The Indian Gaming Industry Marketing Essay

Published Date: 23 Mar 2015

The Indian gaming industry is at a nascent stage but is expected to grow significantly in the coming years. In the last 15 years, India has witnessed considerable economic growth. This, in addition to its demographic structure, offers immense potential for the gaming industry. An amalgamation of our culture, rising urban incomes, education, IT development and telecom growth offer the perfect platform for the gaming industry. IT and telecom considerably drive the gaming industry. One of the segments with highest growth is the console gaming industry which is capturing higher market share year on year.

While the global gaming industry is growing at 22 per cent, the Indian gaming industry is valued at Rs 13 billion and is expected to grow to Rs 38 billion by 2015 [2] . India offers a huge pool of talent in the IT and programming sector which plays a substantial role in the development of quality games at reasonably lower costs. Additionally, while the gaming industry is picking up, serious players and investors are entering into the industry, consequently facilitating its further growth.

Figure 1 - Growth Trend of the Gaming Industry in India [3] 

Recently, 3G rollout in India, an increasing number of high-end mobile phone users, and broadband and DTH penetration into homes, contributed to the strong market currents that the Indian gaming industry is now riding on. Over the years, the price of games has declined significantly, making the games more affordable to Indian gamers [4] .

High-end mobile phone consumers, for instance, a growing iPhone consumer base, point towards a promising future for the mushrooming gaming industry. These buyers thus become a very lucrative segment which includes a premium, tech-savvy population which, evidently, has higher disposable incomes.

Figure 2 - Orientation of Gaming Industry in prominent markets [5] 

Due to the rising population in urban India, more and more open fields and available lands are being converted to high rises, for commercial or residential purposes. This leaves the kids with little or no space to play, which adds on to the inclination towards indoor games. Hence, urbanization as well serves an important factor for the rise in console gaming market in India.

As per NASSCOM report, the growth drivers in the gaming industry in India are [6] :

The growth of the gaming industry from 2006 levels is primarily driven by increased consumer spending on gaming.

The services side of the business is propelled by captives set up by international publishers of mobile game development, BPO support for MMORPG games and development revenues from PC/console game production, game art, etc.

By 2012, the movement up the value chain in services, resulting in more end to end off-shoring work, is expected to contribute to the growth of revenue from development services. Domestic outsourcing is also expected to pick up, especially in the mobile and online gaming segment.

Original IP development in domestic and international markets, which is at a nascent stage, will gain in significance in coming years.

Falling console prices and increasing mobile and broadband penetration are expected to give a fillip to consumer markets.

However the growth in gaming Industry is also coupled with challenges. As per NASSCOM report [7] 

Lack of trained man power in the industry who have the skill sets to develop end to end games and have worked in advanced NGN pipelines

Infrastructure related issues like high cost of consoles, non availability of adequate bandwidth, non availability of SDKs etc

Pirated copies of gaming software and tampering of consoles in still wide spread in the country

Acclimatizing the Indian population to gaming which is relatively a newer form of entertainment and not integrated into the Indian culture.

Lack of original Indian IP and quality games with local themes which can spur the Indian market

High import duties for gaming hardware and absence of well defined policy for the growth of gaming industry

Objectives [8] 

The objectives of this MRR are as follows:

To study the potential market for console based gaming in India and to reach the potential customers in this particular segment of the gaming industry

To study the feasibility to set up experience gaming flagship stores and scale up implementing the franchise model

To study the feasibility of organizing regional league events and launching a pan-India console gaming league event leveraging upon the underlying business model

To study the feasibility of creating a virtual store model functioning as an e-commerce platform to achieve appropriate channels of merchandize distribution and social media integration

To study the feasibility of synergies between each of the business models so that it helps in strengthening the brand

Scope and Limitations of the study [9] 

Scope

Overall

A study of the current Indian Gaming Industry, focusing on the console gaming industry in India

A study of the various players in console gaming market - Retailers, Parlours

An overview of the fully integrated console gaming pan-India network comprising of stores, IT Infra-Telecom network, e-stores, vendor partners and pan-India competition

An integrated financial analysis of the business plan

Console Gaming Store

A study on the requirements for setting up a console gaming store

A study and recommendation on the business model of the store franchise/ownership

A study on local/regional popular gaming championships

A study on the experience aspect of consumer viz. - gaming merchandize, game theme-based relevant food/snack/beverage, entertainment lounges

A study on the interior design plus IT infrastructure for the store

e-Store

A study of the pre-requisites for operating an e-Store

A study of the integration of virtual and physical platforms. (demo games, league leader boards)

A study of IT resources for the e-Store. (hardware / software / network maintenance)

A study of the supply chain framework required for operating an e-commerce model

A study of social-media integration of the GOD brand through the e-platform

A detailed financial analysis for the business model

League Model

A study to explore opportunities at the various feasible levels (local, regional, national etc) to conduct the league

A study to look at the logistics and other facilities required to organize such a league

A study of marketing and sponsorship to run the league model

A study to look at the financial feasibility of organizing such a league

Limitations

The study will focus only on console gaming

The study will only focus on partnerships with console makers and console game makers and no local players

The study will not include who will be the architect and owner of the store

The study will not include where the equipment and other technical requirements will be sourced from

The study will have market research that will have limited sample size

In lieu of reliable data, interviews with experts from the company and the industry will be conducted

Who will implement the 'technology infrastructure', 'supply centre' and 'training and development' and the quality of implementation is not known

Approach and Methodology [10] 

Analysis

External Analysis of console gaming industry in India

Feasibility (Strategic) Analysis of each business model

Competitor Analysis

Data Gathering

Existing competitor stores in major cities

Internet

Probable supplier / partner working model

Feasible communication channels with console game publishers and vendors

Other secondary research

Survey

Three tier-1 cities (Mumbai, Delhi, Bangalore) with sample size 30

Customer questionnaire over e-mail, social media and other online channels

Study

Functional feasibility

Technical feasibility

Survey Analytics

Interview

Potential customers from sample space

Supplier / Partner FGDs

Existing game parlour owners

Note: The above might change in case we adopt the lean start-up process for this business

External Analysis - Indian Gaming Industry

Macro-Environment Analysis

Political Context

The key political factors influencing the Indian gaming industry are as follows:

High duties and taxes for console gaming [11] 

The gaming industry is growing at a very healthy rate. The introduction of all major players like Wii and the aggressive promotions of Xbox 360 have taken the Indian console gaming industry on a high growth trajectory. Even upon the high growth expectations from the Indian market, these consoles are still quite expensive as compared to the US. One of the key factors for this difference is the high duties and taxes in India. These components add as much as around 40% to the price of the consoles. This is comprised of around 27% of customs duty and more than 12% of value added taxes. This significantly increases the prices of gaming consoles in India. [12] 

Infrastructure issues for the gaming industry [13] 

India ranks quite low on the internet and broadband penetration when compared to rest of the world. The average broadband speed available in India is also quite low when compared with the developed countries. This restricts users from connecting with wide range of gamers across territories and to play as per their convenience. However, this is expected to be overcome by the advent of high speed internet at affordable rates. The technological development in the past few years would play a very important role in bringing the gaming revolution in the near future in India.

Economic Context

The economy of India is the eleventh largest (by nominal GDP) and one of the fastest growing economies in the world. The growth rate for the year 2011 - 2012 was 6.5% and is expected to grow at 6.9% in the year 2012 - 2013 (as per World Bank) [14] . This provides an opportunity for various industries to grow within the country. Maximum growth has been observed during the 2000 decade when the country touched growth rate as much as 10.6%. The per capita income has also increased steadily in the past years. It soared by 15.6% in the fiscal year 2010 - 2011 [15] . One of the key factors behind the economic development was the economic liberalization in the early 1990s. This strong economic development portrays an increase in the paying capacity of the consumers and an increased standard of living. The needs of people also grow along with prosperity and opens new opportunity for businesses. Gaming as an industry has also been growing gradually with this incremental growth trend.

For the gaming industry, the expected growth is magnificent. As per a NASSCOM (National Association of Software and Services Companies) report, a 4X growth in the Indian gaming industry is expected from the year 2010 to 2015. The same report states that the console gaming industry would grow 17X from the year 2010 to 2015 [16] .

The rising disposable income in urban India and the increasing consumerism makes a good case for growth in the console gaming segment in the next few years.

Social Context

India's population in 2011 was more than 1.2 billion (Source: World Bank) and a growth rate of 1.41% [17] . India has more than 50% of its population below the age of 25 and more than 65% below the age of 35. It is expected that, in 2020, the average age of an Indian will be 29 years, compared to 37 for China and 48 for Japan [18] .

The increasing per capita income has largely increased the middle class population of the country. This change in the economic status, when seen along with the overall young population, it can be inferred that the paying capacity of the youth has increased in the past years.

The interests of people has also evolved including entertainment and gaming. Gaming is gradually gaining importance not only as a source of entertainment but more towards lifestyle.

The earlier modes of gaming was TV video games and small hand held devices, which has moved to online, mobile based and console gaming. This growth is also supported by the increased paying capacity of youth, who are the most important target market for gaming.

Due to the rising population in urban India, more and more open fields and available lands are being converted to high rises, for commercial or residential purposes. This leaves the kids with little or no space to play, which adds on to the inclination towards indoor games. Hence, urbanization as well serves an important factor for the rise in console gaming market in India.

Another social factor is that of safety. The anti-social elements of the society are also growing, especially in the urbanized regions, which is a cause of concern for the parents to let the kids play outdoors. The cases of kidnapping of children for ransom have become a commonplace now. To avoid such risks, parents prefer their children to go out only under their supervision, or to remain indoors, playing video games on computer or on consoles.

A change in the mindset of parents has also been observed in the past years in terms of how they perceive video games, maybe on computers, or on consoles. Earlier, these games were looked at things which would distract the children from studies, and would spoil the child. Parents were conscious that the children would get addicted to these games. But gradually this mindset has undergone a great change. The parents of today, not only allow their kids to play the games, but they themselves enjoy playing such games with them.

One of the reasons for such a change is the genre of games being developed these days. The games developed earlier were mostly racing or fight based, but now, the games include all variety and cover various fields, including education and strategy type games. These games don't only entertain the kids but also play an important role their mental development. The motion games have taken the trend to the next level by providing means of physical exercises as well.

It has also been observed that the games developed specific to India have shown very good response in the market. Sony launched Hanuman: Boy Warrior, a PS2 game based on Indian mythology with an expectation of 3000 to 4000 unit's uptake on the first day, though the response was 10,000 units. Indian origin social networking site Ibibo started its cover versions of social networking games with Teen Patti and Mumbai Underworld, getting tremendous response. Sony is also planning to launch games based on characters of Amar Chitra Katha. Going forward, we can expect more local developers and players to come out with similar games. [19] 

Technological Context

India has been growing stronger technologically in the past decades. The technological advancement is also one of the key factors for economic growth and prosperity. Post liberalization, in the early 1990s, a lot of investment in the country has on the technology. The advent of internet was a big leap in the field of communications globally.

The telecommunication industry in India is also quite matured. Total number of telephone subscribers in India is more than 960 million, with an overall tele-density of almost 80% [20] . But the users of broadband are still limited to less than 1% of the population [21] . This leaves a huge scope for development of the internet gaming industry. At the same time, this also signifies that the potential for console gaming market is immense.

The number of smartphones in India is currently about 30 million, and is growing at a CAGR of more than 30% [22] . This also opens up a huge market of mobile gaming in India. This is increasing trend of adoption of technology and getting closer to digital gaming, is effectively inducing the spirit of gaming in the Indian multitude, which would eventually reach to the best gaming experience which can be provided by console gaming.

Hence, we see that from a technology perspective, India is very receptive to changes and new technology, gaming being a very important dimension of this entire change process.

Environmental Context

The world has been observing strange climatic changes in the past years. A lot of these have been attributed to global warming as well. The irregular rains, amounting to much more than usual downpour during the monsoons and scorching heat during summers is cause of major concern globally. From a macro perspective, the glaciers are melting and causing danger of extension for some species. But from a micro perspective or from an individual's point of view, such extreme climate causes day-to-day inconvenience.

One of the side effects of these extreme climatic conditions is the inconvenience to children who would want to go out and play. The parents are conscious not to send their kids out for playing in extreme heat or chilling cold, and would rather prefer to keep them in-doors and provide options to play and entertain within the house.

Such environmental changes, not good for the human populations though, are favourable for the thriving gaming industry in India. These factors add onto the influence on people to get more and more involved in the flourishing world of gaming.

Legal Context

One of the most prominent concerns for the concern for the digital world today is piracy. The creativity industry has been losing great amount of revenues due to this evil. The laws for piracy are in place but still need a more firm implementation. Piracy has been observed majorly in the music and movie industry, which has been going on for a long time now. Eventually, this evil also grew on to the world of software's, as computing became an inevitable part of our lives.

The latest trends of piracy are being observed in the field of gaming, wherein PC gaming and console gaming are the soft targets for pirated games. The revenue being lost by these industries due to piracy is immense. The game console manufacturers like Sony are creating more robust and intelligent systems to identify and not support duplicate or pirated games, but at the same time there's more to be done by the government towards reducing this piracy.

National Competitiveness

Gaming industry growth - Comparative Study of other economies

Gaming Industry is already a multibillion dollar industry in developed economies and is growing at a tremendous pace. The below list shows some key developed economies and emerging economies and their current growth pattern [23] .

Developed Economies:

United States - The US video game market is and has always been the largest in the world. From 2003 to 2008, it more than doubled, from $7.00 billion to $15.5 billion, respectively. Because console gaming is the most popular in the United States - and knowing the console market is declining - it is projected the US market will continue to sustain growth but at a slower rate. It is expected to reach $21.1 billion in 2013. Online gaming will be the fastest growing gaming category in the US.

Canada - Canada's market is growing at a very fast rate. Between 2003 and 2008, it grew from a mere $0.4 billion to $1.3 billion. This number is expected to reach $2.4 billion in 2013 while the increasing mobile penetration (phones per capita) of 69% in 2008 is expected to reach 91% in 2003.

Japan - After a 30.2% growth spurt in 2007, the Japanese market declined by 20% in 2008 and is further stagnating. As in the United States, console gaming is the most popular in Japan; the significant decline of console gaming is expected to dramatically affect Japan's growth. Even though Japan is the home of several major video game players, and even though the market size between 2003 and 2011 is projected to increase from $3.5 billion to $6 billion, the console market will disproportionately grow from $2.7 billion to $2.9 billion.

Western Europe - The analysis of Western Europe consists of the UK, France, Germany, Italy, Spain, Netherlands, Switzerland, Sweden and Finland. Similar to the US and Japan, console gaming consists of the greatest portion of the market (70%). However, Western Europe is also the largest world market for PC games. The market in Western Europe is projected to increase from $5.0 billion in 2003 to $13.9 billion in 2008 to $19.5 billion by 2013.

Emerging Economies

India - The gaming market in India has taken a huge leap in recent years. It emerged in 2006 - explaining the lack of data in the chart above. As with many other translational corporations, big video game firms (EA, Microsoft, Sony, Ubisoft and Activision Blizzard) have recently established operations in this economy. In conjunction with its growing economy, the video game market is projected to grow from $0.21bn in 2008 to $1.60bn in 2012. The short-term future of the industry lies in Zeebo - a new console launched in India - but the long-term future, like other countries, is expected to lie in online gaming. India's video game market is growing at such a fast rate that UTV Interactive, an Indian video games publisher, recently purchased the US online gaming firm, True Games Interactive.

Brazil - In Latin American, the market expanded from $0.3bn in 2003 to $0.7bn in 2008 and is projected to reach an estimated $1.3bn in 2013. Though the market has grown about $1 billion, Brazil only comprises about 5% of the market. Though it has minute market share, Brazil is still one of the key emerging markets in the region and the world. Internet penetration is projected to significantly increase from 32.9% in 2008 to 73.2% in 2013.

Russia - Another one of the BRIC economies, Russia's video game industry is expected to double from $0.25bn in 2007 to $0.5 in 2012. With increasing mobile penetration, mobile gaming has become a large part of the country's market.

Porter's Diamond Model Analysis

The below study gives a detailed analysis on national competitiveness of the gaming industry with respect to the leading economies in this industry and a focus on emerging countries like India which have a bright scope for growth in the future.

Figure 3 - Porter's Diamond Model for gaming Industry in India [24] 

The above diagram shows the four corners that make up the national competitiveness structure of the diamond model. Government and Chance above can be attributed to as exogenous parameters.

Factor Conditions:

HR & Knowledge Pool [25] 

Given the current scenario of the video game industry, irrespective of the any particular mode that is thriving over another, e.g., online social media integrated increase in demand over conventional PC gaming, what we see is that the country's leading rapid growth in the industry is capitalizing on a human resource platform that is developing and evolving over time.

An analysis of the video game industry value chain that will be dealt with later involves major parties like publishers, console vendors, retailers and consumers. Every stage in the chain involves extensive human resource requirements.

A recent study suggests one of the key 3 reasons why the US, Canadian, Japanese as well as emerging economies like the BRIC economies are world leaders in the gaming space, is their ability to incubate:

Skilled workforce - There is a massive requirement of programmers and game developers that are young understand the changing trends of the industry and fast in bringing our new games to the market, thanks to the shorter product S-curves of gaming companies. Leading economies like the US and Japan, and of late the BRIC nations, especially India, are breeding grounds for high quality technical talent pool, thanks to its universities, evolving scope and encouragement for fresh talent to take up rewarding careers in the gaming industry.

Supporting Industries - Another factor in steep success of game companies in these leading economies are the supporting industries that groom the industry continually, e.g. retail distribution, online marketing, global supply chain and key partnerships (Facebook and Zynaga). These supporting industries help provide employment across diverse roles and opportunities. With impressive growth projections of the video gaming industry in India, from $ 0.21 billion (2008) to $ 1.6 billion (2012) , aggressive acquisitions like UTV Interactive buying US gaming firm, True Games Interactive, rising middle class with high disposable income, social trends boosting child awareness towards latest technologies, online and brick-n-mortar retail influx, all these factors show the growth potential in supporting industries in India other than US based publishing and developing companies. Thus there's a requirement of talent pool, both by ways of quality as well as quantity [26] .

Physical Resources & Infrastructure

The infrastructure scenario of India is congenial to the scope for growth of the video game industry. The symbiosis of the key physical resource requirements can be depicted using a diagram as below:

Figure 4 - Physical Resources & Infrastructure

Capital Resources

Financing and capital injection across all segments of the industry is crucial to the overall growth of the industry and hence increases in substantial contribution to India's GDP. The primary underlying factors are:

High disposable income of the urban middle class segment

Entrepreneurial attitude to establish end-user delivery systems, e.g. cafes, parlours, lounges, franchises, online media tie-ups, etc.

Liberal legal and government norms encouraging domestic and foreign investment in the sector.

Presence of operations of transnational firms in the country

Based on recent research, EA, Microsoft, Sony, Ubisoft and Activision Blizzard have already established operations in India [27] 

Transnational gaming companies to encourage and invest in development of gaming software from India R&D centres which will further boost national economic outlook on a global scale

Firm Structure, Strategy & Rivalry:

If we take a look at a generic organizational structure of a game development company, we could then analyze how Indian companies are faring against the leading AAA rated ones and whether their firm structure is in accordance with their long term strategic intent and growth prospects.

Future opportunity: extrapolation of existing structure into service space for emerging economies like India

Figure 5 - Firm Structure

From the above diagram, we can see that any game development company functions in a dual structured operational model, first, a business management arm which takes care of the marketing, PR, releases, publishing and reviews of the game, and, second, a project management arm which takes care of the game development through all its technical and functional stages of development, testing and go-live. At the organizational level as well, apart from the above hierarchy, if we compare gaming companies like Electronic Arts against Indian majors like Indiagames, we would see a similar pattern. Every such game development company works in a studio format, each studio responsible for production of a particular genre or line of gaming, e.g., casual, kids, sports, action, etc. Thus, for a country like India where gaming industry growth looks positive, inculcating such a competitive and global culture sets the firm on the path of sustainable development.

As mentioned in the earlier section, based on a research by Duke University, companies like EA, Microsoft, Sony, Ubisoft and Activision Blizzard have setup operations in India. This would in turn give rise to rivalry and competition among the subsidiaries and help release games faster in the market, thus increase potential to bring more and more new and advanced games in the market. Also, the presence and growth of the local Indian gaming community like Indiagames and Zapak also adds to the rivalry, since home-grown developers and publishers would not so easily give way to transnational's to break into the domestic market.

Now having spoken about the firm structure and rivalry in the game development and publishing end, the industry looks feasible for a new business in a country like India. However, if we see from a service perspective, we would see a bigger opportunity with respect to firm structure and strategy. The above generic diagram shows how firms in India are set on leading curve of game design and development. However, in the service space, the firm structure extrapolates from being skill-driven to function-driven. This means whereas for firms like Indiagames and Zapak, business divisions are segregated on the basis of technical skill-sets, lower down the value chain, it depends more on which side of the supply chain the business operates in. In this case, divisions are segregated based on business functions, irrespective of technical skill sets. E.g, the marketing head would take care of all customer-centric parameters, whether he works with teams from the customer team, publisher/developer team or partnerships team. Likewise, operations head will take care of procurements, purchasing, etc across the firm's supply chain. Thus, we see in the service space, it is more function management across verticals than product or project delivery as in the former scenario. Since, India has an edge in service delivery, this seems to be an opportunity than only competing with transnationals, the way domestic leaders like Indiagames and Zapak are doing. [28] 

Demand Conditions:

The demand conditions in India are favourable to growth of the video game industry. These conditions are driven by multiple socio-economic factors. The most important of them are:

Growing population of young children with a bent interest towards indoor entertainment options.

Penetration of technology through gadgets and appliances within a typical household.

Age bracket of population, who spend time playing video games, widening segmentation, e.g. as a hypothesis data point: 8-13: kids' handheld gaming, 14-18: PC / café gaming, 19-25: console gaming (action & adventure), 25+: console gaming (strategy).

Shorter S-curve of every game pushes the game companies to innovate and develop new games and platforms.

Only a minimal percentage of games have the ability to remain popular and make the customers play the same game even with newer games being released. For the majority chunk, the average time consumption decreases over time, hence the pressure and need to innovate faster. This further drives the shorter S-curve of a game life-cycle.

Sophisticated demand: This is another major factor that needs substantial consideration in the demand conditions' analysis. With the evolution of information technology in India, communication between customers and companies has improved dramatically as well as the average consumer awareness. This trend has contributed to orient consumers' toward a more global and sophisticated purchasing behaviour. Consequently, consumers want better and cheaper quality products. In addition, companies need to differentiate themselves from their competitors. Hence, sophisticated demand leads to a more competitive national market. [29] 

Related and Supporting Industries:

If we study the value chain model of the video game industry, we will see that the prime players are the console game manufacturers and game software publishers. The players which support the distribution and penetration of its products into the market are the distributors and the retailers. Now, these supporting industries function through either of the 2 models as below:

Model 1:

Figure 6 - Related industries - Model 1 [30] 

Model 2:

Figure 7 - Related industries - Model 2 [31] 

If we examine the Indian context here in the above standard video game industry supply chain models, we could analyze India's strengths and weaknesses across the channels above.

In model 1, usually the whole sellers order in bulk from the publishers and supply in small stocks to their regional chosen retailers. India, presently does not have a predominant following of this model, owing to the fact that the demand here is still on the rise and yet to be set in pace comparable to the likes of Japan, US and Canada where this distribution network and more established and extensive.

In model 2, usually the big retailers bypass the whole sellers and channelize the bulk order through 3 channels: brick and mortar stores, virtual hubs and specialty brick and mortar stores.

Virtual Hubs: In India specifically, the major dominance has been by the virtual hubs, owing to a steep growth in internet penetration and demographics in the country. Virtual retail players like Cyber Games Solutions, Milestone Interactive, Game4U, Junglee (Amazon) etc. all operate buy/sell over the e-commerce platform. The future of this channel looks bright and here to stay, however, the other 2 channels are currently developing.

Brick and Mortar Stores: This is a retail channel that is predominant in the leading economies, e.g., Wal-Mart, Circuit-City, Radio-Shack, etc. However, with the emergence of retail boom, stores like Reliance and Croma have been able attract customers to brick and mortar sections setup inside these big flagship retail stores. This is a growing trend again.

Specialty Brick and Mortar: This channel, ruled globally by the likes of GameStop are flagship specialty stores meant only for gamers. In India too, this channel is upcoming and it will take substantial time to develop. This is because as of now, only few names are leading this space in India, e.g., Game4U, but there is a dearth of rival players to instil competition and develop this space.

Lastly, we arrive to discuss about the 2 exogenous factors that talk with all the 4 determinants of the Porter diamond model

Government:

The governments, especially emerging like India can greatly influence competition on their markets. For instance, they can generate appealing environments through tax incentive or high educated workforce. Tertiary education institutions have recently included training programs specifically designed for the video game industry. Apart from assisting in developing the requisite talent pool, governments also play a role in regulating the industry at a national scale by controlling or relaxing legal norms to establish transnational firm operations and to develop domestic publisher and developer players who can make it big in the global market.

Chance: [32] 

Chance refers to everything that is unpredictable, such as wars, natural disasters or even market fluctuation. These are factors outside firm control which can create discontinuities where some may gain competitive positions and some may lose.

For a country like India, with emerging trends of GDO (game development outsourcing) and specialized talent development hubs will definitely impact the long-term trajectory of the video game industry in India, whether it will remain an emerging player with domestic AA rated games and GDO transnational operations or will thrive on other positive elements and emerge as a superpower in this industry.

Porter's 5 Forces Analysis [33] 

In the section below, we would analyze the attractiveness of a business venture in the console game industry using the Porter's 5 forces model. A diagrammatic depiction of the 5 forces is shown as below:

Figure 8 - Porter's 5 Forces Analysis [34] 

In the above model, we see the 5 forces that vary from High to Low on intensity and impact which further helps us conclude whether the strategic feasibility of starting a business venture in a particular industry space is viable or not.

In our case of analyzing the impact of the 5 forces on a venture in the console gaming space, we would need to break down each vertex and see whether it is High, Low or Medium.

Threat of New Entrants

There are certain parameters that decide whether the threat of new entrants would be high or low in a certain industry space. We examine each of them below:

Absolute cost advantages: What is the cost advantage of a new entrant to venture into this industry space? Since the value chain of the industry is comprised of a lot of key players who play a crucial role in bringing a gaming experience to an end user, the margins and cost advantage is not very high. Also, either the new entrant has to launch his venture with a lot of value added services or he has to launch his venture on a large scale, occupying a major dependant chunk of the value chain, e.g. game development license or console manufacturing. Since both requires lot of strategic planning, capital, infrastructure, talent pool and resource utilization, it makes the threat of a new entrant very low to an existing player owing to potential barriers involved, in form of resource requirements as well as profit margins.

Proprietary learning curve: This refers to legal and policy requirements to set up a proprietary venture in this industry space. Similar to the above, here too the resource requirements in terms of legalities as well as time are high which contributes to a long learning curve before the venture is established. This also refers to government policy requirements subjective to a particular country that affects the proprietary sanctions.

Economies of scale: How good are the economies of scale in this business? The answer depends on the business model one would follow. Businesses in this industry with high maintenance costs and high infrastructure replacement costs would not achieve much scale economies as expected, however, businesses which are able to achieve high customer retention rate and customer conversion rate would achieve scale offset against costs incurred. It is on similar lines of retailers who have made good money on popular and time-tested game releases.

Switching costs: The switching costs are high. An established business in this industry space has customers who come to the company facility (parlour, café, game lounge, etc) both for the ease and access to games as well as specific value added services. Thus for a customer, switching costs are high and inconvenient.

Access to distribution: This is another prime factor because of which barrier to entry is high. Since the value chain of this industry is long and complex, access to distribution down the value chain to the customer has to be connected and set up. This is again dependant on the availability of resources necessary to push the product or service to the end user.

After careful analysis of the above factors, we can conclude that the threat of new entrants is Very Low.

Threat of Substitute product/services

The factors influencing whether this is high or low are analyzed as below:

Buyer inclination to substitute: Buyer inclination to substitutes is very high. This highly depends on the quality and scope of services other than gaming to the customer, which again contributes highly to user satisfaction. At the same time, this is one of the many household entertainment channels. In the presence of a vast range of alternate entertainment channels, it becomes very crucial and competitive from an industry perspective, for the business venture to retain customers and convert visitors into loyal customers. Also, if services and games are not upgraded regularly, switching costs with ease of access would not be very high for a particular customer towards an alternate entertainment channel.

Price-performance trade-off of substitutes: Price performance trade-off is another important deciding factor to determine how high the threat of substitutes. Since there is a vast scope of price performance options for the customer, the spectrum of choice becomes high and easy for the customer. The customer can choose his channel based on a lot of available factors like price, location, facility, time, frequency, loyalty schemes, indoor-outdoor, etc. Thus, this is high too.

Therefore, keeping the above factors in consideration, we can deduce that the threat of substitutes is high.

Bargaining Power of Buyers

This is similar to threat of substitutes. The factors influencing this parameter are analyzed as below:

Buyer concentration to firm concentration ratio: The players in this industry space are highly fragmented. They are concentrated to the extent that they are not differentiated but more or less, offer similar services to customers. On the other hand, buyer concentration is high, owing to the increase in demography spectrum (class A, B, C and age group). Other factors contributing to buyer concentration would be: disposable income, lifestyle development Vs urbanization, middle class concentration and growth, etc.

Price sensitivity: This factor impacts buyer power since this directly relates to creating value for the customers. Since the substitute options are high, the customers tend to be price sensitive if the brand identity and value added services are not distinct.

Thus, we can see that the bargaining power of buyers is Moderate. The power depends on a lot of factors which either have a positive or negative impact. Hence, moderate.

Bargaining Power of Suppliers

The underlying factors affecting the bargaining power of suppliers are analyzed as below:

Forward integration: It is the ability to forward vertically integrate and cut out the buyer. This is low because for an existing business in this industry space, there are enough suppliers to set up infrastructure and facilities as most of it would be common services, which would then be fine tuned to the specific gaming experience provided to the customer.

Supplier switching costs Vs firm switching costs: This is low because the presence of less established and profitable businesses in this industry space. The growth rate in India for such cafes and lounges are still high but not saturated, hence, for suppliers, there are not enough players where they would be able to bargain for best margins. Hence, switching cost of supplier is low compared to a firm's switching cost. A firm's switching cost is moderate as a lot of services and infrastructure setup is common to procurement, irrespective of any specialized line of business, e.g., gaming.

Impact of inputs on cost or differentiation: Though a lot of supplier procurements are common services, a lot again decides the brand equity of the business. This is because the quality of experience that the owners would be able to provide to their customers eventually depends not on the basic setup and services, also not on the auxiliary services, but on the raw materials and service setup procurements that decide the quality of value added services to the end user. Thus, the impact of inputs on differentiation is very high. Since this is one of the major factors to success of a business venture, on one side, though there is a scope of negotiation for the supplier to provide the materials, however, a strong relationship between the supplier vendor with the business owners would only do good to both the parties, since there are not many differentiated businesses in India in this industry space, hence, not much a scope for bargaining for the suppliers.

Thus, we can conclude that the bargaining power of suppliers is Low.

Competitive rivalry

Lastly, the presence of rivalry is another deciding factor in industry attractiveness. The underlying factors are:

Sustainable competitive advantage through innovation: Since the root factors in this industry relate to knowledge and talent resource, other than the supply chain parameters down the supply chain, a major determinant in a business to become successful is continuous innovation, either by ways of product or service. Also, this has to be sustainable to create a niche and brand equity that will only grow over time. If innovation is not met, rivalry would be intense and fatal, since the industry is already fragmented and there is a vast spectrum of entertainment channels available to customers.

Diversity of rivals: We can analyze this from two ends. On one side, diversity in rivalry would not be much in the same industry segment since barriers to entry is high, as already substantiated. However, on the other hand, a business in this industry would directly compete with entertainment channels in other industry segments; hence diversity from a customer perspective is high. Thus, rivalry with respect to diversity is also high.

Strategic corporate stakes: For a business venture in this industry space, the strategic corporate stakes are high because it impacts both when a firm is losing market position or has a potential for high gains. Since the stakes are high, even in the presence of very few diversified players and service platforms, rivalry is moderate because of the presence of a massive growing market in the country.

From the above analysis, we can conclude that the competitive rivalry is Moderate. It depends both on the intensity of direct competition (not too many diverse platforms - hence low), and the intensity of indirect competition (numerous entertainment channels belonging to varied industry space - hence high).

Therefore, to sum it all up, we see that threat from new entrants and supplier power in this industry space is pretty low. Also, competitive rivalry and buyer power is moderate because there is interplay of several factors. The only high determinant is threat from substitutes, which is a scope for this market to evolve and innovate further so that substitutes from similar or different industry space do not gain a competitive edge.

Thus, from Porter's 5 forces model analysis, we can finally conclude that the industry is Attractive to venture or operate in.

SWOT Analysis

SWOT for the Indian Gaming Industry [35] 3637

Strengths:

English speaking population: Majority of gaming companies have to make little or no changes while releasing games in India as Indians are able to understand all the instructions in English

Equipped Studios: Skilled engineers/graphic designer and good animation studios in India are encouraging game development companies like EA sports to set up offshore studios.

Low cost of animation services: Low wages compared to developed economies is encouraging game developers to come to India.

Encasing on Rich heritage: With history of intellectual service offerings, India has been a favoured destination for gaming companies.

Increase in Disposable Income: With increase in disposable income, average Indian is more willing to spend on luxury items like games.

Favourable Demographics: With more than 60% of population in youth category, gaming is finding acceptance in more households.

Cost Competitiveness: Low cost for the services offered makes it an attractive destination.

Increasing PC penetration: Awareness is increasing in people's mind with more and more PCs in households.

Proliferation of Internet: Internet has now started proliferating in Indian market and still has long to go.

Increasing mobile penetration and growth in VAS market: With only 30% mobile penetration, India is one of the biggest markets in world for mobile based services.

Weaknesses:

Capital Intensive nature: Gaming Industry needs both Hardware and software R&D which needs state of the art facility. Essentially these facilities are costly and require huge amount of capital investment

Insufficient skilled talent: While intellectual service is abundant in India, manufacturing is not predominant due to insufficient skilled labour.

Weak IP regulations: Government laws are not stringent to enforce IP regulations properly. Infect India is one of the worst IP managed country in the world.

Broadband Quality: With 1% penetration, broadband is still a new thing with infrastructure not up to the mark. Broadband quality in comparison to developed countries is intermittent and low in speed.

High Duty rates in consoles: Government currently imposes heavy duty on console games which raises the prices substantially. This law is however going to be repealed soon.

Handset compatibility: With cheap mobile handsets in abundance, gaming experience or internet access is restricted.

Revenue sharing issues in mobile gaming: Have been a contentious issue for quite some time as to who would get the biggest pie. TRAI has not formed in rules around it and is currently with TDSAT for resolution.

Opportunities:

Growing demand of animated movies: Indian audience is developing a taste for animated movies in past few years. Movies like Kungfu Panda, Wall-e have encouraged domestic productions. In-house movie Hanuman has gained lot of popularity in India.

Increasing awareness as a Career: Indians have started to move away from conventional as more and more MNCs are opening shop in India. Past decade have seen lots of new areas where Indians have ventured and done exceptionally well.

Visual effects on the go: Visual simulation in India has soared a lot in the recent past. With new technology people are no more confined to traditional media. Digital billboards, displays, open air theatre have opened Indians to new visual treats.

Gaming Industry: India is one of emerging economies which has grown substantially in last decade. Gaming Industry with people's changing outlook for entertainment, careers etc is growing tremendously.

Merchandizing: Indians are becoming increasingly brand conscious and want themselves to be associated with the brand be it movies, movie stars, sportsperson or games. Merchandizing has become one of the most important aspects to earn popularity and profits.

Mobile Gaming: Mobile functionalities beyond calling and texting have become from past few years. Nokia's games like snake have been very well received and more and more companies are now trying to capture this market.

Threats:

Acute Competition: With low wages, favourable government regulations, good manufacturing industry and bad economic outlook of India are pushing companies to look at destinations beyond India.

Cultural constraints: Although Indian youth is changing with western influence but there are still certain things which have not been fully accepted. Excessive violence, sex, abusive languages are few things which deter companies to develop and market games in India.

Lack of government support: Corrupt practices, weak law enforcement, long judicial procedures force companies to invest less in India.

Piracy: Cheap pirated copies are available in abundance in India and due to lack of government support can't be stopped which threatens companies to do business here as they lose plenty than they earn.

Ever Changing Technology: With changing technology and India being one of the first movers nowadays attracts lot of investment in comparison to other emerging economies

Figure 9 - SWOT Analysis

SWOT for the Console Gaming [38] 

Microsoft Xbox 360: [39] 40

Strengths:

Integration of next generation DVD players i.e. HD technology

Backward compatibility with previous Xbox games

Online product - the first of its kind

Lower price than most comparable competitor PS3

Weaknesses:

Expensive hardware and games

Production flows

Direct competition with Nintendo because of equally large customer base

Opportunities:

Penetration of new markets in ME 

Penetration of untouched markets by means of bundling

Partnership with Hollywood studios

Threats:

Lower cost competitor i.e. Nintendo 

Anti-trust issues in Europe

Hardware complication

Sony Play Station 3: [41] 

Strengths:

Integration of next generation DVD players

Backward compatibility with previous PS2

Recent decline in profits

Strong brand name of both Sony and PlayStation (PS)

Strong network of game licensees

Large installed base of the PS2

Strong global market position

High quality Blu-Ray function

Strong multimedia support

Best raw computing power provided by its Cell processor

Top graphics and audio capabilities

High vertical integration

Weaknesses:

Expensive hardware and games

Lack of PS3 games, especially hit games

Delay in launch

Product backlog

Less innovation compared to Wiimote

Inferior online service compared to Xbox Live

No remote control for Blu-Ray playback

Some Sony products scare away average customers from being over-engineered

Opportunities:

Penetration of untouched markets by means of bundling

Partnership with Hollywood studios

Blu-Ray may become the new high-definition standard

Cheapest Blu-Ray player available

Voice controller under development

Synergies with other products of Sony

Production cost should go down via manufacturing scale-up and improvements

Introduction of exciting games later this year

Threats:

Lower cost competitor i.e. Nintendo 

Delays in production

Constant strategy change

HD-DVD may become the new high-definition standard

The Wii, with its innovative controller might capture market away from the PS3

Microsoft is expanding its advantage in online services

Sony must rapidly build a large enough network to attract game publishersPS3

Mixing the images of game console and Blu-Ray player may confuse buyers

Nintendo Wii: [42] 

Strengths:

Uniqueness of hardware motion detection 

Low cost hardware and software

Intuitive usage 

Opened the gaming doors to people of all ages

Affordable ($250) for people of a variety of economic classes

Weaknesses:

Joystick liability

Limited selection of software

From 1996-2004, Nintendo had issues with 3rd party companies. During those years, Nintendo, for whatever reason, was limiting what games it would allow 3rd companies to release on their game systems. This has in turn affected the amount of 3rd party game support for the Wii

Due to the failure of the Nintendo GameCube and Nintendo 64 during those 8 years, they chose to be more cautious when producing Nintendo Wii's. They couldn't foresee the success that the Nintendo Wii would have, and therefore produced too few Wii's compared to the current demand

Nintendo's Wii starting price was $250, and Sony's Play station 3 that released within the same month had a price of $599. Even though Nintendo has sold more Wii units than Sony's Play station 3, there are still some notable complaints from hardcore gamer consumers. This desire to cut cost is a double-edged sword

Opportunities:

Penetration of new markets in ME  / Europe / Asia 

Marketing to novice gamers including seniors and adults

With Sony's high price tag and dropping sales with the Play station 3, Nintendo has a good chance to sell more of its Wii units

We have already seen the spread of video game fascination with all age groups this past year. If Nintendo can keep the fun factor of the Wii in its next game system, Nintendo can be sure that they will survive yet another decade

Threats:

Loss of potential customer because of lack of software selection and sophistication of games

Software developers abandon game development because of lack of adequate profits

Oil prices and shipping prices may be higher, and considering they are selling the Wii's are being sold so cheap, they may end up going into the red

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