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Correcting ‘The game around gaming in India’- A wider perspective

What’s this all about?

I’ve been asked to read an article on LinkedIn titled ‘The Game Around Gaming in India’. Initially, it wasn’t planned to be any more than a Facebook post. But more perspective added as I kept digging. The article tries to encourage gaming cafe investors under its branding, certification and promotional program. My write-up also shares a similar purpose with a wider depth of field.  The write-up needs clarity since investments in such establishments is not small and takes a long time to recover. That’s why it needs multiple revenue streams. Therefore, this excerpt is the only part from that post we all can agree with:

One good thing about Gaming cafes is, unlike other retail or entertainment businesses, there would be multiple revenue sources – Game Time, FnB, Sales of Accessories, Hardware, Merchandise, Events, PC Rentals, tournaments and Ads, making the business very dynamic.

But the inconsistencies, misinterpretations and omissions in this article from the CII and KPMG/Google’s report are counter-productive. Therefore, I have to agree with the opinions of those who shared this report (expressed in one word- ‘LOL!’ No exaggeration). In reality, it paints a ‘horse blinder’ point of view. Therefore, it needs a wider and balanced perspective about the Indian PC gaming market based on these reports.

In case it is altered, you can read the original version here.

The CII report on the Indian gaming segment

The report by the CII is prepared by TechSci research. At the start of its ‘Hardware’ overview, it observed HyperX as the most preferred hardware for headsets, storage and memory. It also specifies gaming-centric SSDs and memory modules. It mentions AMD/ATI, Nvidia and ASUS.

Gaming industry in the country has been continuously evolving over the past few years, in terms of availability of better hardware for operating games. In India, the gaming industry has been advancing from casual to serious gamers. With presence of new and advanced gaming platforms, as well as rising penetration of gaming hardware companies in the country, the industry is witnessing rapid growth.

Kingston’s HyperX brand is the most preferred hardware brand for headsets, storage and memory among Indian gamers. Under the brand, the company introduced next-gen SSDs and memory modules for providing a better gaming experience to gamers.

Emergence of new technologies such as 3D and Virtual Reality have also offered gamers with an extraordinary experience and to support demand for these technologies during the forecast period, Nvidia and ATI have many hardware products in their pipeline. In addition, ASUS is also focusing on providing gamers with hardware due to rising enthusiasm and passion among gamers.

Graphics hardware of AMD, known as asynchronous compute, helps in providing superior computer capabilities as well as low rendering latency to gamers. Moreover, for increasing awareness about gaming hardware, Acro Engineering Company has created gaming events, roadshows, gamers meet, etc., in the country.

Many can relate with the headset part, while others aren’t far-fetched based on general observation. It is uncertain how the report is evaluated. Some product’s logistics and services are taken care of by the distributors. WD and SanDisk are two of the storage makers who enjoy businesses without ‘gaming’ sub-branding. The report lists Acro Engineering and its promotional activities consisting of gaming events, roadshows, gamers meet, etc.

ATI? Really? Okay…

As much as all this is appreciated, it would be nicer to see such reports evaluating component sales in India. That would be a big one on its own and hence it is nothing more than an overview. The report does emphasize the evaluation of the PC gaming market.

Mis-Corrections, Omissions of the CII report and the message it portrays

The statistics used in this article are based on the report dated in Feb 2017, titled ‘Emerging Trends in paint India Gaming Industry’. No latest articles about this topic were published by the CII. Naturally, the findings were based on the completed year at the time (2016). The report also projected estimates after five years.

The problem starts with the quoted valuations in the LinkedIn article. It is quoted in his article:

“According to a CII report, the Indian gaming industry was valued at USD 543.08 million in 2017 and is projected to grow at a CAGR of 6.61% which in my opinion is a conservative assumption”.

This is what the CII report quotes:

“India gaming industry was valued at USD543.08 million in 2016 and is projected to grow at a CAGR of 6.61%, in value terms, over the next five years.”

Obviously, the basic sentence structure is a copy-paste, but somehow the year is bumped to 2017 and omits ‘valuation’ references. The omission of the sentence may make one speculate the report talks about overall profit in the market. And the projection of growth in value is over the next five years. It is not clear if this LinkedIn write-up concludes the conservative assumption is for next year or five. Its left open for interpretation (a common theme in some places shown in this write-up). I’ll leave the interpretation of this altered sentence to you.

Even in a successful market, there’s a risk because high industry valuation does not guarantee profit for all- small and big businesses. Therefore, this would wither make veteran invstors exercise caution/ scepticism or ignore the whole narration of that write-up or presentation Nvidia does in its meetups.

But suppose a potential investor makes a decision based on these numbers, it is not the number that represents the PC gaming market in India. The overall numbers include mobile gaming, a much larger piece of the pie. CII already has valued the PC gaming segment to give a good idea of its size.

The PC gaming market valuation

From here onwards, we’ll talk about the PC gaming market valuation, what really matters.

CII did segregate the report for the computer gaming market. The report says:

“Computer gaming segment accounted for a share of 15.54% in India gaming market in 2016. India computer gaming market was valued at USD84.40 million in 2016.”

The actual PC gaming segment valuation based on the same report is USD 84.40 million, which represents 15.54% of the Indian gaming market. It further emphasizes:

“Core gamers who do not intend to move to console gaming and make additional investments are driving computer gaming industry in the country.Further, there has been an increase in popularity for online PC gaming due to increasing interest of gamers towards eSports and other electronic games. This is expected to boost computer gaming market in India in the coming years.”

Though some parts of the CII report could have more details, it is a good report about PC gaming and hardware overview in India even in today’s scenario (adding the current trend of battle royale games). Many can relate to this excerpt as it represents most PC gamers which consist of both system owners (notebook and desktop) and cafe patrons. Typically, those regularly play in cafes are into eSports and Battle Royale titles- Counter-Strike Condition Zero, DOTA2, PUBG (PC and Mobile Tencent for PC emulated version), Fortnite and  League of Legends. There are also end-users who enjoy console and PC platforms since the former has many exclusive titles. A large portion of PC owners plays various titles from various genres, old and new, multiplayer or single player.

Coming back to the CII report, one is inclined to ask- why not use the relatable valuation unless they consider “80.84USD valuation with projected growth of up to 105.8 million USD after 5 years” to be small enough to ward away major investors? Then why wasn’t this quoted anywhere at all, while confusing by mixing up the entire gaming market’s valuation in a pitch to consider investing in PC gaming cafes?

Curious wordplay.

Comparison with China

Quoting the context:

The Gaming cafe business is untapped in India and here’s why I think so – China has approximately 60 million gamers and 160,000 gaming cafes with an average 200 seating capacity. Whereas in India, there are only 16 million gamers with 500 gaming cafes with a seating capacity of around 20 which is meeting the demand for less than one percent gaming audience.

In the LinkedIn article, the ‘one percent’ has a bigger font size than the rest. How about that!

I wasn’t too sure from where the statistics for Chinese gamers and gaming cafes are derived from. The Niko report paints a different picture:

The comparison between India and China in this context is irrelevant because the Chinese gaming market is big enough to contribute a sizeable global revenue. China has its own list of successful domestic games and streaming services for a long time. The whole country blocks or disables many internet giants from entering its market and its own ecosystem. Namedropping doesn’t help.

While there is a lack of awareness, it doesn’t help when the details are presented in such a direction. While we know there are many GeForce GTX gaming cafes that were opened and certified, it does not paint the equal risks involved. Nvidia did publish its own whitepaper on August 2018. Unlike CII, this is prepared by Nvidia India management and therefore comes with its own bag of salt. It also did quote another report prepared by KPMG and Google titled ‘Online Gaming in India: Reaching a new pinnacle’.

KPMG/Google Report

The Nvidia report quotes:

Google study “Online Gaming in India -Reaching A New Pinnacle” the consumers who spend more than 18 months on smartphone gaming have 3 times more probability to move to more matured platforms like PCs or Consoles.”

The actual quote is mostly the same:

A gamer with more than 18 months of [mobile] gaming experience is three times more likely to play on PC/Laptop as compared a gamer with less than 18 months of gaming experience.

The report adds further:

With more gaming experience, the gamer(s) preferences evolve. An experienced gamer begins indulging in more complex gaming formats, which may require large screen devices such as PC / laptops. Another reason for this shift could be the age of an experienced gamer(s). Nearly half of online gamer(s) in 26+ years age group have been playing for more than 18 months as compared to the younger age groups.

It’s uncertain why Nvidia’s report would replace ‘laptops’ for ‘consoles’.

The KPMG/Google reports include age group, an important demographic. One can safely assume people in this age group will prefer to have their own systems to play at their convenient time over being limited by the cafe’s business hours. The point is, even the whitepaper from Nvidia paints a very narrow point of view damaging its own credibility. It is no different from Principled Technologies’ commissioned report, which also worked against itself. That’s the problem with such commissioned reports, it does more harm than good. The reports from CII and KPMG/Google, it paints a broader picture.

Evaluation Process

I spoke to a GeForce certified gaming cafe owner. He will not be named because I wouldn’t wish to see his certification to be revoked while expressing a concern that affects both parties. The feeling is justified because of Nvidia’s loose language viz. left open to interpretation. According to him, despite investments made by business owners, Nvidia enforces specifics in the agreement and evaluates before providing a certification. But the vague conditions on the openly available form can mean anything they can bring up to disagree with and pull off its certification for anything.

Its interesting NVIDIA doesn’t have a minimum monitor refresh rate requirement for better experience and prioritizes ‘gaming chair’ instead. Getting the draft and updated agreement would give a better image of its specifics.

The certification is based on the number of systems, PC titles, layout and eSports chairs. This is expected from such commercial space certifications. There is a lock-in period of one year as mentioned in the evaluation process. However, Nvidia states it has the right to terminate its GeForce partner status ‘without cause’. That’s left open to interpretation and allows them to add restrictions or pull their name off at their discretion, even for no reason. This carries the same vibe as the GeForce Partner Program which Nvidia had to take it down, officially.

What do cafe owners really get?

All the investment and expenses are carried by cafe owners. Nvidia does provide glowing signs, but only at their discretion according to a cafe owner. Gaming cafes do get a mention in GeForce India facebook page for some promotions. He also said GTX cafes are required to give editor access in its cafe’s Facebook page. He gave an example of a gaming cafe that shut down very a few months ago, but its page is still used by Nvidia India to promote its content.

Does social media reach really help gaming cafe businesses? Not according to the cafe owner I spoke to. He said,” We get social media promotion on Facebook. You will get likes for your page. Random people from different states will like your page”. When I asked if it helps his business, he replied, “Not to get business. Just to get more likes on our Facebook page.”

Still, it wouldn’t be fair to say gaming cafe owners do not benefit from GeForce branding when the business is executed properly. He said the article is a very optimistic estimation (again- left open for interpretation), but also said there’s no doubt this business will grow. He expressed gaming is an unorganized sector with problems from police and other authorities. Nvidia needs to be realistic when projecting such numbers to attract potential investors. It also needs to safeguard the owner’s investments without the passive-aggressive messages of pulling out its certification at their will. The business owners are supporting GeForce’s ecosystem at their own expense and risk, after all.

Point-of-View from a gaming cafe owner

My source expressed his concerns about certain claims made by the management at times.

Upon asking about his experience with owning and operating a GeForce certified cafe, he says, “It’s good but Nvidia claims there’s is a place for 10,000 cafes in India. Haven’t read a bigger joke this millennium.” Y-ouch! He continues, “Gaming cafes, like any business, takes up to three years to break even. Some of them don’t. Mainly because people are opening cafes with 240Hz monitors in North India and charging Rs. 35 per hour thinking it will attract more people and cafe will always be full. After a few years when he realizes his operating costs and investment couldn’t be recovered at this rate, there would be another cafe open-ended nearby taking a hint from the first guy and this vicious cycle continues!”

Various expenses cafe owners have to bear

While the ability to earn back its investment depends on various factors, buying 10-20 PC systems is not cheap. Add in real-estate expenses, furniture and fixture, other bells and whistles to meet Nvidia’s requirements. Even with the GTX 1060, Intel Core i5 8500 and other standard components and peripherals, most opt for higher refresh rate (maybe 144Hz as a bare minimum), 1080p monitors. Out of all cafe owners, there will be some bad business decisions leading to closure.  Sure, there are gaming cafes with premium hardware and best possible internet connection, private rooms for teams and streamers- even a restaurant- and would do a good business. Give it some time and we’ll have massage rooms, haircut studios and probably a jacuzzi. Why not? If it works, it is not stupid!

RTX Cafes?

He also talked about Nvidia pushing RTX graphics cards on gaming cafes. “No game requires a GTX 1070 or more to run smoothly. But Nvidia and others push the spec war. Ray tracing is not much help in multiplayer games and it is for game designers but they marketed it as a consumer card.”

At the time of writing, there are no games that run on RTX and DLSS. There are some eSport and battle royale games listed to have that future support. It is still uncertain if people will play on premium RTX systems in a gaming cafe all the time. RTX 2070 is the cheapest RTX graphics card available for now. We’ll ignore the RTX argument because of its hot mess.

The message to both:

If the marketing head wanted to, he could have just used the PC gaming market valuation. It could have also included the age group quoted from the KPMG/Google’s report. The realistic picture of the PC gaming market looks good- but not ‘543.1 million’. Nvidia needs to relax its termination notice since all investment is done by the cafe owners bearing Nvidia’s name. They also need a mechanism to reduce GeForce cafes from shutting down. Keeping industry-wide reputation apart, the money spent cannot be recovered- or it does with no ROI you should have gained in time. Truly, be for the game!

That said, its investors who have to do due diligence, irrespective of the pretty picture they see. It also needs to accept its own mistakes and responsibilities. When in doubt or confused, you should not jump the gun and figure it out on the fly. Because once invested, you’re not going to get any of its money and time back. Once invested, you need to make it work on your own Be realistic. Work together but work smart.

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