For Microsoft in India, there is a lucrative game afoot
Cloud service trial aims to grab a piece of a rapidly growing gaming market
During Microsoft’s glitzy Xbox showcase in London last month, gaming boss Phil Spencer revealed the firm would roll out a trial of its cloud gaming service in India.
To an audience hungry to hear about the latest blockbuster games, the announcement must have seemed a footnote. But for Xbox, it was an integral statement of intent. Emerging regions such as India have become a new frontier for the £110bn industry’s biggest players.
“You’re going to see Xcloud start coming to markets where there isn’t a real console install base, as a way for us to distribute great games to people that know our franchises, watch Twitch and watch Mixer,” said Spencer.
The market value of the gaming industry in India was a reported 62bn rupees (£664m) this year, with that figure expected to hit 250bn rupees by 2024.
Until now, India has had a relatively small market for console and PC gaming, but the increasing proliferation and affordability of smartphones has seen the gamer population boom.
It is the second-biggest smartphone market in the world, behind China. The number of mobile phone gamers is expected to reach 628m in 2020, and Indian smartphone users downloaded more than 14bn games this year.
“Adoption of smartphones has made the number of gamers much bigger,” said Piers Harding-rolls at IHS Markit. “There has been a cultural shift, fuelled by mobile-first consumption.”
India has the largest youth population in the world, with 600m people under 25 – more than half the population – embracing the internet and digital entertainment.
Its gaming industry is beginning to grow, with the workforce set to reach 40,000 by 2022. Studios are popping up – particularly in Bangalore, India’s answer to Silicon Valley – including City Block Builder developer Tentworks Interactive.
But with India traditionally lagging behind due to the expense of dedicated gaming hardware, and piracy remaining an issue, there is a growing gap for established companies from overseas to exploit.
“There is a bit of a vacuum in terms of large domestic players, so both western and Asian companies, especially Chinese, are trying to establish themselves in a market with high potential,” said Harding-rolls.
“This includes the console companies and major Asian publishers such as Tencent, Netease and Garena. Telcos are playing an important role in getting cheaper Android phones into the hands of consumers and in rolling out of cheaper mobile broadband services.”
This has led to growing demand for online mobile games, including battle royale favourites PUBG Mobile and Garena’s Free Fire: Spooky Night.
With Chinese companies muscling in on the lucrative mobile charts, Microsoft is looking to find its own way in India with Project Xcloud. It will allow players to stream Xbox games such as Halo and Gears of War to mobile phones, with a free preview starting next year.
“A lot of markets in the world are smartphone-first,” says Microsoft’s Kareem Choudhry. “The content library we have is very compelling. So giving that access to people who only have a smartphone device
– I think that’s the magic.”
“This is about us reaching gamers that have never traditionally been in the Xbox ecosystem” added Catherine Gluckstein, general manager of Xcloud.
As part of Microsoft’s bid for world domination in the next generation of gaming, India seems a fertile test bed to reach emerging markets. The Xbox brand has thus far been relatively low-key in the country, with the Xbox One being outsold by Nintendo’s Switch despite a three year head-start.
Microsoft’s Xcloud gambit will rely on the continued improvement of India’s internet infrastructure. As recently as last year, just over 500m Indians were online, leaving 800m unconnected. By 2025, the number online is expected to reach 850m, more than the combined population of the G7 countries, with plenty of room for growth.
Only China has a comparable population. And with that market subject to heavy gatekeeping from Beijing, India is set to be a lucrative target for tech giants the world over. Google has set up free Wi-fi services at train stations across the country, while Facebook is looking to add 20,000 hotspots. The Indian government has plans for 250,000 hotspots in villages.
With this expansion, and the vast youth population driving a culture shift, video games will be in the vanguard. The hugely lucrative mobile market will continue to dominate, but the potential disruption offered by cloud gaming could help blockbuster publishers carve their own audience.
“This is an interesting experiment,” Harding-rolls said of Xcloud. “Microsoft and others believe there is an underserved audience beyond consoles and gaming PCS, and India, as a mobilefirst territory, is a suitable test case.
“Project xcloud is currently free, so the major challenge is monetisation, even if the service appeals to lots of consumers.”
Google’s Stadia has no concrete public plans for India, but will be watching the Xcloud experiment with interest. Sony is also looking to expand its Playstation Now offering, while Tencent will undoubtedly want to get in on the act with its own nascent streaming service, Start.
Competition in gaming has always has an aptly combative edge, with previous generations defined by console wars. While the technology has changed, that looks set to continue, with India the global industry’s newest battleground.
‘Firms are trying to establish themselves in a market with high potential’