Real Money Gaming ban: India’s gaming industry without RMGs

The Parliament passed a Bill banning the advertising and operating of all kinds of real money games (RMGs) through any channel, imposing penalties and imprisonment on violators. The move has triggered praise and criticism from different players in the gaming industry. 

Whether the ban is effective in curbing offshore criminal activities and transferring user base to other genres remains to be seen.

However, there is no denying that the RMG segment played a significant role in the industry’s revenues. Between 2022 to 2029 (estimated), the RMG segment’s revenues are forecast to make up at least 70% of total revenues. This is despite a fall in the share from 81% in 2022 to around 73% in 2029 due to taxation changes for the sector.

With this revenue gone, the industry will depend on three revenue sources – in-app purchases (IAP), advertisements in games and e-sports. However, not all gamers pay for IAPs. Of India’s 148 million gamers, 25% are paying users.

This is reflected by the difference between the kinds of games played the most and those paid for the most. According to Lumikai, an Indian gaming-focused venture capital fund, casual and hyper-casual games (like Candy Crush and Flappy Bird) are played for the most hours by Indian gamers. This is followed by midcore games (like Clash Royale and PUBG).

However, Lumikai also says that games that are paid for the most are those falling in the Midcore and RMG segments. While IAPs grew by 56% in the midcore segment year-over-year from FY23 to FY24, it grew by 10% in the casual and hyper-casual games segment. 

This push from IAPs helped boost revenue from midcore games more than that from casual and hyper-casual games, especially shooter games like PUBG, where in-app purchases of game currency and battle game passes are popular.

Another way to understand gamers’ payment behaviour is through the Average Revenue Per Paying User (ARPPU). The number of gamers in India, as well as paying gamers, is increasing. The average amount that gamers pay is also increasing. However, India’s ARPPU was approximately $5 to $10 in FY21, while in the U.S., the ARPPU was between $130 to $140, as per a KPMG report. A combination of factors like India’s preference for mobile-based free-to-play games and lower GDP-per-capita can explain the gap, the report says.

Besides IAPs, in-app advertisements (IAA) are increasingly becoming primary revenue streams for casual and hyper-casual games, according to an EY report. With their high download numbers, these sub-segments are attractive options for IAAs. However, IAAs are not without nuance

Indian gamers’ tolerance for ads in games is between 45% to 55%. However, ad-fatigue is the top reason to stop playing and the top challenge faced while playing games. 

This hints that while gamers are fairly tolerant of seeing ads, there is also a chance of them giving up on the game if there are too many ads. While that might seem contradictory, the KPMG report points out that gamers respond better to some kinds of ads than others, and are therefore more tolerant in some cases. 

For instance, ads that give gamers a reward increase clickthrough rate, gamer control over ads and a more pleasurable experience than unskippable, intrusive image or video ads.

Overall, while RMG plays a large part in industry revenues at present, factors like increasing internet penetration (especially in rural areas), rise in disposable incomes, and increasing number of gamers are all strong tailwinds to support industry growth.