The role of the online gaming sector in Tamil Nadu’s digital economy
Online Gaming – An Overview
The lockdown imposed due to the pandemic provided millions of smartphone users with a stable internet connection and a chance to cure their boredom through online gaming. The characteristic of being able to provide something competitive and exciting to engage in as well as provide a common platform for the users to interact with their peers propelled the online gaming industry‘s growth where according to Sensor Tower statistics, the first nine months of 2020 saw India take the top rank in the globe for mobile game downloads, registering 7.3 billion installs and earning a 17% market share of the installs volume. The potential providespromising futures for the $930 million sector in the nation. By 2023, it is anticipated that the domestic gaming industry would add 10,000–12,000 direct and indirect jobs.
As per the AVGC task force report on online gaming, the global gaming market was valued at USD 198.4 Bn in 2020 and is expected to reach USD 314.4 billion by 2026, growing at a CAGR of 9.64% between 2021 and 2026. Mobile gaming generated USD 73.42 billion in 2020. The segment is poised toexperience a high growth rate with projections estimating a CAGR of 11.05% over the following 5-year period ending 2026.
The factors influencing the rise of this sector include enhanced access to affordable smartphones, high-speed 4G internet penetration and the lowest data rates in the world. These factors when clubbed with improved disposable earnings at purchasing power parity (up 25% from 2016 levels) and a wider acceptance of digital payments, lead to a higher readiness to pay for services.
However, this exponential growth has brought the sector under scrutiny by the stakeholders most importantly children, parents and youth cite instances of addiction, financial losses with some reported cases of suicide. Thus, the Indian government is anticipated to get increasingly involved in enabling and regulating the online gaming business as it expands. Forbes has published a report by Qutee, which is a data-led discussion platform that is giving the gamers a voice and asking them for their opinions on the influence that games have had on their lives. It highlighted the large contrast to the common view that playing video games leads to violence and other antisocial behaviour. Which, according to Qutee, is a view that 93% of gamers think is incorrect. Over 40% said that gaming improves emotional well-being. 89% of the participants believe gaming is beneficial to the society, 44% have agreed to improved emotional well-being, 33% say it inspired future careers in history, art and cultural sciences which could improve the growth of creative industries.
Currently, the online games played in India can categorically be divided into two types, Game of Skill where the outcome is based on the expertise, practice and experience of the player and not merely on chance and Game of Chance which bear resemblance to betting, gambling and horse racing. A majority of states permit skill-based games, although others forbid games of chance because they are viewed asimmoral gambling. State Governments have the power to regulate/ prohibit gambling & betting, however, anything in the online world comes under the purview of the Central Government. Some of these laws are currently challenged before various High Courts and the Supreme Court.
Laws on Online Gaming
At present, the ministry of electronics and information technology is formally in charge of making rules related to online gaming while the ministry of youth affairs and sports oversees e-sports. This was notified by the central Government as changes to the Allocation of Business Rules on December 26,2022.
The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, layout a comprehensive framework for Online Gaming Eco-system and deals with Fact checking related to online content pertaining to Government. The twin goal of this latest rules is one, to ensure the responsible growth of online gaming innovation, and two, to protect consumers from illegal betting and wagering, harmful content, and addiction. The Rules also mandate the establishment of self-regulatory organisations (SROs) to oversee permission of online gaming companies, to prevent wagering on any outcome, that the online gaming intermediary and the game complies with the rules and requirements under law. Initially three SROS will be notified by the government which, can be increased later.
It is required under the new rules that SROs include an educationist, an expert in the field of psychology or mental health, and an individual who is or has been a member or officer of an organisation dealing with the protection of child rights. They are required to develop a framework to protect against user harm including psychological harm, parental control in the case of minors, age related mechanism, and how to address gaming addiction
Additionally, Online gaming companies will be obliged to carry out additional due diligence, like an intermediary, such as user KYC, transparent money withdrawal and refund, and a fair distribution of wins through no bot policy, RNG certification etc. They must adhere to the KYC guidelines established for firms under Reserve Bank of India regulation. Further, these gaming platforms will also need to designate a compliance officer to make sure the platform is adhering to regulations, a nodal officer to function as a contact with the government and help law enforcement authorities, and a grievance officer to handle complaints.
AVGC Task Force
Besides the amendment, the central government has established the AVGC Task Force that has proposed a national AVGC-Extended Reality Mission with a budget outlay to be created for integrated promotion and growth of the sector including draft national and state level policies for the sector. India today contributes about $2.5-3 billion out of the estimated $260-275 billion global AVGC market. AVGC sector in India is determined for 14-16% growth in next decade.
The Task Force has prioritised the establishment of a National Centre of Excellence for the AVGC sector to make India a global content hub and create job opportunities. TheRegional Centre of Excellence will be established in conjunction with the state governments to provide access to local industries as well as to promote local talent and content. The Task Force recommends using National Education Policy to encourage creative thinking with specialized AVGC course content at school levels to establish basic skills and raise awareness about AVGC as a career choice. It has also been suggested that AVGC acceleratorsand innovation hubs be established in academic institutions, like Atal Tinkering Labs. The Task
Force has proposed creating a dedicated production fund for domestic content creation to showcase Indian culture and heritage abroad.
Create in India Campaign
Apurva Chandra, Information and Broadcasting Secretary and Task Force Chairman, stated that the ‘Create in India’ campaign will be launched with an exclusive focus on content development in the country. With the combination of technology and creative skills, the AVGC sector offers one-of-a-kind opportunity to promote the country’s history, culture, paintings, and traditional games with a possibility of becoming a world leader.
A “Create in India” project could be created to provide “needed impetus to content creation in India,” especially in vernacular languages. “Entertainment and Gaming Industry producers should be encouraged to convert successful films (box office/critically acclaimed/popular character etc.) into games through a dedicated mechanism of cooperation between the entertainment and gaming industry,” the task force recommended. Content reservation laws can be imposed to promote local content and help it compete on a national and international scale.
FDIs in the AVGC Sector
According to findings from ‘Gaming: Tomorrow’s Blockbuster,’ India ranks sixth in terms of revenue among the world’s largest gaming market indices. According to the IB Ministry, as of 2022, India contributes about $2.5-3 billion out of the estimated $260-275 billion worldwide AVGC market.
The AVGC task force planned Expo is also poised to focus on FDI in Gaming, market access creation, employment generation, new age technologies & knowledge exchanges, coproduction partnerships & IPR. Moreover, the task force sets out to encourage industry to establish incubators and accelerators for early stage-startups in different cities. These incubators and accelerators may be incentivized through mechanisms such as incentivizing FDIs, tax incentives, and other institutional support for establishing labs for research and development, among others.
Potential to Increase Sector Workforce
When the online gaming sector blossoms, a spill over effect will follow bringing in welcome innovations in frontier technologies like Augmented Reality (AR), Virtual Reality (VR), digital assets and so much more. Fundamentally, manufacturing in India will be bolstered in the drive to create faster CPUs and better consoles and expanding their selection of games to cater to the rising number of casual as well as competitive gamers.
This is bound to increase the sector workforce and rope in an inspired batch of youth in the arena of technology, design, marketing, and data science. The gaming sector is a sunrise industry, according to a report by tech staffing firm, TeamLease, and is expected to create 1 lakh direct and indirect new jobs by this year. The government also reports that the sector is geared to employ over 20 lakh people in the next ten years, with the sector also expected to witness a growth rate of 16-17%. With this lockdown spurred rapid gamification, ‘21st century skills’ in UI/UX and product design, category marketing and data science can create gateways to emerging sectors like fintech, cloud services, blockchain and metaverse.
According to a report titled ‘Gaming: Tomorrow’s Blockbuster,’ women are increasing their participation in the gaming sector by more than 40%. The industry is expecting a substantial rise in the number of women in the field, with more of them occupying positions of leadership.
Impact on Digital Economy – Focus on TN
Considering the above changes and the massive economical potential of the sector let us now understand its impact on the state of Tamil Nadu. Tamil Nadu is a state that has both urbanisation and industrialization, and it benefited early from the IT and car booms. In fact, the state is home to 17% of all industries in the nation. The State has more than 2700 registered startups. This creative wealth has value beyond each individual deal. Further, the welldocumented emergence of companies like Zoho, Freshworks, Orangescape, Chargebee, and many more has made Tamil Nadu startups associated with software-as-a-service (SaaS) innovation. In comparison to its neighbouring states of Karnataka, Delhi, or Maharashtra, it has produced two unicorns and is home to some of the most sustainable firms. The report, which was presented at the inaugural TechNext 2022 – “Future of Tech Web 3.0” Conference hosted by the CII, was released by T. Mano Thangaraj, Minister for Information Technology and Digital Services. It included examples of how Tamil Nadu acquired its first virtual realitylab for education, Meta Kalvi on Metaverse for government schools, and how GuardianLink entered the NFT gaming market with the release of its Web 3.0 cricket game and the Meta Cricket League (MCL). The report “Metaverse and web 3.0 opportunities in India – Nurturing Tamil Nadu’s growth ambitions through next-gen technologies” noted that all significant Information Technology (IT) companies in Tamil Nadu are heavily investing in metaverse design, development, testing, and support services, as well as XR, DLT, 5G, AI, IoT, quantum computing, and blockchain. The proliferation of Web 2.0 technology boosted chances for collaborative and participatory interaction with computer applications, which has facilitated information access, shared ideas, knowledge sharing, and content creation.
A lot of transferable talents and abilities can be tested and developed through the very productive activity of gaming. Researchers from all around the world are demonstrating in numerous case studies how playing video games on a daily basis may truly assist solve difficulties in the real world; how it keeps you focused and helps you notice changes in your surroundings fast. Meynikara, a Virtual Reality (VR) and Augmented Reality (AR) startup, based out of Chennai, has launched Meta Kalvi, Tamil Nadu’s first VR Lab for excellence in education, at 3 Government Schools, 2 Corporation schools in Chepauk-Thiruvallikeni Assembly constituency, in the city.
Yet, the gaming industry still struggles to find a firm footing in the State further the state seeks to ban online gaming altogether due to increased instances of suicides. The stance of the government is understandable given the loss of life of the youth and increased concerns among the stakeholders. However, the newly proposed draft rules with a new regulatory framework and an explicit demand to verify the KYC of its users will ensure that minors are kept away from such platforms. According to a research conducted by LIRNEasia and ICRIER, that 5.7 million people (aged 15 or above) came online in 2020, and a further 4 millionin 2021, bringing the total number of internet users in Tamil Nadu up to 32 million people, or53% of the 15+ population. Additionally it has the second largest mobile connection after UttarPradesh with 71.81 million subscribers, according to the TRAI data.
Importantly, the state proudly hosts the fastest growing city for digital payments whereas Katpadi recorded digital payments with 7X growth in 2022, According to a report by One97 Communications Limited (OCL), that owns leading payments and financial services company Paytm.
Conclusion
With such a fertile environment for the gaming industry to prosper and contribute to the state’s digital economy the government must concentrate on developing enhanced policy and regulatory frameworks to enable responsible growth rather than imposing an outright ban on online gaming platforms. Bans will only divert the online gamers to illegal & illegitimate domestic & offshore platforms, further putting citizens of Tamil Nadu at risk, defeating the public interest objectives of the government. Asis already evident, the illegal offshoregambling & betting market is 10x to 30x the size of the legitimate online gaming market in India. The central government’s regulatory framework, combined with the state government’senforcement of the regulations and education of the consumers will significantly address the issues associated with gaming.
Online gaming as a new stream of entertainment is here to stay and Tamil Nadu should not be left behind in capturing its fair portion of the legitimate and regulated market as the Indian gaming industry is predicted to grow from $2.8 billion in 2022 to $5 billion in 2025 with a CAGR of 28–30%. The gaming start-up ecosystem further creates an enabling environment for attracting highly skilled engineering talent in areas such as AI, design, graphics, metaverse, web3.O, blockchain etc. and venture capital investors to Tamil Nadu creating providing an impetus to the entire start-up ecosystem.