How would you describe the events of last year and their impact on the gaming industry?

We started 2023 with the clarity that MeitY is our nodal ministry. That was a significant development for us. Finally, we had a body to go to with our thoughts, concerns and questions. The change in TDS (tax deducted at source) and the creation of a new section for the online gaming industry was also a progressive step for this technology-driven entertainment sector. This was followed by the draft rules for the industry, which further reflected the government’s commitment towards the sector by keeping illegal and illegitimate platforms at bay. The levy of the new rate of GST on the industry, which is among the highest in the world, has definitely set the industry back by many months. However, it provides clarity on the taxation framework, giving businesses a chance to rebuild and reboot. The next year will be crucial as operators come to terms with these changes.

What are the main concerns of the government?

From what we understand, the two concerns the government has right now are national security, including issues like money laundering, and consumer protection. Recent examples of illegitimate operators have added to these worries. To address both those things, you really need to have regulations. A well-thought-through regulatory framework can provide the legitimate online skill gaming industry much-needed fillip. It will enable the government to distinguish between the authentic and the illegitimate operators, and make certain that safeguarding consumer protection remains a central focus.

The gaming industry is probably the first industry in the history of our country that has gone to the government and said, you regulate us. At the end of the day, it is important.

How do you perceive the 28% GST, and what strategies are you employing to navigate its impact on your business?

While the GST increase was very substantial—a 10 to 12X increase in GST on revenues—and when something so drastic happens, anyone will react. You switch on the tap, and the water is very hot, you pull your hand out, it’s just an instinctive reaction.

The industry was paying approximately 10 or 15% tax on its revenue and now, suddenly, it has become 10 times that amount; no one could fathom that. Now, what has happened over the last few months, or since 1 October, is that companies have made changes to their offering, and have introduced features and incentives, whereby they have been able to absorb the GST, but at the same time, at least be above water as they innovate and do other things and figure out what’s best for them to do to run their businesses.

But how has that impacted your business?

Certainly, the impact is significant as a substantial portion is deducted from our revenue due to taxes. However, as time progresses, we all are gradually accepting this new reality. Our perspective is that, although this shift may have set us back a couple of years, as we regroup, replan, and reconsider a lot of the things that we had done in the past, I think in the next two to three years, we’ll be back on track to becoming that major force to reckon with. The big positive that will come out of it is that there’ll be full clarity. And the hope is that in the next five to six months, if we can get clear regulations for this industry, and what kinds of games are allowed or not allowed, we will have the liberty then to try and see if we can do more games.

In a world where there was no clarity, we would have just continued to do rummy and fantasy sports, because those are the only two that had the blessing from our judicial system, and a bit of poker. However, with clarity, we would bolster our revenues by diversifying our game portfolio. Our focus right now is to figure out the right business model under the new GST regime and we see plenty of opportunities for growth in the next five years.

What’s your view on the GST notices worth over ₹1.2 trillion that the industry has received?

The matter is sub-judice and we hope that there will be an amicable resolution.

How are investors taking these developments? Do you see a funding winter for the sector?

Investors continue to express robust interest in the sector. Over the last two or three months, I think companies and investors alike are saying that, yes, the industry has taken some hit, but it’s probably for the better because the clarity will now result in significant multiple increases in value. Until now, gaming companies were not getting the same multiples that e-commerce companies were getting, because there was no clarity. Now suddenly, you will have full clarity. When the right regulation comes in, they define what kind of games should be allowed or should not be allowed, and if you can come out with a business model that can sustain itself, that can thrive and that can grow in this new reality, then I think the funds will be back. So, in the next five to six months, once the regulation comes, then we will be in a place where the investor community will also get a lot of confidence.

The biggest issue with the sector remains one of perception. What are you doing for that?

Perception is our biggest challenge, and I think everyone recognizes that. The same has aggravated owing to the illegitimate operators/bad actors. What we would like is that there should be education and information about how you can play games responsibly and that some games are actually going to help increase your mental faculties. I think that regulations will give us clarity on what should be done or shouldn’t be done. It will allow us to distinguish between legitimate and illegitimate industries, also helping address the perception problem.

We also witnessed some crackdowns on illegal betting apps. Do you think such steps will help the industry?

The more you make consumers understand that there are good games and there are not-so-good games, the more you will help this industry grow. We’re very pleased that the government is focusing on not just regulating but also enforcing what should not be allowed. This is where the industry needs to work with the government very actively because a lot of these problems are very technological in nature to solve. They’re calling it server farming now, which is nothing but once one server goes down, you spawn another one and you start operating. The operators and the government need to work closely with each other and also with the consumers making them aware. Something like our very old and favourite ‘Jaago Grahak Jaago’ campaign back in the day. That’s what’s going to need to happen when it comes to online gaming. That’s when you will see meaningful change.

Once we get there, then two things will happen. One, obviously, the industry, the operators will work with the government to make sure that a lot of the bad actors are kept at bay. But secondly, users themselves will not go to these bad actors, because they will feel unsafe. So, you’ll have to have a two-pronged approach.

You said you are paying the GST on behalf of the consumer. But isn’t it unsustainable? How is it going to impact your business?

If I have to start paying the GST on behalf of the player, I want to make sure that the player is then maximizing their engagement on my platform. That was not the case in the past, because only for the revenue that I generated from the user, I was paying the GST. I was paying it for the user, but I was only paying it for the money that was generated as the platform fees. Because that is not the case anymore and I am paying GST on the deposit that a user brings in, I, as an operator, have to make sure that for the money that the user is bringing in, I’m providing a safe gaming environment to play and, that he’s having a great time playing.

The other aspect is that players used to withdraw very, very frequently. And in the old world, that was all fine. In this new world, every time you deposit your money, you get taxed. I, as an operator, want to now make sure that I at least tell you to keep the money there, play with it, and not withdraw frequently. By the way, withdrawing is important because that’s how we build trust. But don’t withdraw unnecessarily. So, through our product features and offerings, those are some of the things that we’re working with our players on.

Why did Games24x7 recently undergo a rebranding exercise?

From day one, back in 2006, when we started Games24x7, our philosophy was very simple—let’s entertain people through games that they’ve always loved playing. Let’s offer them a legitimate alternative and we believe that online gaming can become a legitimate form of entertainment. With that in mind, we started building our product, our team, got the legal opinions and worked with the payment gateways to give us services. And then eventually, it took us three years to go live, because the perception issues always stacked against us. So, it took a long time to convince the banks that it’s okay to give us a payment gateway because what we’re doing is 100% legitimate. It took a while to convince Google and Facebook to change their policy so that we could run ads on online platforms. As we went live three years later, the one thing that remained consistent through that entire time was our operating ethos and the team that we had.

Lately, the feedback that we got for our logo was that there is a lot of science, but there is no gaming. So, if you look at the new logo, the word Games still has solid edges, but the logo now has a lot more curves. The 24×7 is written more casually. That’s what we are trying to achieve by bringing science and entertainment together.

Going forward, like big brands, we also will have a logo of Games24x7 on all our products such as My11Circle, RummyCircle, etc. We wanted a logo that defines us well, where science meets entertainment, the science of gaming, but also then all our products are reflective of that. So that’s a point that we want to push more strongly because we haven’t done enough of that.

But what was the need to do it now?

So far, we were just so focused on a lot of state-by-state legal battles, hassles, and issues. We were growing the company, growing the team and the business. In all that time, branding wasn’t that important. But now as the industry is sort of being recognized in a major way, we feel that every company needs to have a strong identity. And we really wanted to put our identity out there, especially the whole science of gaming part, that is core to our identity. And that’s why this whole thing happened.