regime, according to a report by consulting firm EY.

Industry watchers believe that as the country's gaming industry matures, and consumers become accustomed to digital transactions, gamers will migrate towards other segments like casual or mid-core games.

Moreover, advertising revenue and in-app purchases from these casual and mid-core games are expected to drive most of the growth for the country's gaming sector.

The Indian gaming market, currently valued at $3.1 billion, is expected to reach a valuation of $7.5 billion by financial year 2028 (FY28), growing at a 20 per cent compound annual growth rate (CAGR), according to a recent report by Lumikai.

"In the last five years, smartphones have become cheaper and more powerful, data has become more affordable, and consumers have become accustomed to microtransactions via Unified Payments Interface (UPI). These factors have made these homegrown games viable, which has in turn attracted investor capital. This has emboldened game developers to take these kinds of risks for the India market," Sehgal added.

Gaming companies are experimenting with new business models and are looking to develop new gaming formats, especially in casual gaming.

"We are experimenting at a very rapid pace in terms of new business models to operate in a sustainable manner in the new GST environment," said Trivikraman Thampy, Co-Chief Executive Officer and Co-Founder of gaming unicorn Games24x7.

"Our approach is very different from other operators who have dozens of games. Over the next five years, we will launch two or three games. We do not want to become a 100-game portal," he added.

The popularity of titles like PubG, Free Fire, and BGMI indicates robust demand for big-budget games among Indian gamers. The coming years might, therefore, see a substantial rise in refined, homegrown gaming titles.