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Ban on online gaming: Will it stifle this sunrise sector?

The online gaming space in India has been witnessing a surge in the last few years. According to Statista, India recorded about 365 million online gamers in FY2020, and this number is estimated to reach 510 million by FY2022. Overall, India ranked the highest in terms of the growth in online game downloads on app stores, with a growth rate of 165 per cent between 2016 and 2018, Statista said.

However, amid this huge growth scenario, there are at three states that are calling for ban on online gaming. Of these three states, two states – Tamil Nadu and Andhra Pradesh – have taken concrete steps to ban online gaming in the respective states, while the third state, Karnataka, is in the process of proposing a law to ban online gaming.

Also read:  Fraudulent activity in gaming up by 172.95% between August 2019 & 2020

Last week, Tamil Nadu Governor, Banwarilal Purohit, promulgated an ordinance banning online gaming in the state. Any involvement with online gaming will result in a fine of up to Rs 5,000 and also imprisonment of up to six months.

People who host common games houses or rooms will be punished with a fine of up to Rs 10,000 and also imprisonment of up to 2 years.

According to the ordinance passed, even electronic transfer of funds in terms of betting, prize money or winnings is banned. People who run online gaming companies will also be punished.

An official statement from the Raj Bhavan cited the fact that innocent people and youngsters were being cheated due to online gaming and some have even taken the route of suicide as an escape.

A press noted by the Raj Bhavan stated, “In order to avoid such incidents of suicide and protect innocent people from the evils of online gaming, the State government has submitted a proposal to the Governor to promulgate an ordinance by amending the Tamil Nadu Gaming Act, 1930 (Tamil Nadu Act III of 1930), the Chennai City Police Act, 1888 (Tamil Nadu Act III of 1888) and the Tamil Nadu District Police Act, 1859 (Tamil Nadu Act XXIV of 1859).”

Similarly, this week, the Andhra Pradesh Legislative Assembly passed the AP Gaming (Amendment) Bill 2020 by voice vote, which seeks to ban online gaming in the state.

Meanwhile, the Karnataka the government is studying laws in other states that have regulated online games, before drafting a regulatory framework.

The primary concerns raised are growing addiction of online gaming amongst the youth, being pushed into a debt trap and even committing crimes or committing suicide.

The booming scene takes a hit

The gaming scene in India and globally has grown tremendously since the 90s. We’ve moved quickly from gaming arcades to online gaming and now even mobile gaming. Almost every game today is played online where the device is connected to a central server which hosted by the gaming company.

Games today are mostly free, although some games like PUBG, Counter Strike and FIFA do have an in-game buying option, which allows the player to access more features and options.

However, online betting and multiplayer cards games require the user to invest some money to play with other players across the globe.

The ordinance passed is definitely going to affect the gaming sector in India. This segment has always seen tremendous growth and even during the lockdown it continued to grow. According to FICCI-EY’s report, titled ‘The Era of Consumer A.R.T.’, the online gaming segment grew 40 per cent in 2019 to reach Rs 65 billion. The report projected the segment to reach Rs 187 billion by 2022 at a CAGR of 43 per cent. The number of online gamers in India grew 31 per cent in 2019 to reach around 365 million and is expected to reach 440 million by 2022.

With this ordinance, there’s also a big question mark on gaming tournaments in India. Games like Counter-Strike and PUBG (although the game is already banned in India) host weekly and monthly tournaments with buy-ins and prize money of thousands of rupees.

Skill or luck?

One of the biggest debates in online games is whether these games are based on skill or pure luck, but the involvement of money has further complicated things for them.

One of the biggest criticisms these receive is that there is no regulation and hence, people spend a lot of money on buy-ins. Also, many kids play these games and hence, the lack of money sets in a different kind of peer pressure for them.

Industry Speak

While the gaming industry is understandably wary of the move of state governments, most of them maintaining silence on this topic when Adgully reached out to them.

Explaining on the implications of the state governments’ move, Pranav Bagai, CEO and Co-Founder, Poker Sports League, said, “The recent ban of online games in Tamil Nadu and similar talks going on in Karnataka will of course affect the gaming ecosystem in India. In my opinion, the ban may not affect Poker Sports League directly as we are a free to play platform with a 100 per cent legal business model. To play on our platform one does not have to stake or wager money to be part of PSL.”

Adding further, he said, “When studied in depth, the line between gambling and sports betting is well-defined. However, with the recent decision of the state governments the definition will be diluted on a superficial level and leave a high fraction of Indian population confused. This will, in turn, also further spread negative sentiment around skill-based games like poker. Furthermore, with such bans coming into effect, people are forced to find a way to play online games perhaps through illegal sites and other means jeopardising the efforts of the gaming ecosystem in India to offer a safe and responsible gaming experience to all its users.”

Subhrangshu Neogi, Co Founder, Escrowpay, felt that it was unfortunate to vilify all gaming platforms at large. He opined, “Prudent distinction should be made between a game of skill and chance. Gaming as a sector per se has seen a healthy growth off late among youngsters especially during COVID times. An entire ecosystem has developed in this space which is quite vibrant and heartening to see. Steps should be taken to preserve and protect it albeit with prudent safety valves.”

Roland Landers, CEO, All India Gaming Federation, too, said that it was definite that any form of the ban would impact the overall business of a sector. “Similarly, the recent ordinance passed will affect the overall gaming ecosystem. Though the industry is still studying the ordinance to understand the implications and seek appropriate recourse. Instead of banning online games, the government should call to devise a regulatory framework. Regulating this sunrise sector can revolutionise investment trends in India, AIGF and its advisory panel of experts from different domains of life will be happy to assist in playing a consultative role for the same,” he added.

Ajay Tripathi, Chief Ideator, IdeateLabs

"The ban will pinch the gaming ecosystem, but it will not create a massive impact. However, betting sports is already banned across many states in India due to its nature & adverse effect on society. The fantasy game owners will lose plenty of users overnight and face difficulty in receiving the expected returns. On the other hand, the masses will switch to other online games and platforms for gaming and entertainment purposes. The state governments have taken the right step for the betterment of people and society. The gaming industry in India is booming at a rapid pace since lockdown and witnessing an increasing number of users. The male-dominated industry is now having a better ratio of female users too. It is a wait-and-watch situation about how enormously the gaming industry will transform in the nation."  

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