India's paid gamer base hits 120 million in FY22 in the world's second largest internet market

Nearly one-fourth of the Indian gamer base in the financial year 2022 (FY22) were paying users, a report has revealed, indicating the sector's rising maturity in the world's second-largest internet market.

India had 120 million paying users in FY22, with two million new paid users added every month, according to a report by gaming and interactive media venture fund Lumikai. The overall gamer base crossed a key milestone of half-a-billion people, touching 507 million gamers in FY22, up from 450 million in FY21.

The average revenue per paying user grew 11 percent to $20 per year in FY22, it said. Key drivers included new content, better in-game items to purchase, and the potential to make money.

Overall, the industry's revenues rose from $2 billion in FY21 to $2.6 billion in FY22 and is projected to grow at a 27 percent CAGR (Compound annual growth rate) to reach $8.6 billion in FY27.

"India's gaming industry this year hit major inflection points, registering strong growth across the board. Industry growth is expected to be fuelled by a rapidly increasing gamer base, higher conversion to paid users, and increasing sophistication of Indian gamers," said Justin Shriram Keeling, Founding General Partner, Lumikai.

India is one of the world's biggest markets in terms of game downloads, clocking over 15 billion downloads in FY22. The report says that the top 10 mobile games in India have cumulative monthly active users of 358 million in FY22.

Which category is doing well?

Real-money games continue to be the largest revenue source for the industry, accounting for about 57 percent of the overall industry revenues.

Of the $2.6 billion revenue, about $1.5 billion came from the real money gaming segment. In-app purchases contributed about $0.6 billion while advertising accounted for $0.5 billion.

Indian Gaming graphic

The report however notes that future growth is expected to be driven by in-app purchases with the segment expected to grow at 34 percent CAGR for the next five years. The growth in in-app purchases will be led by mid-core games which was the fastest-growing category in FY22 and grossed a combined revenue of around $550 million for the financial year, it said.

People are also spending more time playing these games, with the time spent on top mid-core games such as Free Fire, Battlegrounds Mobile India, Genshin Impact, and Call of Duty Mobile nearly double of casual games such as Candy Crush Saga, Coin Master, and Royal Match, among others.

Free Fire was however suspended in India this February while Battlegrounds Mobile India was suspended in July this year.

Funding scenario

India's gaming sector is on track to raise around $513 million in funding in the calendar year 2022, the report said. The sector had attracted an investment worth $1.74 billion in 2021.

"The last 28 months have been watershed years in terms of attracting VC investment of over $2.6 billion in the Indian gaming landscape," said Salone Sehgal, Founding General Partner, Lumikai.

"Sustained capital investment and liquidity outcomes in the form of strategic exits valuing $750M+, multiple unicorns, and a publicly traded company have heightened the interests of entrepreneurs and investors alike. This sustained momentum should further drive entrepreneurial ambition and innovation in the Indian gaming industry," Sehgal said.

Web3 has also emerged as an increasingly popular technology in the sector, with around 30 percent of 450 Indian Web3 companies operating in the gaming sector, the report said. Web3 games have around $400 million in financing between 2019-22, it noted.

Several local companies including Dream11 parent Dream Sports, Nazara Technologies, nCore Games, Tegro are eyeing the Web3 gaming space in the country, amid the growing adoption of blockchain in the country. Founders say Web3 gaming could potentially provide better monetisation opportunities for game developers in India.