December 12, 2023

Can we move the following sections to “Financials” from “Company Announcement”?

Earning call transcript

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Nazara Publishing aims to help Indian developers make great game titles in India. About a month after its launch in October, the publishing programme has onboarded 100 developers and received about 100 applications.

About a month after launching Nazara Publishing, gaming firm Nazara Technologieshas onboarded 100 developers and received about 100 applications under its publishing programme, Nitish Mittersain, Founder, CEO, and Joint Managing Director, tells YourStory in an exclusive interview.

The publishing vertical, which was formally launched in October, aims to help Indian developers make game titles for both mobile and PC platforms. At the time of launch, the company had said that it would invest at least Rs 1 crore per game and publish 20 games over the next 18 months.

Nazara will also look to close three deals related to the publishing vertical by December, says Mittersain.

Gameplay over the years

Founded in 2000, Mumbai-headquartered Nazara Technologies is the creator and publisher of mobile games. It also has offices in Dubai, London, Africa, and Singapore where its games are available. It debuted on the stock market in 2021, thus becoming the first Indian gaming company to be listed on the Indian bourses.

While the company started with mobile gaming, Nazarahas since then expanded into other categories of game development, such as gaming news, real-money games, children’s games, and casual games, by means of acquisitions and organic growth.

Nazara’s buys include publishing rights from Israeli gaming firm Snax Games in August this year for Rs 4.15 crore and Pro Football Network, a digital platform that tracks the National Football League in the United States, for $1.82 million in March.

With its acquisition of Nodwin Gaming in 2018, the company boasts of a presence in esports as well.

In May, the company increased its majority stake in Chennai-based games maker Nextwave Multimedia from 52.38% to 71.88%. Nextwave makes cricket simulation games for mobile phones and holds intellectual property for the world cricket championship series—this marks Nazara's debut in the cricketing world.

The gaming company's latest sprint in game development is Nazara Publishing in a bid to transform into a complete gaming platform.

“With Nazara being a publicly traded company, it is definitely the most well positioned to take on a project like building a publishing division. However, only time will tell if they are successful at executing it,” says a venture capitalist investing in gaming, on conditions of anonymity.

Making great games in India

The primary idea behind the publishing programme is to encourage Made-in-India games of the highest calibre.

India, according to Mittersain, has fallen short in terms of game design and game monetising capabilities despite being strong in animation and coding.

“A lot of developers have been doing services businesses (such as game development and animation) rather than product businesses because they need to monetise. Focus on creating original IPs, therefore, has been fairly limited, but we are now seeing a lot of enthusiasm," says Mittersain.

“I think it’s still a work in progress, but we will definitely see a lot more Indian developers emerge in the next few years.”

Nazara Publishing's screening process involves evaluation of game quality and potential, with in-depth gameplay testing by dedicated gamer panels. Feedback from testing will play an integral role in the selection process. After due diligence, gaming studios will receive funding to advance their games to the final publishing stage, according to information available on Nazara Publishing’s website.

Apart from capital, Nazara Publishing will also offer hands-on support, guidance and mentorship to developers.

As per the FAQs on Nazara Publishing’s website, there will be a revenue share of 50:50 between Nazara and the developers on the net revenues post launch.

The company has its ear to the ground with respect to emerging trends—particularly that of artificial intelligence.

“We believe AI will have a profound impact on how games are made and also how players are engaged within a game," says Mittersain.

Besides AI, web3 and virtual reality will find a place in Nazara Publishing as the company plans to publish games across categories, beyond mobile games.

"Our publishing initiative is aimed at being pretty cross platform," he adds.

Real-money gaming

For a long time, Nazara had shied away from real-money games due to the nature of the segment.

Real-money games have always functioned in the grey area as placing of wagers–in games like rummy and poker and fantasy sports–has been equated to gambling by various state governments and regulatory authorities. Despite this, the real-money gaming segment accounted for 77% of India’s gaming sector revenue in 2022.

"Nazara has always been a bit cautious about operating in this grey market," says Mittersain. However, with recent clarifications on online games like rummy, the company is now more confident about taking bigger strides into the space.

The Supreme Court has ruled that online rummy is a game of skill and not of chance. "We are actively looking to acquire companies in the space,” says Mittersain, adding that responsible gaming will be critical to make it a sustainable business model.

Tackling the Indian market

The Indian gaming market, which is currently valued at $3.1 billion, is expected to hit the $7.5-billion valuation mark by FY28, says Lumikai’s State of India Gaming FY23 report.

There were about 568 million gamers in India in FY23, marking a 12% growth from 507 million in FY22, according to Lumikai.

Despite the robust growth in the gaming market, Mittersain admits that India is not an easy market to crack.

"If the game is priced well, adopted well, then monetisation should happen," he says. "Indian consumers are relatively open to seeing ads in games which can create incremental monetisation; so, with the right product, the customer acquisition cost (CAC) to lifetime value (LTV) ratio problem should be solved.”

The LTV to CAC ratio measures the lifetime value of a user against the cost it took to acquire that user to the platform.

In recent times, gaming firms have been reworking their strategies in India due to rising CAC and new GST norms. Some companies are moving to other geographies, including Brazil, to counter these challenges.

“There's a lot of grind work to be done in India. A lot of data-driven analytical work has to be done. But if that hard work is put in, then there's a large pocket of users available,” says Mittersain.

Nazara Publishing will be a crucial part of that grind. With the publishing programme, Nazara’s plan is to generate original games across genres for both domestic and international markets and become a platform where developers can access everything they need, end to end–from live operations to figuring out monetisation means.

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