In October 2023, when the Indian government announced a 20 per cent GST on Real-Money Gaming (RMG) retrospectively, gaming platforms reported a sharp decline in user traffic. 

The crisis deepened further when the Directorate General of GST Intelligence (DGGI) issued tax demand notices worth Rs 45,000 crore to a dozen gaming startups. This was followed by massive laying off with some startups even shutting down shops. The tax regime was believed to be the biggest setback for the country's burgeoning gaming sector, which had been at the forefront of advertising and sponsoring sports tournaments. 

However, EY's latest report on the media and entertainment sector released on Tuesday in Mumbai reveals that the industry did not only come out of the GST shocker but bounced back within months. 

Transaction-based game revenues increased by 21 per cent to reach Rs 18,200 crore in 2023, indicating higher engagement and spends on the gaming platforms, said EY’s #Reinvent report. 

The segment’s growth slowed to 22% in 2023 to reach Rs 22,000 crore but it overtook filmed entertainment to become the fourth largest segment, after TV, Digital and Print Media. India is poised to become the world's largest gaming hub, the report states. 

“Larger players absorbed the impact, and by cushioning the player, ensured growth rates were not significantly disturbed, though margins were, and this caused layoffs and shutdowns among smaller gaming companies,” the report points out. This strategy impacted their margins, but protected growth, it noted. 

The report also predicts that the sector is headed for consolidation post the GST regulation changes of 2023. It expects the market to stabilize with two to three fantasy sports players, one to two players each in rummy and poker, and one or two large multi-game platforms. 

With nearly 455 million gamers, the gaming segment in India is now a formidable force in the M&E sector, displacing filmed entertainment to become the fourth largest segment. Almost a quarter of them are engaging with online games daily. About 90 million gamers reportedly paid for online games and real money gaming comprised 83% of segment revenues, says the report. 

The robust growth of the gaming segment is also expected to continue through to 2026, when it will become a sector worth Rs 38,800 crore. While there are pockets of distress in some states concerning administrative oversight, the segment has a positive outlook in the coming times as the market now has greater acceptance, the report noted. 

The segment will grow across all its verticals viz, esports, fantasy sport, casual gaming and other games of skill, but revenue growth will be led by mobile-based real-money gaming and casual gaming. 

“The last 12 months have provided significant business clarity and therefore the opportunity to reconstruct and revitalize. The next 12 months are expected to offer similar clarity through well-crafted regulations,” noted Bhavin Pandya, Co-Founder and Co-CEO, Games 24/7. 

As for Akshat Rathee, Co-Founder and Managing Director of NODWIN Games, “Worldwide gaming and esports markets underwent massive consolidation in 2023, which will accelerate in 2024. The business model will evolve to address a wider TAM as gamers become a superset indicative of youth. Esports will become closer to sports entertainment like Formula 1 with a multi-faceted entertainment approach.”

Other highlights

• Google’s decision to permit the listing of skill-based real money games on its app store has widened the reach for many other games that charge participation fee.
• With multiplayer games making a comeback, prominent esports titles almost doubled to 19 in 2023, with 1.8 million Indians participating in them, and which were available across 20 platforms.
• In-app purchases revived significantly due to the launch of BGMI during 2023
• Fantasy sports grew on the back of the IPL and the CWC, where India’s performance drove both viewership and game play.
• Casual gaming grew 24 % in 2023.
• As many global companies look to launch their games in India, we expect in-app purchases within casual games and esports to become significant revenue streams 
• Gaming event IP will come into being, in the form of esports leagues, national online gaming events and multi game platforms where gaming will be united with social interaction and commerce 
• Once clarity on retrospective taxation is resolved, international interest will be significant, given limited opportunities for growth in foreign markets, and foreign investment into the segment will grow.