March 12, 2023

Beginning of a new era for a gaming sector—from the hinterlands of Tier 2 and Tier 3 Indian cities


As we all know, the World came to a standstill when the COVID wave hit all of us, two years ago. With lockdown descending on us like the darkest clouds, everything changed overnight, from personal to professional life to business management methods. Despite the widespread economic disruption caused by COVID, business in various sectors started picking up, and the digital economy, has become the new hero of the Indian economy.

Amongst others, the Indian Media and Entertainment (M&E) industry, for example, is making significant progress. The Indian Brand Equity Foundation 2022 (“2022 IBEF Report”) suggests that within the M&E sector, the Animation, Visual Effects, Gaming and Comic (“AVGC”) sector is growing at a rate of ~29%, and is recognised as one of the champion sectors by the Government of India. In this article, we specifically speak about the ”Gaming” segment in the AVGC space and the upcoming market in Tier 2 and Tier 3 cities(“T2 & T3 cities”).

The Hon’ble Prime Minister of India, speaking on the announcement of the AVGC Promotion Task Force in the Union Budget 2022-23, highlighted that India is one of the top 5 markets in the world for mobile gaming.

The online gaming segment grew by 28% in 2021 to reach USD 1.9 billion, as per 2022 NITI Aayog Report. This exceptional growth is fuelled by demographic factors, change in media consumption habits, innovations by the industry as well as low cost of internet during the past few years and last but not the least overall impact of the Pandemic. India is expected to become one of the World’s leading markets in the gaming industry.

Further, the number of online gamers in India will increase from 390 million in 2020 to about 500 million gamers by 2025. Other emerging gaming genres include e-sports, streaming, and social gaming, and the 2022 Commonwealth Games is a proof that e-sports are a niche and brand-new segment.

With gaming sector gaining momentum, Government of India (GOI) is also acting as a frontrunner in promoting start-ups. Initiatives such as Digital India, Start-up India, Invest India, and other new-age GOI schemes including Start-up India Seed Fund Scheme, will also usher in a golden era for new and upcoming start-ups.

The Government of Karnataka and Telangana have set up the Centre of Excellence to promote innovation in technology digital media hub which will also enable setting up of more gaming start-ups.

How are the Tier 2 and Tier 3 cities shaping up?

The growing popularity of mobile gaming in T2 & T3 cities are intriguing to say the least. The digital consumer base in India is the second largest in the World, and the benefits of the technology are being felt by all segments of the people. The spending habits of the people have changed positively over period and Indian income categories

support the fact that with more and more disposable income in the hands of consumers, the new paying users (NPUs) will increase exponentially and by 2030, around 60%+ 1 of population will be in middle class and upper middle class income categories and thereby increasing the consumption and the NPUs.

These statistics are not just limited to young male gamers, what is interesting is that number of women gamers have also increased substantially and are contributing to the significant customer base.

While Tier 1 cities were already contributing substantially to the gaming space, post Pandemic – T2 & T3 cities have seen significant growth spurts. As India transitions from a rural to an urban society, there is a need to not only nurture megacities and their hinterlands as centres of economic growth, but also facilitate T2 & T3 cities to take on the mantle in the future, says the 2022 NITI Aayog report.

India is shifting from net importer of global gaming titles to a global exporter of content and IP. Users are maturing and localizing in their behaviour – from time-spent gaming engagement with new midcore gaming formats. The founders from T2 & T3 cities can take cognizance of this fact and build World class games in the upcoming years.

The progress of start-ups and start-up initiatives in the smaller towns in India are not only proving to be effective for the start-up founders and entrepreneurs but also helps in revenue generation for the entire economy of that region. Some of the major benefits that the T2 & T3 cities of India offer include –

  • Accessibility to immense pool of talent
  • Affordable living – Better standards of living
  • Congestion free roads – means that you get to places faster and more importantly, happier.
  • More contented and serene workplace with access to plenty of places toexplore for quick weekend getaways.
  • Access to multiple Government initiatives specific to smaller towns

Way forward

There are more than 400 million gamers and 1000+ gaming studios in India. With advent of technology – the gaming industry has the potential to evolve into one of the strongest pillars of our economy. The dawn of the new era beckons the T2 & T3 cities to function as a backbone to the Indian economy, by contributing alongside the Tier 1 cities.

Looking at the opportunities, benefits, and the incentives available in T2 & T3 cities and not to forget T1 cities, it truly looks like this is RIGHT TIME for an aspiring gaming founder to start his entrepreneurial journey.

Our Fund, Ventana Ventures is a first gaming fund from a Tier – 3 city from a small quaint town called Udupi. We aim to support the founders and create an ecosystem of team of teams which can learn together, build together, have fun together while aiming to create some of the most compelling gaming IPs for next 10-20 years.

We have set up this fund with a goal to make it big from the Temple town here where many companies have started their humble beginnings and grew to become the business Giants. Needless to mention, 99Games – friends of Ventana are also from Udupi and trying to build a next gaming unicorn from here too.

This fast-paced industry, while providing casual gaming-based leisure to the population, has also got to offer a new competitive space, especially in the E-sports, and lucrative career options to many aspiring young generations at the same time. With endless technology-driven possibilities and unprecedented growth, the gaming industry is here to stay.

Poornima Nayak