Pulse
India: The Best Exotic Investment Market
By Lewis - 25 January 2021
Ahead of his appearance at SBC Digital India 2021, Pariekshit Maadishetti, Managing Director at Grid Logic Group and Founder of Taj Rummy, urges companies who are considering tapping into India’s vast market potential to do so quickly, legally and with goodwill to those already operating in the market.
International operators are increasingly looking to invest in India’s gaming market, and with good reason. The online gaming industry is expected to grow at a compound annual growth rate of 40 per cent to $2.8bn by 2022, up from $1.1bn in 2019, according to a Deloitte India report released this month. The mass use of smartphones, affordable data and increasing disposable income is expected to strengthen the sector’s share of total media and entertainment industry by four to five per cent.
“India’s gaming market guarantees mass volumes but the average revenue per user is significantly lower than in Western nations,” explains Pariekshit. “However, the size of India’s population covers the revenue differential per customer. India’s evolving class demographics and lifestyle will lead to a change in spending and mindset that is going to bring in more revenue.
“This is the right time to be in business in India’s gaming market as Indian consumers appreciate recognisable and trusted brands more than anything else. I would even argue the brand is more important to Indian’s than the offering itself.
“I have operated in the US for four years and the UK for five years prior to joining the Indian market eight years ago. They are absolutely nothing alike. You cannot entice Indian customers with a bonus offer. Building a brand now will pay off a decade down the line. It is certainly going to prove a priceless outcome for companies already operating and building trust in the market.”
THE LEGAL LANDSCAPE
India’s gambling law is governed by the Public Gambling Act of 1867 that prohibits public gambling. However, gambling statutes of different states use interchangeable terms. The Public Gambling Act 1867 makes it an offence to operate or be found in a ‘common gaming house’; the Assam Game and Betting Act 1970 penalises a ‘betting’ activity; while the Orissa Prevention of Gambling Act 1955 uses ‘gambling’ and ‘gaming’ to mean the same thing.
Constitutionally, only state governments can make laws on betting and gambling. Generally, the dominance of skill over chance decides whether it is a game of skill or not, with skill games excluded from most gambling laws. There are only five States that do not allow skill games: Assam, Odisha, Telangana, Andhra Pradesh and Tamil Nadu.
A handful of international operators are operating in the game of chance market according to a letter written by the Chief Minister of Andhra Pradesh to The Ministry of Electronics and Information Technology (MeitY) submitting a list of 132 websites and apps which the state believes are involved in offering services like gaming, betting and gambling online.
THE KEY TO LONG TERM SUCCESS
Pariekshit advises international brands to use their communication capabilities to operate in the Indian market legitimately with regulated payment gateways and games.
“If international operators want to have long-term success in India it is through games of skill. As a case in point, Taj Network (a B2B white label solution provider for Rummy with plans to expand into Poker and Fantasy) are the only ones offering a B2B and white label offering for Rummy with player liquidity, so I’ve actually run the Rummy Network/Exchange as a monopoly for over five years. Now I don’t see anybody else getting to our scale in B2B Rummy market.
“My advice for operators looking to enter India’s gaming market is to offer legal legitimate games that will improve the existing ecosystem. The more international operators continue to offer games of chance via the .com market, the more likely it is the government will simply ban gambling in its entirety.
“This would result in existing brands, who have built themselves on offering legal games of skill, forced to go through courts in order to educate the government on the differences. It is our responsibility to educate everyone entering the market to prevent this from happening.”
SKILL GAMES
Rummy, Poker, Fantasy, and Quizzes are legally operable across India. Real money games such as Rummy and Fantasy Sports provide gamers a chance for them to win back more or the same amount that they paid.
The increased penetration of smartphones, adoption of wallet-based payment mechanisms, a rising availability of quality gaming content, and further venture capital investments is expected to see real money gaming such as Rummy and Fantasy Sports grow exponentially.
Despite only eight to 12 per cent of registered active users currently paying for real money games and in-app purchases, the trend of monetisation and change in the mindset of Indian players has begun.
Rummy has been prevalent in India’s culture for a long time. Traditionally, Rummy passes from generation to generation and is played when the family gets together for festivals, marriages, and parties, particularly in southern India.
The number of Indian Rummy players is vastly greater than that of its card-based contemporary, Poker, and its popularity is expected to continue growing exponentially, fuelled by a lack of other options. Rummy’s domination of the market is now leading operators to piggyback on the game’s success to fund the launch of other skill games.
“In the Poker market, there are several international software companies such as Connective Games, Evenbet and other native software providers performing well. In Fantasy, there are a number of UK software providers including Incentive Games and Scout Gaming Group who are helping brands looking to gain critical mass.”
A CASE FOR CENTRAL LAW
The Sports (Online Gaming and Prevention of Fraud) Bill 2018 proposed a central law for online skill games, and the Law Commission of India has since recommended the same. A central law would empower a self-regulated association with individual bodies representing each gaming category.
Pariekshit shares the same view: “Many states such as Meghalaya and Assam are looking at regulation. However, unless a central regulation team is formed, each of the 29 states will continue to differ in their approach.
“Currently, it is only when there is a certain level of revenue coming in that states will think to regulate and, conversely, without a quantifiable amount of revenue individual states have the mindset of not bothering to regulate. Until we have a country-wide body, India will continue to be an unlicensed market.
“In my view, regulation will not come from the Government but from the direction of Supreme Court of India who has traditionally taken all the major decisions, including politically charged and regionally sensitive cases. I think the Supreme Court will end up deciding on gaming’s regulatory future and we will respect the decision either way.
“As a businessman, I have spent eight years in the market and if I’m going to spend 10 or 20 more years here, I want it to be regulated. I want my country to make sure everybody is operating responsibly and that all players are safe/being looked after.”
Asked why India’s government adopts such a reactionist approach to gaming regulation, Grid Logic’s Managing Director cites the country’s mass population and its regional and cultural differences.
“The Government needs to see a huge strength of people supporting anything before it will consider taking action on anything. There is also a taboo and stigma attached to gambling and real money games. To combat this, we are trying to move into and be recognised within the entertainment space.
“We are not there yet – it is not yet understood in India as it is in Europe that rather than watching Netflix or playing videogames, it is possible to enter an online tournament for money. It is going to take time.
“If you asked me ten years ago whether India would pay and access an international streaming network called Netflix, I’d have said there would be no chance. Now, everybody in India seems to have it and OTT streaming is a huge industry in its own right. Things can change very quickly with sufficient demand.”
SELF-REGULATION
While the Indian government is yet to define regulations for online gaming, the industry is proactively forming self- regulatory bodies. There are four major charters working towards self-regulation in India:
1. All India Gaming Federation (AIGF)
2. The Online Rummy Federation (TORF)
3. The Internet and Mobile Association of India (IAMAI)
4. The Federation of Indian Fantasy Sports (FIFS)
These federations have defined or are in the process of defining self-regulatory frameworks, laying down industry specific guidelines and adopting international best practices around fair play, responsible gaming, ethical advertising, online security and privacy, software integrity, user verification and complaint redressals. To bring more credibility to the industry, the federations have started conducting third-party audits to ensure that operators follow the set guidelines.
“As part of these self-regulatory guidelines we take extensive details from our customers, including a driving licence, passport or proof of address as part of our KYC process, who are then subject to deposit limits and proof of fund checks.
“Most operators are extremely careful, and we have guidelines for KYC that are almost on a par with strict regulatory bodies such as the UK Gambling Commission.
“Regardless of whether operators are offering Rummy, Fantasy or Poker, the basis and purpose of the charters is the same – to operate responsibly. Operators who follow these guidelines earn the respect of the industry, players and, crucially, the Government.”
