India’s Growing Gaming Market

Hi Everyone. Welcome back to another issue of Master The Meta. Last Sunday's most popular links included: Gubsheep's piece on The Strongest Crypto Gaming Thesis, GameDeveloper's piece on Play-To-Earn's looming risks, and Damion Schuberts thread on the economics of making AAA games. With that, let's jump into Wednesday's issue...

Naavik Exclusive: Crypto Corner #6

In the 6th installment of our Crypto Corner, Derek Lau and LordOfAFew join host Nico to take a deep dive into how we’ll scale Blockchain Games.

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#1: Recapping Two Excellent India Market Reports

Quite recently, two reports on the Indian gaming market caught my eye:

“Leveling up India’s Gaming Market 2021” by Lumikai and Redseer (Link)
“Asia Games Market Report 2021” by Niko Partners (Link to report highlights)

To no surprise, many of the higher level numbers are up and to the right. India is one of the fastest growing gaming markets globally after all. However, in this blurb, I wanted to call out 3 learnings that taught me something new about how the market is evolving.

#1: India is the fastest growing gaming market in Asia by revenue, gamers, and ARPU

India Games Market — *Source:* *Niko Partners*

According to Niko Partners, India is the fastest growing region in what they call “Asia-10”, which includes Taiwan, India, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Thailand, and Vietnam. Combining that with some observations from the Lumikai/Redseer report, this is mostly driven by the following macro factors:

India offers one of world’s cheapest data rates ($0.1/GB, spurred by the launch of Reliance Jio in 2016)
The proliferation of affordable smartphones (primarily Android), especially across India’s rural population
The abundance of high quality F2P titles that run on a variety device specs (thank you app stores)
A large and growing addressable young population (~500M 15-35 year olds) who have a strong exposure to gaming culture, resulting in gaming increasingly becoming the more popular medium of recreation in India (avg. time spent per week on gaming equals that of OTT video)
The more recent localized evolution of payment mechanisms (such as Paytm and Razorpay) combined with an increase in disposable income (+45% increase in the last 5 years)

The ARPU growth part of Niko Partners’ statement surprised me the most, especially since India is a notoriously poor monetising market. While I wasn’t able to glean more solid ARPU numbers, they did note that India currently has the lowest ARPU in the Asia-10 and that they haven’t included revenue from Real Money Gaming (RMG) in their analysis. That brings me to the second learning.

#2: RMG is over 50% of India’s gaming market, and IAPs will be the fastest growing revenue segment

India Report — *Source:* *Lumikai & Redseer*

Not only was it surprising to see RMG take up such a massive share of the market (driven by companies like Dream 11 and MPL, which we covered previously), but IAPs outpacing both RMG and ad revenue in terms of CAGR also made me do a double take. Comparing these estimates to those of Sensor Tower’s, I can confirm that a ~40% CAGR for IAPs is very much realistic.

This reinforces many of the previously listed macro driving factors and showcases a growing shift in Indian gamer culture. More specifically, not only are the number of gamers in India increasing, but also their propensity to spend a portion of their monthly disposable income on virtual leisure activities is increasing. This is in stark contrast to where the market used to be 10 years back!

#3: Livestreaming is a growing theme

The reason I found this so interesting is because when a population showcases a growing interest in watching game livestreams, it means that the population is graduating into a whole new level of gaming culture. Not only do Indian gamers now engage more with games, but they’re also engaging using a completely different medium. And in addition to spending a growing portion of their disposable income on gaming content, Indian gamers are also spending a growing portion of their disposable time on gaming content. The most immediate impact of this can be seen in the nascent but rapid rise of esports in India with 2021’s prize pools 4x’ing YoY to $14.3M.

Having started my gaming industry career 9 years ago in India, I can definitely say that the Indian gaming market has come a long way in nearly all respects. The TAM is unmistakably growing; the talent and entrepreneurial ecosystem is richer than ever before; EA, Ubisoft and Zynga aren’t the only big names in town; and India is building a gaming culture of its own.

A more personal anecdote hints to me that this culture is going to be deep-rooted in the long-term. 10-15 years back, kids got laughed at in India when they wanted to build a career in games. Today, a growing number of Indian parents seriously consider it. India’s gaming market has a very bright future ahead. (Written by Abhimanyu Kumar)

#2: How Composability Will Unleash Creativity

It’s not unreasonable to predict that our ability to create in the virtual world will far exceed anything we’ve ever built in the physical world. Digital spaces aren’t bound by the same limitations as their IRL counterparts, which is why I believe that with the advent of Web3 technologies and virtual worlds will become as prevalent and abundant as websites are today. One of the major keys for this proliferation will be composability, which allows users to create new experiences using the work of others, while simultaneously providing transparency and provenance to all those involved.

To understand why composability is meaningful, we must first understand how to define it. The easiest to understand definition comes from a16z’s Chris Dixon, who compared the composability’s utility to that of a a Lego block. Much like Legos, composability allows Web3 developers and creators to mix and match various functions, features, and value from across the existing crypto ecosystem in service of building a more complete final product. It’s like open-source software taken to the next level.

The prospect of interchangeable functionality for a rapidly scaling industry is exciting - imagine the velocity and scale at which Web3 creators can develop, ideate, and execute thanks to the collective knowledge of the wider global community. Composability serves as a natural way for creators to introduce diversity and self-sustainability into their products from inception, rather than as an afterthought later down the line.

If HTML was the internet’s previous building block, one that allows for the formation and development of websites at scale, composability stands to offer a similar level of connectivity for the burgeoning “metaverse” that is developing alongside the growing technology industry. Interestingly, the idea of technological flexibility as a means of proliferation, democratization, and adoption isn’t new. Biz Stone, co-founder of Twitter, once said:

"The API has been arguably the most important, or maybe even inarguably, the most important thing we’ve done with Twitter. It has allowed us, first of all, to keep the service very simple and create a simple API so that developers can build on top of our infrastructure and come up with ideas that are way better than our ideas, and build things like Twitterrific, which is just a beautiful elegant way to use Twitter that we wouldn’t have been able to get to, being a very small team. So, the API which has easily 10 times more traffic than the website, has been really very important to us.” - from AVC

APIs are but one example of a wide range of the ways creators can branch out and build on top of original technologies to generate new expressions. Historically, these technologies have been impactful but have also faced one key problem that has prevented them from driving substantive change: misaligned incentive structures. Without an effective method to identify and grow the number of builders — as well as create proper governance and incentives for those involved — many talented builders ended up going back to the same platforms where they could find clearer upside. This led to an industry defined by centralized platforms and walled gardens, which also stifled broader innovation

In a Web3 world, concepts like tokens and DAOs (decentralized autonomous organizations) largely fix this constraint, creating opportunities for creators and developers to utilize open-source technology via composability in service of both personal and collective success. The development of these projects naturally incentivizes the greater good, as development grows the overall network (and its associated token value) and distributes opportunity more fairly across those involved.

In this promised land, composability allows for unbounded creativity built on the backs of creators to fulfill a metaverse vision they want to see. While most will goal-seek towards building ecosystems of their own, at least initially, interesting synergies and benefits will be found. By loosening boundaries and enabling greater experimentation, monetary value, prestige, and ownership will increasingly flow to those who were the genesis.

While there are obvious challenges associated with this — hardware, compute ability, networking, etc. — we can see forms of composability taking place in the existing platforms of the metaverse today which hints at the immense potential that is being unlocked. Decentralized publishing platform Mirror allows creators to turn any post into an NFT. In turn, Zora, an NFT trading protocol, lets creators take these Mirror NFTs and auction them off directly within their posts on the platform. Other examples include game developers allowing users to loan out their NFTs in titles like Axie Infinity to others, creating the opportunity for reoccurring revenue if supporters own the right digital assets. Additionally, Loot is probably the best example of what composability can unleash for video games. While this building block-esque format has existed in gaming before through modding, composability builds financial incentivizes into the technology that powers it from the get-go, creating larger (and more natural) economic implications from inception.

In a way, composability and the rise of user-centric involvement and development may lead us to a path not too dissimilar to the Protocol Wars of the 1970-1990s. In that time, there was a long running debate in the computer science community centered on which communication protocol would result in the best and most robust computer networks. The conclusion of those wars led to the format of email we now know today. Similar to that discussion, conversations are already ongoing about ideal common standards for composability within NFTs (in order to streamline the user experience and make interoperability cost effective).

“Just as every company a few decades ago created a webpage, and then at some point every company created a Facebook page, I think we’re approaching the point where every company will have a real-time live 3D presence, through partnerships with game companies or through games like Fortnite and Minecraft and Roblox. That’s starting to happen now. It’s going to be a much bigger thing than these previous generational shifts.” - Tim Sweeney (2020)

To add to the above, it’s not just about companies and corporations but every individual who has access to the internet that can provide value to the overall ecosystem. True composability will abstract away all the nuanced and granular details of various coding languages and allow anyone in a network to take existing programs and build on top of them, which completely unlocks new use cases that may not exist presently.

Similar to a software library, smart contracts for different protocols and applications can easily plug into each other like building blocks. This is already happening in DeFi, representing one of the earliest examples of vibrant re-uses of these building blocks of composability to create new and interesting combinations that the originator may not have thought of, increasing the value added.

*Source:* *Beginner’s Guide to Furucombo*

From a gaming perspective, imagine being able to bootstrap your own indie product without having to build everything from scratch. Instead, you could leverage the builders and creators in your community who have done work that inspires you to get a head start.

Adopting toolsets from the low-code/no-code movement (along with smart contracts) will allow developers of all stripes to add whatever their imaginations unlock. Imagine being able to, for example, leverage a creator’s smart contract to create a fully decentralized marketplace or create a procedural dungeon for a RPG game you enjoy. Much like the mod communities of old, where some of the best experiences known today (e.g. League of Legends, Counterstrike) become global phenomenons, blockchain composability will open up a whole new world of possibilities while taking everyone in the value chain along for the ride.

Not only is this powerful due to the possibilities of development and incentive alignment, but an often overlooked aspect is the social fabric and connectivity tissue that will emerge because of the collaborative nature of creation. With blockchains / smart contracts that provide ownership and unlock composability, tokens that provide incentives, and DAOs that enable community adoption, it’s easy to see how rapid innovation can be unlocked. It’ll allow everyone from individuals, indie teams, and large corporations to be able to quickly experiment, build new experiences, and foster growth.

In the future, many virtual boundaries will collapse and extend beyond the walls of a singular game. The protocols and standards that will enable are already forming. When you can do more with less and apply your mental bandwidth to innovation and experimentation, we will all be beneficiaries of more collaboration, creativity, and choice on the internet, particularly in games, where the medium has the greatest opportunity for mass adoption, innovation, and growth. (Written by Chong Ahn, VP Product at Mythical Games)

📚 Content Worth Consuming

Designing Virtual Worlds (ResearchGate): “What are virtual worlds? In this context, a world is an environment that its inhabitants regard as being self-contained. It doesn’t have to mean an entire planet: It’s used in the same sense as “the Roman world” or “the world of high finance.”So what about the virtual part? Not to get too philosophical about it: 1) Real: That which is. 2) Imaginary: That which isn’t. 3) Virtual: That which isn’t, having the form or effect of that which is. Virtual worlds are places where the imaginary meets the real.” Link

12 Principles for Game Animation (GameDeveloper): “In game animation, we spend a lot of time focused on technical elements, such as the structures of rigs, animation pipelines, or AI-driven solutions for having characters respond to the player. But as alluded to in one 2017 GDC Animator’s Bootcamp talk, game industry animators have few opportunities to build lavish motions that our colleagues in the film and animation industries do. Games are simply different than these mediums: while we are “time-based” just like film, we have to think beyond visual presentation and into things like collisions or making sure our characters feel responsive.” Link

Rational Design, Part 1 — The Player (GameDeveloper): “It is often said that Design, especially Game Design, is perceived as the “Realm of Ideas”, i.e. designing is coming up with ideas. My answer to this misconception is that designing is actually coming up with answers, solutions. On a good day, that solution might also end up being a good idea. Why is this distinction so important? Well, games are an interactive medium, as in, they do not exist in a vacuum, but only through the experience of the user. Whether you use the medium of videogame to craft a product or a purely artistic experience, the nature of the medium itself is centered around the idea of a User using a System through Rules. Another lens used to look at this distinction is saying that, basically, as a Designer, you are your worst enemy, the main hurdle to overcome on the path to perfecting your craft. Why? If you look for a “good idea” while letting your own perception of “cool” drive your creative process, you are blinding yourself to the other users as a whole, all billions of them.” Link

2021’s Merge Mayhem (Ludocious): “At Voodoo Berlin we have been one of those studios; having worked harder than ever to lift Plantopia towards the top of the Merge charts, and what a journey it's been. Meanwhile I've been keeping a close eye on the Merge market, which means it's about time for a breakdown of what has happened in 2021 in this new and crazy market segment. Over the last 12 months we have seen at least 16 new games with the Merge Mansion "Casual Merge-2" loop start scaling their User Acquisition. Its developers are all sticking to their guns as we see conventionally casual-focused companies betting the majority of their monetisation on In-App Purchases, while hypercasual companies Lion and Voodoo include interstitial ads and have Rewarded Videos more deeply wedged inside their game economies.” Link

Value Chains — A Method For Creating and Balancing Faucet-and-Drain Game Economies (Lost Garden): “Recently I was designing the harvesting and crafting system for our Animal Crossing-like game Cozy Grove when I ran into a problem: picking up a stick is not that fun. The core activities in a life sim are generally not full of mastery and depth. You chop trees. You dig holes. You pick up sticks. In isolation, each of these is dull. Our playtesters would harvest a leaf pile, get some sticks, and then put down the controller. They’d turn to me and ask “Uh, okay, where is the game?” If we were following the standard advice on prototyping core mechanics, we might as well stop development right there. Clearly the core was not fun. We tried extending the loops out from 5-seconds (gathering), to 30 seconds (wandering), to 5-minutes (selling). No luck. My playtesting group hated the game. Yet life-sims do exist! And they are delightful. Clearly there’s more to establishing value in a game than just perfecting a ‘fun’ core mechanic.” Link