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The Indian Market

FXLabs' CEO Sashi Reddi takes us through the Indian games market, and explains where the opportunities and challenges lie

While there's plenty of talk in the industry about emerging markets such as China and parts of South-East Asia, Russia and even Turkey, not many people seem to be focusing on India - a territory which for other industries might be near the top of the list.

To find out why, and what the challenges are facing the Indian games market - such as it is - we spoke to Sashi Reddi, founder and CEO of FXLabs, a developer which is just launching its first title aimed at the mass market, who gave us his honest assessment. Tell us a bit about your company, first of all.
Sashi Reddi

The company's called FXLabs, and we're a game developer. When I started this company about four years ago the objective was to build our own games for sale both in India, but also outside India as well, specifically the UK and US.

In the last four years we've built four games, all for the PC, and they're all starting to come out into the market. We took some time to build the first one, because we were new to the business - but now we're much quicker.

Of those four games, two of them are based on some of the Bollywood hits in India, and we wanted to see if we can use the Bollywood angle to sell games here.

To give you the background on India, there's not much of a market for games, even in the last four or five years. Even though there's been a push from Electronic Arts, Microsoft and Sony, the sales of games consoles have been fairly small - just because the price points are very high, there's a lot of duty on the consoles, and so on.

So there are few consoles being sold, and therefore few games being sold. We wanted to change that by building a game on the PC using a Bollywood property as the best way to get the attention of Indian consumers.

We're not that interested in connecting with the hardcore gamers, who are going off and importing the latest Xbox 360 titles and so on - we want to hit the mainstream. We had a bit of trouble with those two Bollywood games, but they're now going out into the market, and we're really excited about that, because that will tell us a lot about whether or not there is a way to build up the games market in India.

But the challenge we are facing on the distribution side is that the price points in India will be very low - we're looking at a price point of about USD 6 or so, something in that range is what the market seems to be comfortable with for a game.

So we're building a game for a market that's not really there now, but we think probably in the next three years it could be worthwhile building a game just for the domestic market - but that said, we think that the Bollywood titles could sell well to various Indian communities living outside India.

For the title launching now we don't expect to recover our money from India, but we do expect to make some money from the Indian population that lives in the UK, or US, or Africa - places like that. How many titles would you expect to sell before breaking even?
Sashi Reddi

The answer to that question is quite scary actually, because we'd have to sell about 80,000 units to break even, and about 100,000 to get a small profit to make it worthwhile.

But the problem is, if you look at the past year of sales in India, there have been very few titles that have sold even 10,000 units in India. We could argue there are two reasons why that's happened - firstly that the price points are well above the mass market, and that they're targeted at a small, elite group, and the second is that the content being sold isn't something that the country's interested in.

So we hope that's not an indication of how our game will sell. You talk about the small elite and the mass market - what are the sizes and playing habits of those two groups?
Sashi Reddi

I would say that if you were to add up all the consoles in the country, you wouldn't hit 1 million units. Sony has indicated that it's sold about 400,000 PlayStation 2s, and there's been a bunch of other stuff floating about - so I'd say about 1 million would be the cap in terms of consoles, but that's spread across a number of platforms, with PS2 being the biggest.

Now on the PC there's a far larger number that can play games at home, and that's the target base for us - it's probably in the region of about 20 million plus PCs at home. It'll be quite a challenge to educate PC owners that there's a game out there, which is where the Bollywood license comes in - but how else do you expect to market the game?
Sashi Reddi

Yes, that's definitely a challenge. We're trying out two experiments right now, one is the game just launching which is a tie-in with a huge Bollywood film. That's one way how we can see it play out.

The second way is that we actually build an arcade machine, and we're putting in some top Bollywood songs - we created a sort of dance game, and that's something we're selling to game parlours, malls and so on. Do people play games together? What's the social view on games?
Sashi Reddi

Well, in terms of the social aspects with respect to the casual online games portals, I think that sort of thing is starting to come together. The biggest one has about 5 million registered users, which isn't how many people are playing all the time, but it's still a pretty big number. How do you see the market developing? Is there a future for consoles in India, do you think?
Sashi Reddi

Well, I recently heard a panel discussion on this topic, and now I'm changing my mind. I'm beginning to think that maybe consoles will never become the dominant platform in India.

Of course, there's the matter of price points, but I think that there's no reason why they would become dominant. Some people will buy them, but not enough for them to become very popular. The mobile games industry in India by contrast has fared pretty well - how is that at the moment?
Sashi Reddi

Well, that industry has suffered a lot, because the telecoms operators keep 70 per cent of the revenues, and it's made it very difficult for the developers to survive. A whole bunch of guys have shut up shop, and now there are probably three or four decent-sized players in the mobile games space, and I don't see that number changing too much - I think probably about 20 or so smaller guys have been wiped out now. What's the broadband penetration rate at the moment, and how is that changing?
Sashi Reddi

Broadband in India is still very, very expensive, and also what you would think of in the UK as broadband is different to here. Here, what's called broadband could be 56.6kpbs or even less, so in that sense you can do some sort of casual gaming, but you couldn't get the full benefits of an MMO.

I would say that in the long run, though, it's probably the place where we'll see things evolving and becoming more viable as a gaming platform, from the PC, then to the internet, and playing online. Other industries look to India thanks to the lower costs - are there many companies that are doing well out of outsourcing?
Sashi Reddi

Well, that's a question that I've been looking at, because when I started this company four years ago I wanted to build our own games, with a reputation of a company that builds its own products.

But with the difficulties of building up our own IP, we've made a conscious decision a few months ago that we want to start offering lots of services, and we've signed our first customers. It helps that we're the only company here that's built our own game end-to-end, so we can offer that service to others.

But if you look at India as a whole there aren't many companies that are offering game development outsourcing. Traditionally all the work has gone to China, although we've got about two or three shops in India in the range of 100 people - very small - compared to about 200-plus shops that have a similar size in China. It's a whole different set of numbers.

I do think that will change though, and we'll see more being outsourced to India. We have the people, but so far we've not been able to show we can do it. I think firms like ours and others, once they put out games, they'll build up the credibility of the Indian games industry.

Sashi Reddi is founder and CEO of FXLabs. Interview by Phil Elliott.

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