India's gaming market has demonstrated remarkable growth, recording US$ 3.8 billion in revenue for FY24, marking a 23% year-over-year increase despite the challenges of the 28% Goods and Services Tax (GST) imposed on online gaming. According to a recent report from gaming-focused venture capital firm Lumikai, this sector is projected to grow to over US$ 9.2 billion by FY29, driven by a five-year compound annual growth rate (CAGR) of 20%. This expansion cements India’s position as one of the fastest-growing gaming markets globally, reflecting both shifts in user behavior and increasing revenue streams from varied sources.

Real-Money Gaming Leads but In-App Purchases Soar

Real-money gaming (RMG) continues to be the largest revenue generator, contributing a substantial US$ 2.4 billion in FY24. However, in-app purchases have emerged as the fastest-growing revenue segment, witnessing a 41% YoY increase in FY24. This trend is projected to continue, with in-app purchases forecasted to grow at a CAGR of 44% over the next five years. By FY29, in-app purchase revenues are anticipated to surpass RMG, indicating a shift in consumer preferences within India's gaming ecosystem.

Rise of Non-RMG Gaming and Changing User Motivations

A noticeable trend is the increasing shift towards non-RMG games, particularly casual and mid-core games. Unlike RMG, which requires monetary deposits from players, non-RMG games typically monetize through in-app purchases, appealing to gamers motivated more by recreation than monetary rewards. Mid-core games registered a 53% YoY growth in in-app purchase revenue, while casual games grew by 10%, indicating the appeal of these genres to a wide range of players. With the rise of mid-core games and sustained interest in casual gaming, this segment is expected to attract a larger share of India's gaming revenue in the years to come.

Advertising Revenue and Industry Challenges

Despite a global pullback in ad spending, advertising revenue within the gaming sector remained steady, underscoring the resilience of this market segment. However, for RMG firms, the high GST rate has created financial pressure, leading them to absorb US$ 400 million in additional costs in FY24. While large RMG firms managed to shoulder this burden, smaller companies faced working capital challenges with gross margins declining by 30% and payback periods nearly doubling. This financial strain may impact the sustainability of smaller players in the RMG sector and potentially reshape the competitive landscape.

Demographic Insights and Spending Patterns

India's gaming user base reached 590 million in FY24, with around 25% of gamers spending on games. This surge in active players reveals a significant shift in the profile of Indian gamers, with 44% of gamers now being women and 66% hailing from non-metro cities. The 18-30 age group shows a particularly high willingness to spend on gaming, showcasing the expanding appeal of gaming across demographics and regions. The growing representation of women and players from non-urban areas highlights the inclusivity and potential of the Indian gaming market.

Industry Outlook and Future Growth Drivers

As part of the broader US$ 12.5 billion new media market, the gaming industry accounts for 30% of market share and is projected to maintain strong growth. Driven by demographic factors, a favorable policy environment, and increased investor interest, India's gaming sector is positioned to reach new heights, especially as infrastructure improves and internet accessibility expands across the country. The projected growth is anticipated to benefit from the evolution of in-app purchases and continued interest in non-RMG gaming, as well as sustained engagement in real-money gaming among specific user groups.

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