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Video-Game Industry Targets New Market: India

India's nascent $30-million gaming industry is set to grow to $700 million in the next five years, driven by global companies that are pushing new-generation gaming consoles in the Indian market, industry watchers said.

Microsoft Corp (MSFT) launched its Xbox 360 in India in September 2006, the premium version retailing at 24,000 rupees (about $600), without taxes.

In April this year, Sony Corp (SNE) launched its Playstation 3, priced at a hefty 39,990 (about $1,000) rupees, complete with the latest Blu-ray formatted optical disc drive.

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The third major console maker Nintendo's Wii has not been officially launched in India, but is sold through various channels at a substantial discount to the Xbox and the PS3.

"The main drivers for the growth of the gaming industry in India would be seeding initiatives by the players, marketing, and pricing of the games — which is an important aspect in India," said Rajesh Jain, executive director, KPMG.

He said India's gaming market would go to $650-700 million in about 4-5 years from $30 million now, including the grey market.

MARKETING HYPE: PLAYING THE GAME

Microsoft, with its first-mover advantage, is meeting the challenge head on.

"The response to the XBox has been phenomenal ... absolute demand has exceeded our expectations and plans," said Microsoft India's Mohit Anand, country manager (entertainment and devices).

"I have more than 1,000 retail touch points across the top seven cities," he said. "We are everywhere ... any retail outlet."

While in the past consoles were left to sell themselves, now makers are taking a proactive approach to sell their products.

"This kind of an organized marketing thrust was missing when the first Xbox was launched," said Anand Gurnani, head of animation and gaming portal Animationexpress.com.

People's perception of gaming has also changed. "It has gone from being a product for a cult group to a lifestyle product."

Tanisha Kaul, product head, PlayStation at Sony India, said that a study done prior to launch showed an increase in jobs, disposable incomes and Internet usage were inclining more people towards a digital lifestyle and alternate means of entertainment.

"Indian consumers might catch everyone unawares by bridging the gaming gap with the developed markets more quickly than anyone could have imagined," she said.

CONTENT AND PRICING

Price points are very important in India. Most games are priced steeply.

In the U.S., new games for the 360 retail at around $50 a DVD. In India imported games attract a steep duty and retail at upwards of 3,000 rupees (about $75).

Prices of games are being reduced as there are more homegrown games available.

"Some of the Playstation 2 games have already been brought down. That helps to grow the market," said Jain. "At the end of the day the prices at which the games are bought is important."

He pointed out that software developed in India leverages local strengths bringing down costs and the selling price.

So Microsoft has introduced a game on cricket in India priced at 1,699 rupees (about $42). In fact, the company has absorbed part of the import duty of 54 percent on the Xbox.

"It is not the cost of the box which is important ... it is the cost of the recurring games which is," Jain said.

"What is needed is localized content and games designed for the Indian market," Tony Garcia, CEO of FX Labs, said.