The gaming series part 1: Esports: key trends & what's next?
28 MINS watch

9th Jun, 2022

In part 1 of our Gaming series, we talk about the future of e-sports with Manish Agarwal, CEO, Nazara Technologies, Thomas Purtell, Co-founder & CEO, Omlet, and Anirudh Pandita, Founder, Loco. Tune in for an insightful discussion.

Tarun

 Hi, everyone. Welcome to another episode of Matrix Moments. I’m very, very excited about today’s panel. We have a fantastic set of people with us today. We’re going to cover sort of recent trends in gaming in India all of us who’ve been listening to the Matrix podcast would know that gaming is one of the sectors that we’re very, very bullish about. There are a few themes within that that we’ve been spending time on and the thought today was to bring together a bunch of people who are very, very experienced and very knowledgeable about what’s happening in gaming in India and globally as well. 

You know, within gaming e-sports and e-streaming is something which has taken off through Covid so we’re going to talk about that as well. And towards the end, we’ll spend a few minutes talking about Web 3, NFT, Game 5, and a bunch of all the exciting sort of buzzwords that all of us have been hearing about and try to break it down and see how real it is and what the opportunities are. So I couldn’t be more excited to welcome our three panelists today.

I’ll start with Manish. Manish, thank you so much for doing this. You and I’ve been good friends but I always learn a lot from you every time we speak. Manish, for those who don’t know, is the CEO of Nazara Technologies which is India’s only listed online gaming company. So, Manish, thank you again for doing this. I’ll just go in order. 

The second is Thomas, Thomas is the founder and CEO of Omlet which is one of the leading sorts of e-streaming platforms and community platforms globally. Thomas is going to add a global view to see sort of share what he’s seeing around the world but more so in India as well given you’ll have a lot of customers in India as well. So, Thomas, again welcome and thank you. 

And last, Anirudh. Anirudh is a well-known personality in the online gaming space in India. Anirudh is the founder of Loco which is one of India’s largest sort of e-streaming platforms. Anirudh, thank you again for being here with us for this, really looking forward to your insights as well. 

I’m going to also just quickly introduce my colleagues, Ayush and Rahul who are going to be the MCs of this discussion for us and I’ll just keep butting in with my comments and questions. Ayush and Rahul are part of the gaming team at Matrix, they spend time with me on gaming investments.

Ayush, over to you. Maybe you could start with a few thoughts from your side and then open it up to the panel for the questions that we want to cover. 

Ayush

Thank you so much, Tarun. And welcome again to all the panelists. We couldn’t be more excited to have you guys with us. So maybe I’ll start with quickly covering our outlook on this space. We’d want to keep it short and then would open it up. So just double clicking on the Covid tailwind point that Tarun mentioned the way we see it 2020 and 2021 were perhaps the watershed years for the Indian gaming industry. Today we’re one of the top 5 markets globally in terms of viewers and India has what, 400 million plus gamers and the number keeps on increasing day in and day out. 

And all of the viewers, all of the streamers, everybody is looking for alternate forms of gaming entertainment. What Covid has also done is propelled this creation, e-streaming, and creation from a pastime to a real career option. The fact that 5 of the top 10 YouTubers are e-streamers who are earning more than a million dollars on YouTube alone is a very big testament to this fact. India also possesses a very unique opportunity in the sense that we are a mobile-first market, we completely leapfrogged the PC and the console gen which also provides very unique opportunities to build mobile-first solutions for the Indian market.                   

And what Tarun mentioned coupled with the advent of Web 3 gamify the space is only getting more interesting. So what we think is, as the gamer base keeps on expanding and with all of these macro factors e-streaming and e-sports are going to become a very key trend going forward. And that’s why I think we’re very excited about this entire space, about the exciting founders that are building in this space and the innovative business models that are coming up.

So with this let us just dive in and maybe we can start with e-sports. And as I said e-sports is slowly and steadily growing and has now become the second largest destination after IPL with more than 20 million plus viewers across tournaments. So, Manish, maybe we’d love to get your thoughts on this given you run Nodwin which is the largest e-sports player in India today. So having looked at the e-sports industry for so long would love to get your perspective on how have you seen this space evolve particularly over the past 2-3 years and where you think this space is headed, what would usher the next level of growth. 

Manish:           

So, guys, this space, my brush with this space started in 2012 and the disclaimer is I’m antique. So that is how in Busan in Korea I saw an e-sports tournament and a massive stadium full of young kids and they were watching something on stream and there were some another set of younger kids playing on the stage and I said, yaar, what is happening here. And you have seen football matches or cricket matches before that and you really didn’t know -- and then it suddenly clicked oh, they’re playing a game. And there is a set of professional players who were sitting there and they’re kind of really playing and there are all their fans who are clambering and rooting for them as they kind of go about. 

And kid you, not that was the time when I thought that this is something in India that will go crazy because of our young population and gaming is a conviction which mind developed long, long back. So now in sports entertainment, the context of gaming is something which I’ve been very bullish and that’s why as Nazara when we partnered with Akshat at Nodwin in 2017 I remember telling my board what is e-sports and I had to dig out some videos to kind of show to them what is e-sports and why this would become big. And they said can’t you find something better to invest in rather than kind of really wasting time on all of this. 

I think fast forward the conviction and belief have only strengthened with every year and as Ayush, you mentioned last two years have been amazing catalysts for the viewership. I believe that a few factors are underlying factors. One, it’s on mobile, I can play as a team versus team every day and that is my community platform to kind of unwind. It is weather resilient, I don’t need to worry about rain, heat whatever it is. The convenience of playing every day is there, it leads to conversations because when I’m playing as my team my other friends are also kind of watching.

And then the entire hierarchy of sports kicks in where you have zero to hero stories, the celebrations of those heroes stories, you have fandom happening, you have people who want to aspire to become a college hero or a city hero or a state hero or national hero so all of that kind of is built into this sports ecosystem. And the beauty of this is the format is shrunk to less than 18 minutes. So I was watching 5 days cricket match then ODI happened and then T20 happened and I think now it’s 18 minutes with 7 matches or 9 matches happening. So your curve of the emotional curve is amazingly sinusoidall and you can kind of have your underdog feeling of somebody kind of coming back after chips are down. 

So I think those are the elements which I believe that if not bigger but at least as big as cricket viewership is what we’re kind of really banking upon in the Indian subcontinent for cricket and we have a larger theory that the emerging markets e-sports will be number 2 sports besides whatever is popular as number 1. If it’s soccer in Africa it will be soccer and then e-sports, if it’s cricket it’s cricket and e-sports. And that’s what we’re going after and building. 

Ayush

Thanks, Manish. Manish, just picking on one point that you mentioned, right, that now more and more different types of players are coming in, and different category of players are coming in. This is literally what Anirudh calls a Cambrian explosion of talent happening in e-sports. So how do you see that happening, how have you seen that evolve in terms of also the demography of players playing. The type of players playing this game and where is this heading?

Manish:           

I think the key thing which I’m still -- the opportunity, there is a bottleneck in that opportunity is the number of games which can command e-sports viewership. To me that is you check out e-sports viewership and BGMI viewership today in India after Free Fire and you will find that the viewership shrinks and Anirudh can give more details on that. So I would like to have 15 equivalent games which can command that kind of viewership.

And then the heterogeneity of your players and their cohorts, their profiles, their things would kindly be very, very distributed. Otherwise today we’re kind of really talking about one game players, maybe language vernacular plays, when they’re playing kind of things they’re doing that, could vary. But the number of games is what I think is needed for the true potential or true dream which I have for it to come and play out. 

Ayush

Got it. Anirudh, we’d love to get your thoughts on this with tournaments such as the world series of poker coming in and money ball movements happening were not a pro poker player but just a normal accountant coming and winning millions of dollars. How do you think this would influence the new upcoming players, the new upcoming e-sports players, right, and what more can be done to get people interested in this gaming?

Anirudh:          

Yeah. For me the first brush I think Manish structured it very well, my first brush was when I was running Pocket Aces. I had a very big advantage compared to every other entrepreneur in that everybody in my company was very young. So whatever they were doing always gives you a sort of insight into where the market is going and everybody was playing what was then called PUBG Mobile at the time. This got me thinking about what’s going on here and that led us to change the complete business towards game streaming. And today when you look at it if I had to compare it to Manish gave an example of cricket.

You know, I say that Kapil Dev is just been born and Sachin has not arrived yet, MS has not arrived but what is going to happen is all these guys are going to arrive in a much shorter frame of time and I refer to this Cambrian explosion because what’s happening is with the old world of sports you could see cricket half an hour a day and then it became one hour then became you could see it all day. And as you got more and more accessible forms of entertainment more and more supply of talent came through because even parents said okay, my kid could become an IPL player. 

When I used to play all cricket growing up you only saw the 10-20 guys again and again just rotating through. Now there’s like every team has like many people, it’s become a profession and you can have a fun time. What I’m seeing now is what I call the sort of WSOP effect, right, which is different from the money maker effect, I just coined this term WSOP effect which is if you see -- and I’m a big poker player, it’s like every time there’s a famous guy on screen in the WSOP some other guy on the table pushes all in 100 percent because at least he gets on TV. And usually, with poker there’ll be some 30 percent chance or a 20 percent chance so it’s not like you don’t have any chance, you could win. 

If you win like you’re a legend in your town and your friends, right, I’m seeing that in e-sports as well where smaller teams are sniping the bigger teams, they know where these guys land, they know where these guys are slow. They know what’s happening and so they will go for the big team, so rather than sometimes you might pick a strategy that I’ll go for a small team they’ll go for the biggest team right away and you see this time right now we have BMOC live on Loco is becoming BMPS which is a very prestigious sort of I would call it the grand slam type tournament. A lot of the invited teams are out because they were caught napping and I think this is just the start, I also have a theory that to become good at anything you have to spend a significant amount of time on that.

And in India people have a lot of time and you look at it from an entertainment point of view gaming is much cheaper than a lot of other forms of entertainment and I mean gaming I mean the sort of PUBG Mobile, Free Fire, BGMI this sort of gaming which is kind of free to play. So you end up even if you include sort of in-app purchases it is about a third of what Netflix costs, right, and if you don’t purchase it’s just data cost. So when you’re in a smaller village or town what are your options for entertainment, and now with this, the infrastructure required is not that much, you just need a phone. So you’re seeing huge demand and we’re seeing insane numbers and honestly, you just saw a very small tournament like on Loco it was not some big tournament already 200,000 plus people watching at the same time. So concurrency of 200 K plus SU I’m a big Liverpool fan as you can see and I’ve not seen too many Liverpool games this year also with 200 K plus SU on Hotstar.

So I think we’re getting there and I just want to end with a simple anecdote, you know, I often say sometimes you follow the data, and sometimes data follows you. So the two anecdotes I wanted to show, one is my nephew recently pinged me and said hey, can you help me meet Scout which I was like why do you want to meet Scout he said, oh, I want to be Scout when I grow up. That’s like the idols and the pop culture icons are changing and recently my partner Ashwin he asked someone at a party who is their favorite sportsperson and honestly, we were saying and just thinking about who can we sign etcetera, do we need a brand ambassador. And we were thinking -- honestly, I was thinking actually it would be like Rishabh Pant or Hardik Pandya but they mentioned Mortal and Scout and that just shows you where young people are and it’s across India. 

If I show you my distribution of cities it’s not like Tarun and I have been in this business long enough that there used to be tier 1 platforms, there used to be tier 2 platforms, this is the first time I’m seeing a pretty even thing because anyone anywhere is like I can make it and some of the top guys today there is Magni who is from Sangrur it’s a small town in Punjab, he’s a top player and you’ll see this iconic figure I cannot forget he had some 40,000 people watching him. He’s got his quilt on who razai main baitha tha, and he’s playing with his pillow in front and he’s playing and he’s really good. And then on the other side, you have someone like Jonathan who is from Bandra very urban sort of kind of milieu. 

So I think it’s across the country and it’ll take time, it’s not going to happen right away, I think that as Manish said is something that will happen over time but it’s an exciting time to work in something like this. 

Tarun

Anirudh and, Manish, I’ll just have one follow-up question, a lot of us read these headlines about $300 million or sort of total e-sports winnings around the world. We hear about people like Total Gaming and a few others and you gave a few examples of making millions of dollars a year on this stuff. As you look at TAM in India today and maybe projected out say five years what’s the- like beyond the headline like eyeball popping numbers like just break it down and make it a bit more real for people to understand what’s the real TAM here and what’s the opportunity for somebody who’s looking to startup in this space. Like how should they look at it and not just today, right, but maybe five years from today what does that look like and how do you guys see it?

Manish:           

Ani, you must be fresh from the fundraising. 

Anirudh:          

No, I think about this question quite a bit because India is such a large market. When you look at it -- we’ve 700 million internet users as Ayush mentioned earlier, 400 million gamers. I believe the word gamer is going to be extinct in 3-4 years, it’s going to be like saying do you watch television series or whatever like nobody asks that. Right, you ask how much the viewership was for a particular show or whatever. So I think that’s the same thing that you will see. So from a user count point of view, you’re looking at I think just the mobile arcade-type games will be 300-400 million plus users easily. I think everybody is going to be a gamer so whatever 700 million internet users are there today will be all gamers everybody will be playing something. 

You also have like a big cohort of young people graduating to paid games who know how to operate that. In terms of the market size depending on where you operate, right, if you’re a publisher your market size is a bit different, if you’re a game streaming platform it’s a bit different. But I think multiple multibillion dollar businesses will get built, it’s not even that okay, like are you going to reach 100 million dollars in revenue I think you can easily beat that. And that’s just from a simple sort of willingness to pay analysis we have done internally where our investors have done it and the number is higher than what I thought.

And I think the other way I triangulate this is okay, look, gaming itself will be a $7-8 billion business with a lot of that might be RMG like 30-40 percent might be RMG but a lot of the rest is going to be kind of typical gaming. On the other hand, you have an online video that has subscriptions as advertising that is also going to start moving towards this, so towards what I’m doing. But also in general like as people if you think of video games as frontline entertainment which I do and which entertainment execs used to laugh at me when I used to say that five years ago but today I think their market share is actually under danger which is why you see Netflix making the first steps towards starting a gaming franchise. 

Today you’re looking globally I don’t know like and TJ will know this better than me but 180-200 billion is the market size of video games versus some of the other guys like box office is much smaller, music is much smaller, I think VOD is the only one which is even in the same ballpark and it’s also I think like 50-60 percent lower. So I think there is no reason for India with the advent of mobile games of the kind of scale and size that we’ve seen now by the way on mobile India, Free Fire, and more are coming. And because every publisher is now seeing this, like they’ve seen that the users exist they can spend they’re going to show up. 

So I think once that happens you’re going to have much more content and then that opens up the rest of the ecosystem quite a bit.  

My view is that it’s a very, very large TAM and I think you just pick a particular thing that you can get good at, and even if we don’t download PC gaming we cannot treat it like this small thing that kind of sucks. But even PC gaming in five years is going to start looking bigger than many other gaming markets and it’s kind of like ignored opportunity like what are you going to do with those guys. But those guys are the highest spending category inside gaming. So you can pick your kind of vertical which you like and you have somewhat of a wedge in and get stuck in that. 

Rahul

Thanks, Anirudh. I think this would be a good time to bring in TJ to give us a global outlook on this space as well especially when we talk about the global TAM. Thomas, what do you think has enabled China and Southeast Asia to become one of the largest e-sports markets in the world, and what could be the learnings for Indian counterparts?

Thomas:          

Yeah. I think it’s been exciting to see that all of the e-streaming stuff from Loco has grown incredibly whereas all the mobile networks that took off and started to have good cheap data available. People always want to engage in these social activities around something that they share an interest around. So traditional sports is really that you know, something that brings us together to learn a lot more about it, to enjoy it together, give us that conversation backing. 

On the e-sports side the mobile games as they mature it allow us to watch that incredibly skilled game player but also to come in and participate in doing it ourselves. And so what we saw happen in a lot of places in Asia is that you start to see people at dinner and after dinner, they pull up their phones and they’re playing a match just after-  that’s their dessert and I think that’s something we don’t see like in the US that being sort of a global platform we have the opportunity to experience that. And we saw the trajectory is very different in sort of the western markets and the Asian markets so I would say that we’re starting to see things ramp up in Europe a little bit in terms of the adoption of mobile e-sports and mobile e-streaming. 

A couple of years later, right, because we saw everything grow up probably earliest in Thailand and Vietnam around 2016-2017. And I think at that time we saw India didn’t grow as quickly in terms of like adopting. We saw a platform in technology and the big factor that we saw there is just the cost of mobile data and so I think that you know, as Reliance brought the unlimited data to be like the absolute standard in India that really unlocked like a huge part of our industry and so I think that’s exciting to now have the opportunity to reach billions more consumers now.

And I think that more recently what we see is like now what are the big events that make people believe that gaming is cool like not cool for geeks but like very good for everyone. America’s moment was really like Twitch, with Ninja playing with Trey and that was huge, it just unlocked a whole array of interest in online streaming and respect basically for that’s a real thing. And I think that that’s what a lot of these top stars and top-quality e-sports content can serve as something to show that off.

But I think we have to all be creative to help inspire those moments to happen. I don’t think you can script the best ones, I think it’s those things that will push us to the next stage of this.

Rahul

Manish, we would love to get your thoughts in as well, how far do you think we are from where China is today. China has specific stadiums where e-sports is played. So how far do you think we’re away from that and what would it take us to get there?

Manish:           

So, Rahul, if you look at it e-sports is an outcome of the underlying multi-player games. If you do not have and my personal opinion is for a game to become qualified for an e-sports viewership business model it needs to at least have 7-8 million DAU’s, 30-50 million MAUs. If you do not have that kind of scale you will not be able to generate those CCUs which I was talking about that viewership, and then the fame I can’t become like- “ bachpan mein mummy bolti thi 5 ke 5 bache class mein 1st aaye – like that doesn’t make sense. So you need to be a hero among a large community.

So that’s exactly what is -- so what is missing there. In three years India has now at least got a respectable number of in-app purchases as a business market. 

Now, in 2017 we were number 4 in downloads but only 50 million IAP as a country. Now $50 million IAP no global publisher will even maybe waste their time. Kudos to Tencent and PUBG to take this market, build that base as PUBG, create that multi-player environment, invest in the infrastructure, and coupled with the improvement in our mobile network infrastructure. Now fast forward today at least from my sources and anecdotally I understand that it is roughly around crossing 700 million kind of a number in terms of in-app purchases. 

So that’s what we’re talking about ‘17-’22 and that makes it at least some exciting not rounding off figure for global publishers to come and start looking at India. How many such games as I mentioned earlier today really e-sports viewership worth in mobile, in PC it’s a very hardcore audience, it’s a very niche audience, the engagements are different but the business model has to be very different it can’t be a volume-based business model. Now in China, just to juxtapose this, we have maybe 80 million multi-player players who are mid-core and hard-core in India today. And there may be like 500-600 million guys in China. So that’s the juxtaposition of numbers that makes it a very attractive market for you to look at. 

And as Anirudh was talking about 900 million Indians will become gamers this question of how many gamers will cease to exist because it’s the most dominant form of entertainment which will happen. Out of that the key question on e-sports should be how many of them are becoming multiplayer to teams versus one versus we, one we versus one versus one, three versus three, five versus five kinds of tournament formats which they will continue to play. For that’s where these sports kick in, that whole competitive piece and I think that is 5-6 years away. It’s not going to kind of change that, it has been accelerated and that’s the reason why all of us are excited about it. 

The last two years have accelerated the adoption of it and what adoption, in my opinion, is that the parents which never understood what their kid is doing on PUBG or a Free Fire now at least understand what the kid is doing. Like how they were forced to be locked down in one house for 20 months and they had to co-exist and that’s why they’re now understanding these games and that has kind of really got it mainstream acceptability and from that onward point onward I think the market needs to have 2-3 billion dollar depth in terms of in-app purchases, it needs to have 200 billion, 250 billion mid-core, hardcore users, more number of games will happen and then whether it’s Anirudh or whether us we will be seeing a upward curve in our revenues in our time spend and our engagement any matrix you talk about.

Ayush

Okay. This was very helpful, Manish, thank you so much. 

Anirudh:          

Ayush, you gave all my notes to Manish?

Tarun

He got access to your investor presence ☺