Investments in the Indian gaming sector has plunged by 77 per cent over the past year, from $423.2 million in 2022 to $94.2 million in 2023, owing to heightened competition and uncertainty over tax issues. The number of funding rounds also decreased from 32 in 2019 to 15 in 2023, a 53 per cent drop, according to data from Traxcn.
According to Rohit Bansal, founder of online fantasy sport game Super4, the gaming industry has experienced growth over the past decade, leading to a surge in new games and companies. This saturation has intensified competition, turning investors more cautious due to the perceived overcrowding.
“The global economic climate significantly influences investment decisions. In the present economic uncertainty, investors are adopting a more conservative approach, reducing their willingness to invest heavily in any industry, including gaming. Economic fluctuations can create an environment of risk aversion, which impacts the inflow of capital into gaming ventures,” he said.
Policy challenges
Investors are re-evaluating strategies to align with changing consumer behaviour and economic conditions. Notably, the rise of mobile gaming and popularity of free-to-play and play-to-earn models have influenced these adjustments.
Neha Singh, Co-founder, Traxcn, said, “The recent 28 per cent GST mandate and state-level bans on real-money gaming further strains the Indian gaming space, raising concerns about the future impact of these policies on the industry. There are multiple developments in the gaming space globally, with technologies like AR/VR [augmented/ virtual reality], generative AI, metaverse, etc, the gameplay is becoming more immersive and engaging for players. Currently, the real-money gaming start-ups are struggling in the country, but with these recent innovations in the sector, there is scope for growth and innovation in the coming years.”
Game for innovation
Despite the challenging market conditions, start-ups are adopting newer approaches to attract investors. For example, many players now offer games on low-end mobile devices to broaden the user base. “We are leveraging data analytics to inform game development decisions, ensuring games remain aligned with market demands. We are also collaborating with the sports and entertainment industries to access new audiences and resources,” said Bansal.
Start-ups are also embracing emerging technologies such as blockchain and NFTs for innovation and revenue generation.
While the overall gaming sector has seen a decline in investments, certain segments continue to attract investor interest. Esports remains thriving, with a growing fan base. Companies are capitalising on this by adding esports fantasy leagues and tournaments to their offerings.
“Investor interest will be for those games that can draw players in vast numbers and revenue-generating projects. We believe there are several such gaming segments that continue to attract players and investors. Esports, mobile gaming, hyper-casual games, indie games, metaverse and NFT games, and health and social games are some areas where users are coming in hordes. There is, in fact, a huge following for fantasy games, which enable users/ avatars to become heroes, strategists, and explorers, immersing themselves in imaginative adventures and competitions.,” said Lokesh Rao, CEO, and co-founder, Trace Network Labs