'Many RMG startups in India on the verge of shutting down business', says CEO of Winzo

The 400 percent GST hike seems to be the primary catalyst for the Real Money Gaming (RMG) industry's troubles. The GST amendment has had a steep impact on the companies' margins. Revenue growth for companies in gaming has stalled, and some early-stage companies are also experiencing de-growth.

Paavan Nanda, CEO and Co-Founder, WinZO said, "The 400% hike in GST has posed unprecedented challenges and existential crisis for the gaming industry. Companies are struggling to retain gamers and attract new users, leading to widespread consolidation and pushing startups out of the ecosystem.”

Nanda said, “Many startups have already shut down, laid off hundreds of employees, and are grappling with stagnant revenues. The pay per play segment of the online gaming industry, which previously absorbed 90% of the $3 billion FDI in gaming, has seen a complete withdrawal of investments.”

In an interview with Storyboard18, Paavan Nanda, CEO and Co-Founder, WinZO discusses GST challenges, lower developer salaries and production costs in India compared to Western countries, India's gaming industry shifting from being an importer to an exporter, and more.

Edited excerpts:

How is WinZO navigating GST challenges to ensure profitability and continuous de-growth?

The 400 percent hike in GST has posed unprecedented challenges and existential crisis for the gaming industry. Companies are struggling to retain gamers and attract new users, leading to widespread consolidation and pushing startups out of the ecosystem. Many startups have already shut down, laid off hundreds of employees, and are grappling with stagnant revenues. The pay per play segment of the online gaming industry, which previously absorbed 90 percent of the $3 billion Foreign Direct Investment (FDI) in gaming, has seen a complete withdrawal of investments.

Apart from a few large-scale operators, early-stage and upcoming companies face near-certain extinction. Addressing these concerns will help the gaming industry thrive and contribute significantly to India's economy. We have urged the government to levy GST on GGR/ Platform fees, which is the actual revenue received by a platform. This approach will ensure the sector's viability and foster growth

India has lower developer salaries and production costs compared to Western countries. What competitive advantages do you see for Indian gaming companies on the world stage?

The availability of world's top tech talent at competitive compensation is anchoring the growth of online gaming in India and its growing role in the global market. Earlier, India did not figure among the top 10 countries with the highest software engineer salaries but today the top tech talent in India is paid at par with their peers in Silicon Valley.

India boasts a vast and growing population of young, tech-savvy gamers, providing a significant user base for initial game testing and adoption at a scale that is parallel to no other market with 600 million gamers, consuming across 20 languages and regional preferences. This large market allows us to refine our products and build a strong foundation before expanding globally. The country also benefits from a highly skilled workforce, with a large number of engineers, developers, and creative professionals well-versed in the latest technologies and trends in gaming. This talent pool enhances the quality and innovation of Indian gaming products.

Can you elaborate on the anticipated factors that might contribute to the significant margin variations in FY24?

The GST amendment has had a steep impact on the companies' margins. Revenue growth for companies in gaming has stalled, and some early-stage companies are also experiencing degrowth. Decreased margins due to increased GST (which is currently being absorbed by the companies) have resulted in employee layoffs and/ or reduced hiring in the gaming industry.

Owing to all the above reasons, only a handful of entities remain profitable at lower margins as compared with the previous GST regime. The majority of companies have suggested that industry should be taxed on platform fee the real revenues of the company instead of deposits, which is at par with global benchmarks.

Can you comment on India's gaming industry shifting from being an importer to an exporter?

India's engineering excellence, nurtured by over 1,168 universities and 45,473 colleges, has positioned the country as the engineering talent capital of the world. The country's technical prowess and innovative spirit, exemplified by successes like Mangalyaan, highlight India's ability to achieve high-quality outcomes cost-effectively, unlocking the true potential of the Indian gaming industry.

Second, India's rich cultural heritage provides a treasure trove of stories, characters, folklore, and indigenous games such as carrom, chess, ludo, snakes and ladders, and marble games. The global audience's appetite for these games is immense, and platforms like WinZO have introduced these traditional games to international markets, showcasing India's cultural richness and generating exportable gaming content.

Third, with 600 million gamers, India constitutes 20% of the global gaming market, making it the world's largest. This diverse user base, with over 80% from smaller cities and rural areas and a significant 40% of women gamers, demands continuous innovation from Indian gaming companies. This dynamic environment fosters a virtuous cycle, enhancing the global competitiveness of the Indian gaming sector.

Despite forming a substantial portion of the global gaming market, India has historically captured only 1% of the $300 billion industry. However, innovative monetization models developed by Indian companies are changing this narrative. For instance, WinZO, after achieving a significant user base in India, expanded to Brazil, enabling its 100+ partner developers to enter the Brazilian market.

What kind of Indian gaming content and IP are finding success in the global market?

A key factor propelling the success of Indian gaming content and IP are the integration of local culture, folklore, and mythology into gaming content. These elements have captured niche audiences globally, appealing to international players seeking unique storytelling and cultural experiences. On WinZO’s platform, traditional games like Ludo, Snakes and Ladders, Carrom, and Chess have gained traction worldwide.

The global and Indian gaming user base exhibits a preference for diverse content across various genres. The rich tapestry of Indian culture offers opportunities for creating engaging and distinctive games that resonate with players everywhere.

How is catering to regional languages is driving user growth and engagement on your platform?

At WinZO, over 90 percent of users come from tier 2 cities and beyond, and 90% of our 200 million registered users access the platform in regional languages. Currently, WinZO offers game interfaces in 13 regional languages, including Hindi, Bengali, Tamil, Telugu, Kannada, and Marathi. This makes our platform more accessible to users who prefer to interact in their native language.

We have also incorporated culturally relevant themes and narratives into our games which includes integrating local festivals, traditions, and folklore into game storylines and events.

In addition, collaborating with regional content creators and influencers is another key aspect of our strategy. These creators produce content in their native language and the influencer-audience relationship creates awareness around games on our platform.