GG: But speaking of challenges what challenges did Gameloft face when they entered India? How was their journey?
RK: The challenges of Gameloft India, there were many challenges. The biggest challenge is the market is not game friendly market in a way because gaming is the first, it’s the new hobby of a young India. There was never a console game in India, there was never an online gaming experience in India, there was never a game parlor in India, so everything related to gaming is new. So it means a lot more education that needs to be done by mass media for the general public.
So that’s a big challenge because a lot of time goes in telling people that game play can be a good experience. The first challenge is educating the people or taking a mass media approach where people know that you can play games. Now we see in media like in a Sunday edition or something game of the week or top games you know like movie reviews or game reviews something like this but in 2005-2006 you hardly saw a game review or game of the week or top game or Sony PlayStation launched you know, it was not heard.
It was not visible here, now things are changing so that’s one challenge and every game company is facing that it’s not only Gameloft. Two we have to go via operators to sell all our games because we need to have billing. Each game is downloadable it needs to be billed that means we need to go through Vodaphone or BSNL or Airtel. Now Vodaphone, Airtel, BSNL, Idea whatever operators in India have a huge opportunity right in front of them that’s to grow their subscriber base and that takes off the attention from this part, the value added services of which games is a small component, music is a bigger component.
So in a way if you look, the operators are not absolutely keen or motivated or enthusiastic on pushing the games to their customers. One their priority attention is to have the subscribers base growing because India is a growing market. Two, in the value added services side is music is a much bigger share of the value added services pie than games. And if the need to push games they need to push some bit of education that means more work.
Music is simpler because ring tones are simple and the pricing is just right 10 rupees, 15 rupees and it’s from Bollywood. People know Bollywood and have a cultural connection, so it’s much easier. That’s a second challenge. I won’t blame the operators entirely because they also have to focus on their business priorities.
But from a gaming perspective, this kind of propriety does damages and the third challenge for Gameloft in India or any mobile gaming company in India is to have a good revenue share with the operators which are not easy because most operators don’t want to give gaming company a revenue share like we have in Japan. For example in Japan companies offer us 80 percent revenue shares, so the content gets 80 percent and the operator gets 20 percent.
Here in India if we get 50-50, we think we have done a great job. So the revenue share is also skewed, in favor of operators. That makes a bad commercial deal. If we sign at something lower than 50 for example, I think we lose a lot on what we could do to make the gaming experience better, to push more money in the production of high quality games.
The less we make money, the less we have chances of localization also. Suppose we had a game like King Kong, which was a very successful game. So if we wanted to make that in Tamil, it was possible but if we earn a lot of money from India, then we can channelise a part of that into making a local, regional game to see how the market is like.
But when you don’t earn a lot of money because of the revenue share you don’t feel like investing back, reinvesting into the market. Basically three challenges, one, education of the public through mass media and that will take time and we need support of mass media, that’s the first challenge. The second challenge is the priority of operators and value added services itself.
We need to have a proper structure, a framework of regulations which content needs to be pushed on priority basis, which content needs to be pushed when there’s lot of. In fact TRAI, the Telecom Regulatory Authority of India has asked for and will invite people from different companies to share their views and opinions in an open house and try to regulate the VAS industry so that operators and content partners have a kind of an equal deal.
Those people who have already used voice calls for 3-4 years and SMS for 3-4 years, they definitely want to do more things with the mobile whether it’s reading news or whether it’s checking stock market prices or whether its checking cricket scores or whether its playing games. So you know there is a part of the subscriber base, which wants more things out of the mobile game or of the mobile phone.
And this, operators realize pretty well. So it will be very good if we have a regulatory framework like we have in different industries where a central government body kind of organizes the rules of fairplay and that will also probably cover the revenue share. I think these are the main challenges.
But there is a terrific opportunity as well if you look at the bright side since gaming is new to India we don’t really have a lot of competition from the existing game business companies like Sony PlayStation or an online gaming company Zapak, or a game parlor business. So we don’t really have a lot of competition there with game parlors or online gaming business or the game console business.
I think all of these companies or all of these businesses are new in India and mobile game business is the fast growing business of these segments. So that’s the advantage. If we are new and a mobile phone is in everybody’s hands, the business is new. So if people start moving towards mobile phone games, it is an explosive number.
We will never have so many people with internet connections so fast. I don’t think we will have 250 million internet connections in next two years. But in mobile phones, we already have 250 million subscribers in fact 270! We will never have so many buyers for game consoles because the pricing is rather steep.
People don’t want to shell out 20,000 rupees to buy a game console, especially when it’s just a hobby thing, with a mobile phone its many things. And game parlors are limited today; they are present in certain parts of Bombay, I think and Delhi or in Bangalore but not really in small towns.
So in the end, if you look at the totality, mobile gaming business is the most promising segment of the gaming industry in India. We don’t know yet what kind of partnerships it will have to make to make more revenues. Whether it will be through manufacturers or only through operators or through some other mechanism like an open source where we will be able to bypass the operator.
We will have to find an independent distribution channel whether its possible, not possible if the technology works maybe its possible and if that happens I think India will be the hottest market, top 5 markets across the world because today we lose a lot of money on the taxes and also on the operator payout.
If we find an independent distribution channel that means we save a substantial amount of money for each game that’s bought and it’s a function of technology, if the technology evolves and finds some mechanism like this I think India can be very, very hot. And also there are lots of advantages in mobile gaming for example if you look from a value added services perspective, music you can have another system, like to play a CD or to have a walkman or anything to listen to songs.
There is not one platform alone, you are not limited by choice. For videos I think we have television for sure for news you have the newspapers or your computer or whatever but for gaming I think mobile is very specific. You can’t play a game on television, you can’t play game on newspaper, you can play game on I think on PC for sure. So TV you can’t play games with, walkman, you can’t play games with, newspaper you can’t play games with.
You need a device which is interactive, which is like a mobile phone or a game console. So in the value added services segment music will always be one of the top earners but game business will move forward for us in India as well because I mean there is no equivalent, you know there is no alternative to this console that mobile is offering.
Personally I think people who watch videos on mobile, it won’t grow to a great degree. The mobile TV experience cannot be compared to the normal TV experiences and one TV is present in every home today. So why watch the same news or the same cricket match on a mobile phone when you can see the whole thing on a television set at home you know.
Exposure of Indian people to big screens of gaming is limited. Mobile phone is going to be the first screen where they experience gaming. Their tastes in gaming will be defined by mobile game experience.
Small elements like this fusing together, will fetch the industry sustainable good returns. So the mobile gaming business in India is going to be very sustainable. Those are my take on the business side and on the lifestyle side, of course, if you look at the Bollywood reports, the business that these movies are making today, many of them are making losses. In 2008 in fact, we are 24th June so by this time we have had only 3 hits this year, Jannat, Race and Jodha Akbar.
And the amount of money that goes into producing a movie is very high and when there are many clauses that are also huge, it can be two crores or three crores. So there must be something wrong with the whole industry or the movie industry in general which means either the quality of movies has gone down or the taste of people for entertainment are shifting. And if they are shifting they must finding some another avenue.
I mean because the need for entertainment or the need to relax or the need to have fun is not going to disappear and if the movies are failing, it means that same income, the same money that the household is spending or an individual is spending on entertainment is being routed to another avenue. It could be gaming, it could be, I don’t know, but in television you don’t need to pay, so I think probably there is something happening, the taste is shifting.
So gaming business and of this the mobile gaming business has a sustainable business in India for many years to come. I don’t know how big that will be but its going to be sustainable. We have also the download reports each month that some people, who bought one game like Prince of Persia Classic or Die Hard 4, they keep buying games from Gameloft, which means there are lot of repeat buyers and so game is also a function of community.
It’s a very special hobby, some people love games but many people don’t. I mean it’s also a function of who wants to play games and who does not. Television is meant for a very vast audience. It has news, it has sports, it has fashion, it has everything but by nature or by personality some people are inclined to play games, game freaks, game addicts some people are not.
We also see that in download reports in India that some people keep coming to buy games. We have lots of mobile numbers, who if you track month after month, you will see the same guys coming. So it is possible that the number of people who play mobile games in India is not going to be huge or phenomenal but there will be a steady base which will keep the business like if not always going forward but at least stable steady giving you annual good returns.