K. Rajesh Rao’s Dhruva Interactive wants to play both the global and domestic gaming product markets

Vipul switches off the game he was playing on his mobile phone and pushes open a door. A loud cacophony of plonks, sprats and dhishooms greets him. All around the floor, 20-somethings are sitting glued to computer screens, playing games. All of them have the audio on full-blast. It's a geek-meets-goth scene, where spectacles, goatees, tattoos and T-shirts are the norm. A huge board on one wall has a large toon drawn on it. No, it's not a gaming parlour Vipul has walked into. It's his office.

Welcome to life at Paradox Studios, where 'pay-per-play' gets a whole new definition. Vipul and his colleagues are interactive game developers at this wholly-owned subsidiary of Reliance Infocomm. It is one of India's largest game development companies, with presence in the local and global gaming markets. But, wait a minute. Game development? In India?

Yes, the $22.3-billion global gaming industry has struck roots in India in the past half-decade. Industry sources estimate there are now about 14 game development companies in the country who work on all the three platforms - PCs (on standalone machines, private networks or the Internet), consoles (on Playstation or the like) and wireless (on cell phones or personal digital assistants). In all, they employ a little over 300 people. Typically, they are headed by tech geeks who veered away on their way to Neverland. They don't have much to drive them - no infrastructure, puny market, meagre talent pool and tough financing norms. That is, not much except their passion for gaming.

It's this passion that has led the three largest players - Dhruva Interactive of Bangalore, and Indiagames and Paradox of Mumbai - to make a mark globally. Dhruva has worked on several international gaming titles, of which four have already seen the light of day. It has reportedly worked on parts of Enter the Matrix, a game based on the movie franchise. Recently, Time took note of the company while doing a story on animation outsourcing to India. Indiagames has developed games for 60 mobile service providers and has been nominated to Nokia's gaming advisory board, one of just eight such companies worldwide. Paradox counts Sprint, Vodafone, Verizon, O2 and NTT DoCoMo as clients. No mean feats these. But, their names still don't ring a bell for gaming freaks.

The reason for that isn't hard to grasp if you know the history of gaming in India. For a long while, interactive gaming meant slot machines in friendly-neighbourhood arcades, and then, furtive sessions of Minesweeper on the PC. What finally caught the imagination of would-be gamers were the PC-based games of Cricket and Need For Speed. Now, 30,000-odd serious gamers around the country are nurturing a legitimate gaming market worth Rs 40 crore and a pirated market thrice its size. It's still nowhere on the global gaming map, but they are at least in the game. The interesting bit is about how they crossed Level 1 of this global game.

Level 1: Getting Started

The first sparks were lit back in 1997, soon after the Pentium chip made its debut. Till then, games that ran on PCs were modest in terms of graphics and quality because the machines' processing power set a limit on what could be done. Gaming was certainly not a priority for the average PC user, who had just discovered the Internet and free email.

But that didn't deter 34-year-old techie K. Rajesh Rao. Rao had whetted his appetite for gaming at the Royal Institute of Technology in Stockholm, where he completed his masters. In 1995, on his return to India, he founded a multimedia company called Shrishti Interactive. But he found that multimedia was in its nascency and was still used largely for sprucing up business presentations. So he shifted tack to gaming with the launch of Dhruva in 1997.

A chance meeting with Intel traders, Rao managed to get a Pentium II chip and test machines through Intel's technology partnership programme. That nudge from Intel allowed Dhruva not only to begin game development on technology that was cutting edge, but also allowed them access to companies like Microsoft. It took Dhruva another one and a half years to make its own PC game engine. But no big studios were willing to touch it.

Another chance meeting in December 1998, this time with gaming legend and Infogrames Studios' co-founder Eric Mottet, changed things. Rao reminisces, "He (Mottet) was very surprised that a game development company existed in India." At that time, Infogrames was looking for someone to work on the PC version of the Mission: Impossible game, a huge success on Nintendo's handheld platform. Dhruva has worked on that game and two subsequent ones from Infogrames. In 2001, Mottet's investment company Incube picked up a stake in the company. Another big killing was made last year, when MS Gaming signed up Dhruva to work on the Xbox (console) platform.

Dhruva wouldn't divulge their current earnings, but claims that its topline will touch $10 million in another two years. The company believes this will come from a two-pronged strategy - cutting-edge games for overseas studios and smaller ones for India.

Others took more winding routes. After graduating in physics in 1994, Anurag Khurana moved into networking and started a software consultancy. But the gaming and dotcom bugs bit him simultaneously. He left the consultancy and set up a gaming site called passion4games.com. But it went under.

After the flop of Yoddha, Vishal Gondal’s Indiagames is betting on a Playstation game, Ashoka

After floundering for a year, Khurana finally struck gold. Officials from Reliance Infocomm, which was getting into game development for its high-bandwidth offerings, met Khurana and gave him a broad mandate. In April 2001, Paradox Studios was formed. It now boasts of one of the biggest game inventories in the country, comprising over 100 products. It believes that the mass products market is the way to grow. To that end, it has tied up with Reliance Webworld to develop simple online games like Pool and Carrom for surfers at its Webworld outlets. It has released its first PC game, Battledust: The Championship. And it's poised for its international release soon.

Like his peers, Khurana shies away from telling how much he's pulling in, but allows himself just this: "This year's target is $2 million-4 million. And half of it is from non-Reliance business."

About the time Khurana was coping with his post-bust status, in another corner of Mumbai, Vishal Gondal was busy setting up Indiagames. Gondal, 27, started his first company, a multimedia venture named Fact Interactive, when he was just 16. For Indiagames, he got funds from Infinity Ventures and IL&FS. It started on a different tack, offering gaming services and looking at co-branding with sponsors. But it started shakily with Yoddha in 2002, the first PC-based game developed by an Indian company for the local audience. Says Gondal, "The market wasn't ready when Yoddha was released." He has since shifted focus to products, especially mobile games. It has paid off somewhat with the success of The Day After Tomorrow and Spiderman. Emboldened, it plans to buy 18 Hollywood franchises this year, at costs that could go up to $800,000 a licence. It is also set to launch Ashoka, its first Playstation game.

Gondal is confident that these products would help him rake in more than $6 million this year. The future, he reckons, lies in more product development.

Level 2: Mapping The Market

What came about largely as a series of serendipities would need more to graduate to the next level - more original products that can find a global audience. But the few early successes haven't really spurred the rest of the industry beyond developing parts of a game (See 'Developing A Game') to creating shrink-wrapped products.

Gondal puts it at the pusillanimity of the early developers. To be fair, we need a view of what they were up against. According to Mohit Anand, manager (home and entertainment), Microsoft India, a typical AAA franchise game - global blockbusters like Age of Empires or Counter Strike - would take $25 million-30 million and three years to develop. It'll be years before Indian companies can pull in that sort of resources.

Says Christof Romuland, content editor at Game Force, an Indian magazine dedicated to gaming: "For a long time, Indian game developers didn't develop original content that was good enough for international publishers."

Rao, whose company started as an outsourcing firm in the gaming space, says: "Gaming studios the world over are not looking for cost advantages. They want the best possible quality for the money they pay, and they're willing to fork out 10-15 per cent extra."

Now the Indian industry has seemingly woken up to the fact that more money to be made in original content and design. Milestone Interactive is an example of this. It distributed for nearly seven years and brought to India Electronic Arts Studios and Sony's Playstation. It moved into development less than two years back.

The segment that's growing the fastest is mobile. Says Anupam Mittal, president and CEO of Mauj.com, a mobile solution provider: "Mobile games are more attractive. They're simpler than PC-based games and require less technical competence." Gondal paints the attractive picture from the development perspective: "A typical mobile game costs $50,000-100,000 to develop in India, as opposed to $200,000 abroad." They also take shorter time to the shelf than PC and console games - six months as opposed to two years or more. Even Indian mobile service providers like Hutch, Airtel and Reliance Infocomm are extremely keen on gaming as a value-added service. Says Mahesh Prasad, president (application solutions and content group), Reliance Infocomm: "Gaming is an important offering for us. We had started to bring on board mobile game developers before our services started." The company claims 750,000 daily game downloads from its free site.

There are other structural issues keeping the Indian industry from realising its potential. "A developer could get 70 per cent of revenues for providing game content in the US and up to 90 per cent in Korea and Japan. In India, local developers don't get more than 35 per cent," says Khurana. This keeps the Indian players focussed on quantity.

There's also the personnel problem. "Game development requires a different mindset from regular graphic design and programming," says Sachin Naik, head (business development), Milestone. Very few people are equipped to think out of the box and it takes at least 6-8 months for fresh recruits take to grasp the finer nuances of development. Paradox and Dhruva have sought to get around this problem innovatively. Paradox invites game developers from leading studios across the world to work with its employees and provide insights about the business. This has proved to be popular with its employees. Dhruva has been a sponsor at IIT Mumbai's annual Techfest for a few years now. It conducts gaming workshops and gets in touch with serious and budding gamers who may move into the segment later.

Level X: The Future

Consultants PricewaterhouseCoopers estimates that gaming will be one of the fastest growing segments of the media and entertainment industry worldwide. It's expected to reach a size of $55.6 billion by 2008. And one of the fastest growing regions is expected to be the Asia-Pacific (compounded annual growth of 23 per cent for the decade to 2008).

Some contours within are also expected to change. Mittal of Mauj.com expects console gaming to morph with PC gaming and emerge as a single sector in the future, and account for about 60 per cent of the industry's sales.

The market for development, in which East European and CIS countries are making deep inroads, is much smaller. At the recent entertainment expo, Frames 2004, consulting firm Ernst & Young predicted that the Indian industry will grow to Rs 600 crore in another five years. Gondal and Rao think it might not come about that soon.

Meanwhile, some developers are themselves trying to help the evolution. Indiagames is promoting the annual Cyber Games for four years now, where thousands slug it out on-screen.
So far, so good. But will somebody in India please switch to Level 3?