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Business Gaming

FICCI-EY Report Claims Online Gaming to Grow at 40% CAGR, Reach Rs. 18,000 Crores in 2022

A 2020 report on India’s Media & Entertainment Sector titled ‘The era of consumer A.R.T. – Acquisition Retention and Transaction,’  released by the Federation of Indian Chambers of Commerce & Industry (FICCI) and consulting firm Ernst & Young (EY) claims that online gaming grew at a rapid 40% growth rate in the year 2020 and the total revenues generated by the sector in the year 2019 was Rs. 6,500 crores (Rs. 65 billion).

The report further claims that out of the Rs. 6,500 crores garnered by the online gaming industry in 2019, transaction-based (including real-money) gaming contributed about Rs. 4,600 crores, while the remaining was contributed by casual games. The total number of gamers in the country are pegged by the report to be around 36.5 crores (365 million).

EY also estimated that amongst various categories of real-money gaming, fantasy sports grew by over 100% in 2019, while poker and rummy grew by around 30%.

The report further forecasts that online gaming would continue to see robust compounded annual growth rate of about 43% over the next 3 years to become a US$2.5 billion dollar industry (about Rs. 18,700 crores) and would account for over 40,000 direct jobs in the country.

It is also reported that the total indirect tax contribution of the online gaming industry in 2019 was estimated to be around 9,800 crores, with the 2022 estimates pegged at around Rs. 28,600 crores.

The FICCI-EY report, which was supposed to be unveiled at the flagship FICCI Frames event this month, was released digitally due to the cancellation of the event in light of the Coronavirus crisis.

The report adds a caveat that its estimates and forecasts have not accounted for the economic impact and disruption caused due to the Coronavirus pandemic.

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Legal & Regulatory

Legal Heavyweights Battle it out in Dream11 GST Evasion case

The Bombay High Court has adjourned the hearing in a review petition filed by the central government on the manner of payment of Goods and Services Tax (GST) by Dream11 to 19th March, 2020.

A division bench of the Bombay High Court comprising of Justices Ranjit More and Bharati Dangre was earlier supposed to hear the review petition filed by the Union of India in the Public Interest Litigation (PIL) filed by advocate and social activist Gurdeep Singh Sachar in-chamber on 11th February, but on the hearing date decided to adjourn the matter by more than a month.

According to the order of the court, senior advocate and former Attorney General of India Mukul Rohatgi (who has also represented the fantasy company in several earlier hearings in the Supreme Court on related matters) along with senior counsel Vikram Nankani appeared for Dream11, while Additional Solicitor General of India Anil C. Singh appeared for the central government and counsels Yogesh Naidu and Sarosh Damania appeared for Sachar.

It may be noted that Sachar had originally filed a PIL in the Bombay High Court in April 2019 alleging that online fantasy sports operator Dream11 conducts gambling operations and wrongly pays Goods and Services Tax (GST) only at the rate of 18% on the margin retained by the company, instead of 28% on the face value of bets under Rule 31A of the Central GST Rules.

A division bench of the Bombay High Court comprising of Justices Ranjit More and Bharati Dangre had dismissed Sachar’s petition and ruled in Dream11’s favour on 30th April, 2019.

Sachar as well as the Union of India, State of Maharashtra and activists Varun Gumber and Avinash Mehtrotra had filed appeals/applications against the order of the Bombay High Court in the Supreme Court.

However, through separate orders, the Supreme Court dismissed Gumber’s petition as well as the central government, Sachar and Mehrotra’s pleas, but allowed the government to file a limited review on the GST issue in the Bombay High Court.

On 31st January, 2020 a Supreme Court bench comprising Justices Rohinton F. Nariman and S. Ravindra Bhat also dismissed a clarification application filed by Sachar and noted that the issue of whether gambling is or is not involved in Dream11 cannot be revisited by the Bombay High Court.

Notwithstanding the Supreme Court order restricting arguments on the gambling/betting issue, the central government in its review petition contended that gambling/betting is involved in Dream11 and has claimed revenue implications of over Rs. 2100 crores in the matter.

The government in its petition has also relied on judgments of the Kerala, Madras and Gujarat High Courts ruling rummy and poker when played for stakes to be gambling.

The central government has also claimed that there is collusive behaviour between the PIL petitioner Sachar and Dream11 as well as violation of principles of natural justice since the original order was passed by the High Court without hearing it.

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Legal & Regulatory

SC Dismisses Gurdeep Sachar’s Clarification Application in Dream11 GST matter

A Supreme Court bench of Justices Rohinton F. Nariman and S. Ravindra Bhat on Friday dismissed a clarification application filed by advocate Gurdeep Singh Sachar, which had urged the apex court to allow the issue of whether the fantasy games offered by Dream11 amounts to gambling/betting can be reviewed in the Bombay High Court for the purposes of determining whether there is any GST evasion on Dream11’s part.

Sachar’s counsel, senior advocate Mahabir Singh, contended that the application for clarification be allowed as the issue of gambling/betting is connected to determination of the manner of payment of GST, while former Attorney General of India and Senior Counsel Mukul Rohatgi, appearing for Dream11 strongly opposed the application.

Senior Advocate K. Radhakrishnan appeared on behalf of the central government.

The Supreme Court bench while dismissing Sachar’s interlocutory application, noted, ‘It is reiterated that in accordance with our order dated 13.12.2019, the only scope of the review filed in the Bombay High Court is with respect to GST and not to revisit the issue as to whether gambling is or is not involved.’

Sachar had originally filed a PIL in the Bombay High Court in April 2019 alleging that Dream11 conducts gambling operations and wrongly pays Goods and Services Tax (GST) only at the rate of 18% on the margin retained by the company, instead of 28% on the face value of bets under Rule 31A of the Central Goods and Service Tax Rules, 2017.

A division bench of the Bombay High Court comprising of Justices Ranjit More and Bharati Dangre had dismissed Sachar’s petition and ruled in Dream11’s favour on 30th April, 2019.

Sachar as well as the Union of India, State of Maharashtra and activists Varun Gumber and Avinash Mehtrotra had filed appeals/applications against the order of the Bombay High Court.

However, through separate orders, the Supreme Court dismissed Gumber’s petition as well as the central government, Sachar and Mehrotra’s pleas.

While jointly dismissing the central government, Sachar and Mehrotra’s pleas on 13th December, the Supreme Court bench comprising of Justices Nariman and Bhat had allowed the Union of India to file a Review Petition before the Bombay High Court on the limited issue of GST evasion by Dream11 within four weeks.

The central government’s review petition came up for hearing on 28th January, but its contentions on the GST issue did not find much favour with the bench comprising of Justices Ranjit More and SP Tavade.

The matter is now scheduled to come up for hearing on 11th February, 2020, with the Additional Solicitor General of India expected to lead submissions on behalf of the central government.

Importantly however, with the Supreme Court’s dismissal of Sachar’s application and its categorical assertion in the order that the issue of gambling with respect to Dream11 cannot be revisited, there remains little doubt about the legality of fantasy sports in India.

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Business

Dream11 Likely to Raise $500 Million in a Funding Round Led by Tiger Global

Dream11, India’s first gaming unicorn, is looking at raising $500 million in a funding round that is likely to be led by Tiger Global Management, a New York-based startup investor that is actively investing in India. Tiger Global Management is likely to lead the funding round for Dream11 at a valuation of $2.5 billion, as reported by LiveMint.

The ace investment fund, which has invested in other Indian unicorns like Flipkart and Byju’s,  is expected to invest $200 million in Dream11 through purchase of new shares and in a secondary market transaction by purchasing shares from the fantasy sport platform’s previous investors Kalaari Capital, Think Investment and Multiples.

As per an anonymous investor, who spoke with LiveMint, Dream11 has caught the eyes of a lot of investors, as it has no major competitors while having a lot of avenues of growth.

Apart from fantasy gaming, Dream11’s parent company Sporta Technologies Private Limited is expected to foray into other sports related business ventures, including live-streaming of sports matches and a platform for sale of sports-related merchandise.

For the said funding round, Dream11 is said to be working with the investment bank Credit Suisse.

In April 2019, Dream11 was valued at $1.1 billion, making it the first Indian gaming company to join the Unicorn club, after London-based Steadview Capital invested $60 million in the company through a secondary market transaction.

Dream11 is the official fantasy gaming partner of various leagues and tournaments like ICC, IPL, ISL, Pro Kabaddi league, and Big Bash league.

In April 2019, Bombay High Court passed an order stating that the company’s gaming format is skill-based and it even approved the company’s manner of payment of Goods and Services Tax (GST), relying on a 2017 Punjab and Haryana High Court decision and other Supreme Court precedents.

Various Special Leave Petitions (SLPs) were filed in Supreme Court against the Bombay High Court order, out of which the one filed by lawyer Varun Gumber was dismissed by the apex court through an order dated 4th October, 2019 and the others were dismissed  in December 2019 by a division bench of the Supreme Court comprising of Justices Rohinton Nariman and S. Ravindra Bhat.

Another PIL against Dream11 has been pending in the Bombay High Court, since April 2019, alleging that Dream11 has indulged in tax evasion. The PIL is yet to be listed and heard by the court.

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Legal & Regulatory Poker

Gujarat HC Defers Poker Matter to 17th February

The Gujarat High Court once again deferred the hearings of letters patent appeals filed against a single judge bench’s order ruling poker to be a game of chance.

A division bench of the High Court comprising of Chief Justice Vikram Nath and Justice AJ Shastri did not hear the appeals that were scheduled for arguments on 8th January, 2020. The court instead adjourned the matter to 17th February, 2020 and observed that daily hearings would be conducted from that date to expedite hearings in the matter.

Letters patent appeals filed by Indian Poker Association Secretary KN Suresh, Dominance Games Private Limited, Aman Chhabra and Hotel Ramada, Ahmedabad against a December 2017 single judge bench’s order ruling poker to be a game of chance  have been pending for over two years now and have seen 22 adjournments till date.

With the court deciding to expedite hearings in the matter from February 2020 onwards, the possibility of getting a conclusive verdict on the legality of poker has increased. The high stakes matter would have implications on the skill games industry within the state of Gujarat and also have wider ramifications for the industry across the country.

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Business Gaming

Paytm First Games Stats for 2019: 45 Ml. Users, 485.16 Cr of Winnings and More

Paytm First Games (earlier known as Gamepind) recently released a report called Gamestats 2019, which reported various stats about their gaming app’s performance in the previous year.

As per the report, 45 million users registered on Paytm First Games app in 2019. The platform hosts around 200 games. The biggest amount won by a single Paytm First Games Winner in the year 2019 is Rs. 12.59 crores.

In 2019, the total time spent by gamers on Paytm First Games app was 7700 years, and over 72.5 crore Paytm games were played online.

The three most engaging games on Paytm First Games were Rummy, First Captains and Battle Center. Rummy and First Captains were launched on the platform in February 2019.

Rummy is one of the most popular card games in India. On Paytm First Games, Rummy was played for above 2.3 million hours last year. About 26.25 crore cards were dealt in Rummy on the platform, where Rs. 76.66 Lakhs is the biggest amount won by a single winner in the game in the year 2019. The maximum percentage shares of rummy players on the website hail from Uttar Pradesh, West bengal and Rajasthan.

The app also hosts a fantasy sports game called First Captains. The game’s most preferred captains were Virat Kohli, R. Sharma and M. Dhoni among men, and Deepti B. Sharma, Harmanpreet K. Bhullar and Smriti S. Mandhana among women. The game was played for above 2.8 million hours on the platform. IPL, WC and Kabaddi Championship were the most popular leagues. About Rs. 115 crores were won by players of First Captains in 2019. They created over 1.1 crore teams on First Captains. Uttar Pradesh, West Bengal and Delhi have the highest percentage of players playing this game on Paytm First Games app.

Another popular Paytm game is Battle Center, which recorded above 43.4 million hours of play last year. An average of 23.47 hours per user were spent on the game.

Paytm quiz called Trivia recorded above 1.5 million hours of play in 2019. Last year, the quiz served 45.5 crore questions, to which 65% were answered correctly. Cricket, GK and Bollywood are popular themes on the Paytm quiz game. Delhi, Uttar Pradesh and Maharashtra topped the list with the maximum percentage of Trivia players on Paytm First Games app.

Other casual Paytm games like Ludo, Wheel of Fortune, Tom & Jerry Maze, and Paytm pass the bomb, were played on the platform for over 18.7 million hours.

Paytm First Games is a casual and skill-based gaming platform that was first launched as Gamepind in February 2018. Alibaba-backed Chinese technology company AGTech Holdings Limited and Paytm entered a joint venture and initially invested USD 16 million in the gaming venture.

The gaming website was rebranded, in June 2019, after Paytm’s brand name.

The gaming platform recently raised another USD 20 million from Alibaba’s AGTech and Paytm’s parent company One97 Communications.

Categories
Legal & Regulatory

Gujarat HC Poker hearings moved to January 2020

A division bench of the Gujarat High Court comprising of Chief Justice Vikram Nath and Justice AJ Shastri did not hear appeals challenging ban on poker in Gujarat on the scheduled date of 19th December.

Letters patent appeals filed by Indian Poker Association Secretary KN Suresh, Dominance Games Private Limited, Aman Chhabra and Hotel Ramada, Ahmedabad against a single judge bench’s order ruling poker to be a game of chance  have been pending for the last two years, since December 2017, without substantial progress.

On 18th November, 2019, the bench on a plea made by Senior Advocate and Barrister Nakul Dewan representing the appellants recorded that the matter be taken up on 19th December, with permission to mention the matter before the bench on the date.

The High Court had also indicated that it would try to expedite the hearings and ensure early disposal of the appeals.

However, the bench could not hear the matter once again on 19th December due to other matters listed on board. The next date of hearing is now 8th January, 2020.

It remains to be seen if the hearings will gather steam in 2020 or will once again be put in cold storage by the court.

Categories
Legal & Regulatory

Delhi HC disposes PILs against online betting, poker

A division bench of the Delhi High Court comprising of Chief Justice DN Patel and Justice C. Harishankar disposed off two Public Interest Litigations (PILs) filed by social activist Avinash Mehrotra and lawyer Deepti Bhagat seeking action against offshore online betting websites and local online poker and card game websites.

The court through a common order directed the central government and the Delhi government to treat the petitions filed by Bhagat and Mehrotra as representations, and decide on banning websites like Betway, 1xbet, Dafabet, Adda52 and PokerStars.in referred in the pleas after ascertaining whether they hosted games of skills or chance.

The court said the governments while arriving at their respective decisions would also keep in mind the aspects of money laundering, FEMA violations and taxation of the gaming proceeds.

The centre through the Ministry of Electronics and Information Technology had earlier through its affidavit submitted that blocking of online gaming sites, including those of card games, was “technologically infeasible” as many states have enacted laws which partially or fully allow such activities.

On the other hand, the Delhi government told the court it can only take action if a gambling site was being hosted in the national capital or if there were instances of offline gambling.

In May this year, social activist Avinash Mehrotra had filed a PIL in the Delhi High Court seeking an end to illicit online gambling/betting/wagering websites. Mehrotra had alleged that various foreign betting websites are illegally accepting payments from Indian users and allowing Indian citizens to bet vast sums of money, in contravention of FEMA and money-laundering regulations, without paying any taxes.

He had also alleged that several Indian companies are offering online poker, which according to him was a game of chance and hence not legal.

Last month, lawyer Deepti Bhagat had filed a similar petition arguing that several companies are offering online poker and card games, which are games involving luck. She further averred that licenses for offline events are also granted for such games and demanded strict action, including cancellation of licenses issued, if any to these websites and companies.

The Delhi High Court had tagged both Bhagat and Mehrotra’s petition through an order last month and today, it disposed off both PILs through a common order. The court has now entrusted the central government with the responsibility of taking a final call on whether to block offshore and domestic gaming websites.

Categories
Legal & Regulatory Poker

Gujarat HC to have day-to-day hearings of poker appeals from 19th December

A division bench of the Gujarat High Court, comprising of Chief Justice Vikram Nath and Justice AJ Shastri once again adjourned a clutch of letters patent appeals filed by Indian Poker Association Secretary KN Suresh, Dominance Games Private Limited, Aman Chhabra and Hotel Ramada, Ahmedabad against a single judge bench’s order ruling poker to be a game of chance and within the ambit of gambling.

Senior counsel and barrister Nakul Dewan, appearing for IPA Secretary Suresh sought to make his submissions before the bench. The bench however adjourned the matter to 19th December and stated that the hearings of the case would be conducted on a day-to-day basis from 19th December onwards.

The appeals filed against a December 2017 single judge bench order ruling poker to be a game of chance have been marred by adjournments ever since they were first listed two years ago.

The matters however are expected to gather steam and see a final outcome from the Gujarat High Court within the next few months, if day-to-day hearings are indeed conducted from 19th December.

Categories
Gaming

Feature: WinZO CEO Paavan Nanda discusses his vision of building a vernacular gaming platform

In this exclusive interview, serial entrepreneur and IIM Calcutta graduate Paavan Nanda, who founded gaming platform WinZo Games discusses his vision of creating a vernacular esports and digital gaming platform that would cater to the needs of tier 2, 3, 4 and 5 cities in India.

Full interview:

Q. You launched the app, earlier branded as TicTok Games in 2017. Can you tell us the idea behind your venture, the rebranding of the product and the response in the past two years?

Paavan Nanda (PN): In 2017, Jio created a great infra in India that got 300 million people from Tier 2/3/4/5 audience for the first time on smart phone and internet. This new audience that was very diverse, was spending ample time consuming content in form of games and videos on their mobile phones. In 2018, there were 6 billion mobile games installed by 300 million people who were clocking on an average 45 mins playing games! This massive engagement was not the best monetized in India, in-app purchases and ad revenues didn’t make a stable business case to this audience.

The Team at WinZO, was most excited about building an online vernacular social arcade gaming platform that was backed by micro-transactions. With an 8-member team, we started our journey in early 2018 and developed a Tier2/Tier3 audience focused product. Focus was  to introduce them to the digital grid where they make their first entertainment transaction.  

Today 30% of WinZO consumers from the Tier 2/3 cities are making their first media and entertainment transaction online. The product is not just for Bharat but is actually build by Bharat. All the translation done on the platform for the vernacular languages and trivia are being done real time by housewife’s, teachers and university students from different part of the country.

WinZO is the first vernacular gaming company to partner with more than 600 housewives, schoolteachers and university students in rural Bharat to empower them by providing a parallel stream of income.

WinZO is one of the fastest growing players in the industry! And we aim to become the world’s largest online arcade gaming platform.

Q. We know that WinZO has seen 10 million installs till date and has set an ambitious target of reaching the 100 million registered users mark. How does the company plan to achieve this? Also, can you throw some light about the numbers generated by WinZO such as active users, monthly revenue run rate and paying user base?

PN: Today, WinZO has 10 million registered users on the platform playing in 10+ languages. These players are playing from 10,000+ cities, towns and  villages across India. Less than 10% of the audience is from Metro/ Top Cities of the country. The average time spent on the app is 45 mins/day. This is more than the time spent watching TV during primetime, you can clearly see a shift in the consumption pattern with great infra kicking in the country.  We see these numbers grow 10X in coming 12 months.

Interesting, UPI and Digital payments have solved for different monetization models for products. We decided to use this to drive micro-payments driven economy. We are already witnessing 130 million micro-transactions/ month. These are very exciting numbers for us. It’s a beautiful evolution of new consumption and paying pattern of the Indian Consumer.

Q. An important feature distinguishing WinZO from other apps has been the availability of games in more than 10 Indian languages, with plans to launch the app in more regional languages. Can you tell us how the response has been to the app in various regional languages and which languages have seen the most activity?

PN: You mentioned it right our entire focus is to build an online place to hang out for the audience coming on smartphone for the first time. We always say it this way, we are building Netflix of Gaming for Bharat, and solving for Bharat is not going to be easy.

One of the most amazing feature of WinZO Games is that, the app being provided in vernacular languages. Adding to that, 80% of our users are playing games in non- English i.e. in their native languages, which makes WinZO a complete social gaming platform where you hang out with friends playing super casual games, use voice chatting, and meet many new people who can speak the same language and have the same gaming interests. Currently the app is functional in  10  languages on  i.e. English, Hindi, Bangla, Tamil, Telugu, Kannada, Gujarati, Marathi, Punjabi and Bhojpuri. We plan to add another 6 languages on the app by March 2020.

The team has spent a lot of time working closely with this target group building a product for them, we are always trying to understand our users better, everyday is a new learning.

Do you know people in T2 cities put money in their PayTM by giving cash to kirana store, and these store owners do this transaction on their behalf for small commission? We also learnt this in our journey. Average time spent by paid players on the platform is 55 mins, with an average overall time spent close to 45 mins. This is a testament of our continuous effort to build a great product.

Q. You had recently announced a $1.5 million fund to support Indian game developers. Can you share some details about the initiatives taken by the fund?

PN: Building the supply side is an ongoing process. We are committed to helping the game developers and studios to believe in building for India, because it makes a business case. This would require an initial support. Any sector requires influx of economy to boom, we had set aside a fund of $1.5 million to support Indian game developers keeping in mind the needs of developers as well as the users.

With this fund we are already supporting and aim to support further by giving content developers a platform to make and showcase their games and at the same time monetize it.

So far, we have received phenomenal responses from the  developers community, and we are already working with few students and gaming studios supporting them to develop games for Bharat. This response was surprisingly not restricted to just India. We will be adding more than 100 games by 2020 on the platform, to make WinZO an entertainment powerhouse.

Q. After the Series A round raised by the company from Kalaari Capital and Hike Messenger, are any more funding rounds in the pipeline? –  Will need your help in answering if we are raising/expectations, etc.

PN: We are creating a product that will tap into a multi-billion-dollar market.  In coming months, we would be responsible for creating a lot of awareness, for educating users, and catering their need to consume personalized content through a single app, becoming the go to place for all entertainment needs.

We are talking about doing this at a very massive scale to the tune of 500 Million people just in India. Reaching in every household, inside every Indian’s smartphone is definitely going to be a very challenging, exciting journey and would need not only capital but also  best talent and an ongoing learning of the consumer needs and behavior.

Q. Speaking of Hike as one of your investors, can you elaborate if there are any other synergies you are looking at any with Hike messenger given that they are also a mobile platform?

PN: Hike being a very personalized app, we are considering many synergies. However, these discussions are still at exploration stage. You can expect some developments soon.

Q. What do you see are the challenges and risks on the legal and regulatory for the online gaming industry?

PN: So far online gaming with money was also seen in context of card games. This inertia was broken to some extent by Dream11, with Fantasy coming out clear in most states. Talking of esports or casual games, this has entered as a legit new category in Asian Games.

Most Indian states, at present, permit engagement in paid games of skills. The Supreme Court has examined the legislative history and intent of Price Competition Act, 1955, and excluded games which are predominantly based on skill from the regulatory purview.

The Nagaland Online Games of Skill Act, 2016, that prohibits gambling but promotes and regularizes games of skill, lists games that qualify as virtual game of skill. The list is exhaustive and includes virtual cricket, virtual pool, virtual carom etc. This indeed would be a persuasive document for all the courts and states.

What is most important is to demonstrate and ensure that dominant factor in the game is skill and not chance. 

Q. Finally, your parting thoughts on WinZO’s expansion plans and vision for the near future and how you see the gaming?

PN: 10 million + user base in a year, this speaks a lot about our aggressive plans, and to capture the next 500 million users who are going to join the smartphone bandwagon by 2023.

At WinZO we are focusing on a very unorthodox way to capture the interest of the users.

With data rates in India cheapest across the globe and affordable Smartphone market growing, India is poised to witness a large chunk of its population shift towards smart phones. All these people are expected to consume the content. video and gaming are the two biggest entertainment channels for the Smartphone users.

We are currently committed to expand our user base in India and create a much-localized experience for the audience that is coming on the digital grid for the first time. We are also looking at a possible expansion in countries with similar economies such Indian sub-continent and South-East Asia.