Emerging Markets: India

"So they will definitely target here. There is huge monetisation potential due to the sheer size of the population. Even if the ARPU is down [relative to other markets]...you have maybe 100 times the population."

"In the last two months there have been a lot of visits by some of the biggest in the industry," says Ojha. "Square Enix came to India, there was a group of people from Activision, EA keeps coming to India, and of course Sony."

"So they are definitely taking a lot of interest in the Indian market. Of course the primary interest is always outsourcing, but at the same time they are definitely getting serious about setting up their shops here or collaborating with Indian studios... There is a big picture kind of thing there. India is now definitely showing up on the global map of game development."

The Console Conundrum

India is huge a huge country in a number of different ways: landmass and population, obviously, but also in terms of cultural diversity. There are 30 languages spoken by more than 1 million people, and the top 10 have at least 30 million speakers each. Hindi is by far the most common language with 41 per cent of the total population, but it would be reasonable to assume that localisation is a major issue. Actually, the opposite is true.

The sheer variety of languages and cultures has resulted in English becoming a common language - particularly in the cities, where the majority of gamers and potential gamers are found. Casual titles like Angry Birds have simple enough interfaces for localisation to be only a small impediment to their success - particularly when compared to a country like China - while the sheer cost of console gaming naturally limits its audience to the country's wealthiest and most educated young people.

Among console gamers, the most popular releases are all too familiar: Call of Duty, Grand Theft Auto, God of War, Battlefield, Halo, Fifa. There have been a small handful of attempts to develop console products specifically for an Indian audience - Hanuman: Boy Warrior (PS2) and Ra.One (PS3) are prime examples from the last few years, and a Move-enabled game called Street Cricket is due for release this month - but Version 2's Ojha claims he has never met anyone who has "played and completed those games." As things currently stand, the Indian console audience doesn't require that approach.

The only real obstacle to deeper penetration for consoles in India is price. Milestone Interactive has been distributing consoles and software since 2001, when it brought the PlayStation to India for the first time. The PlayStation 2 followed in 2003, the PlayStation 3 in 2007; the gap between the hardware's worldwide release and introduction to India shrinking with every generation.

According to Milestone's founder, Jayont Sharma, the console market for all platforms is still limited to less than 2 per cent of Indian homes - generally those with annual income above $25,000 - but that number is growing every year. A driving force behind that growth is the PlayStation 2. Ever since the introduction of the PlayStation 3, the PS2 has retailed at a price-point low enough (around $100) to make the console viable in what Sharma calls "tier two and tier three cities" - generally, those with 1 million residents or less.

With the right support, Sharma believes that the console market in India could become highly lucrative. With yet another generation of consoles looming, the day when an Xbox 360 or PlayStation 3 can be sold at $100 and still make a profit are only a few years away. At that point, the PlayStation 2 could be manufactured and sold at a price that would make it accessible to an unprecedented amount of the population.

The product is right, but greater penetration - particularly after the emergence of social and mobile - will require a long-term strategy involving driving down costs through the local production of hardware and software. Right now, only Sony seems to be contemplating such a move - in April 2010, the company ended its longstanding agreement with Milestone to bring distribution back to Sony India.

"I don't think there's an issue of content suitability," says Sharma. "If one can get to India aggressively, invest in expanding the base and increase penetration levels, and make the product a lot more affordable - we do need the products to be around one-third the price of what they are in the US."

The average income per capita is rising every year - growing 16 per cent to reach Rs50,000 last year - and Sharma agrees that the demand for games will rapidly increase as the nation's youngest consumers gain access to more disposable income. However, a new DVD, CD or movie ticket retails for around 20 per cent of the equivalent item's price in Europe and the US, while a copy of Deus Ex: Human Revolution on Xbox 360 can cost the equivalent of £35.

With more than a decade of experience selling consoles in India, Sharma understands that, as long as it is still manufactured by Sony, Microsoft or Nintendo, console hardware will eventually reach an attractive price-point. Software, on the other hand, is different.

Retail And The Black Market

"Indians are typically very, very value conscious in that we don't mind paying extra for a piece of hardware, as long as we don't have to pay anything for the software," Sharma says, echoing Kreeda and Chayowo's comments regarding micro-transactions. "We pay more for a diesel car, because the cost of fuel is cheaper than for a petrol engine."

The problem is the black market. A cheap imitation of virtually any high-end consumer item can be found on the streets of India's big cities. Traditionally, if you weren't in the upper class and wanted access to Western pop culture the black market was your only option. Even for those in the vast emerging middle class - around 350 million people - it remains something of an institution.

"You can get any Xbox title for $1 in the market, and then you're good to go. The same thing is happening with PS3 also," says Version 2 Games' Rajat Ojha. "Piracy is definitely big, and especially with gaming, people take it for granted."

"Games, by Indian standards, are still very expensive. In fact, we have been suggesting to Sony India to produce the games here... That would actually cut down the whole cost to probably one third. But they are importing all the games, and that works out, for most of the people, to be one-fifth of their salary for one game - that kind of thing. They don't mind going down to the market and playing $1 for an Xbox 360 game. You can get a [retail] Xbox 360 modded for $30."

For Sharma, the solution lies with another rapidly evolving aspect of Indian society: retail. "India is at the early stages of that mall culture," he says. "In the last six to eight years we've had a lot of new malls and new shopping centres open up, where every store that retails games will have to trade in legitimate product. I can say that 1200 to 1400 stores across the country will continue to carry legal product."

And that number is increasing, not least because of Game4u, Milestone Interactive's burgeoning retail chain, created when Sony's decision to internalise distribution left Sharma with a sizeable hole in his business. Milestone enjoyed great success as India's premier distributor of gaming products, but it relied on major Western companies like Sony, Microsoft, EA and Activision keeping their distance.

Sharma, like everyone else we spoke to for this article, believes that their arrival is only a matter of time, and a move to legitimise game retail in the country would both speed up that process while establishing a reliable partner in the shopping centres.

"Retail, in time, will probably become the larger piece of our business," he says. "We've been fortunate in terms of our timing. Considering what Game and Gamestop are facing, and seeing their strategies shift, we are able - to some degree and in an educated manner - to pre-empt that situation here and build that into our model at the early stage."

"India is at the early stages of that mall culture. In the last six years we've had a lot of new malls open up, where every store that retails games will have to trade in legitimate product

Jayont Sharma, Milestone Interactive

Game4u's physical and digital presence are being developed concurrently. The stores are bright, vibrant, family-friendly spaces with numerous free console units and a staff directed to be knowledgeable and engage the consumer. When we spoke to Sharma at the end of last year he was just preparing to open Game4u's sixth outlet, with another four due by the end of this month. Indian retailers caused Sharma a great many problems when Milestone was focused on distribution and marketing; in many cases, those experiences taught Sharma what not to do.

More importantly, with broadband connectivity only now beginning to spread across the country, high-street retail in India has never been under threat from online trade. As hard as it is to imagine with GAME swaying dizzily on the ropes, it is on course to enter a boom period.

"I'm fully convinced that we've still got a minimum of 10 years before some of these other challenges start affecting us," says Sharma. "It will be another three years by the time we open our 50th store, and we will only be touching the top 25 or 30 cities. And I can still go to another 30 cities. The top 60 cities are close to a million population and above."

"The caveat here is that I think the key stakeholders need to come in and participate in growing the market a lot more. While as Milestone I may fear what will happen to my distribution business, in time retail will be the bigger piece of the pie. We can't worry about that. As long as we own the consumer the publishers will partner with us."