Online Gaming in India

The Indian online gaming market currently stands at USD 290 million which is further poised to grow to USD one billion by next year despite the current circumstances.

The Indian online gaming market currently stands at USD 290 million which is further poised to grow to USD one billion by next year despite the current circumstances. The steady rise in consumption volumes, the local development and monetisation etc. is expected to catch up at an exponential rate and grow beyond precedent levels according to a study conducted in 2019. Traditionally pure-play service providers as well as several local companies are expanding currently in order to develop end to end games for the growing and never ending demand amongst the young gaming generation of our country. Further, the freemium model is expected to improve the monetisation for developers in online gaming in India exponentially.

How to start your own online gaming business:

The process of beginning your own internet gaming business is a function of the rapid strides made in technology over the last few years. The rapid advances over the internet have really opened up new avenues for newer business growth prospects starting straight from internet cafes, website creation and maintenance to the new frontier in online entertainment, which is, internet gaming.

When embarking upon an online gaming business, a person needs to take care of a few important aspects to ensure a successful business opening as well as its sustenance. Some of the procedures for setting up an online gaming business have been enumerated below:
  • Infrastructure:

1. Hardware: It is just quite obvious that an internet gaming business would require adequate infrastructure in terms of game portals or high end, sleek personal computers or consoles with adequate memory configurations to support the gaming software.

2. Software: There are quite a few different gaming options available online nowadays. For instance there are online poker and casino as well as quite a few sports based or combat games. Many of these are available online and in some cases, you may have to procure and load the software locally. In any case, there are a plethora of sites you can recommend to your customers for their greatest gaming pleasure. Additionally, you will have to do regular market research to gain information on latest gaming trends and customer sentiments.

3. Networking: when you have 8-10 or more PCs at your gaming cafe, you would require proper server management systems. Many of the games could be inter-linked and played from the server itself as multi-user modules.
 
  • Location:
    Location of a gaming cafe is of paramount importance as it determines the number of footfalls and customer base. Ideally, renting out space in a mall or a shopping complex or perhaps a commercial are makes the best business sense. Also, if the gaming area is near a school, the chances of garnering business from teenagers go up exponentially. This is because the typical target audience will consist of students or customers up to the age of 30s.
  • Marketing:
    Attracting customers is another area that needs to be taken care of. Half the battle is won if your gaming cafe is at a prominent place which has enough footfalls. If not, you may have to promote your business through in-house contests, distributing pamphlets in nearby localities to spread the word around and garner more business.
 
  • Franchise Option:
    Another option that you could consider is getting into a franchise agreement with online gaming corporation that is looking to expand locally and nationally. This generally provides better reach, marketing and technical support facilities.
 
Types of Licences you require:

Depending upon the type of product and the medium through which it is sought to be offered, licences may be required for certain products, as follows:

While, no licences are required for betting on horse races online. Based on the Lakshmanan Case, it can be argued that such games are games of skill and exempt under most Gaming Enactments. Innovative structures can be put in place for a foreign operator to offer such games.

As stated above, the question of whether sports betting is a game of skill is pending before the Supreme Court in the Geeta Rani Case. Only the State of Sikkim offers a licence to offer sports betting through the intranet within the State of Sikkim only.
  • Fantasy betting: if the fantasy sport game qualifies as a game of skill, no licence is required for offering such products under most Gaming Enactments. However, a licence must be obtained for offering such games in Nagaland, under the Nagaland Act.
  • Lotteries: under the Lottery Laws, State Governments may appoint an individual or a corporate as a “distributor or selling agent” through an agreement to market and sell lotteries on behalf of the organising state. Such persons would need to obtain authorisation from the State Governments. Private lotteries are prohibited in most Indian states under the IPC.
  • Social Gaming: no licences should be required for such games in most Indian states.
  • Skill games: as stated above, games of skill operate under the exclusion for such games under most Gaming Enactments. There is no licensing regime for such games at a federal level. Only the States of Nagaland have enacted a licence regime specific for online games of skill under the Nagaland Act. Sikkim has a broader set of games covered under the Sikkim Act, under which the games can be offered via the intranet within the state of Sikkim.
The process and timeline of applying is as follows:

Despite betting/ gambling remaining matters of exclusive jurisdiction of the applicable State legislature, there aren’t any state laws which clearly classify a game to be a game of skill. With a pragmatic approach to deal with the difficulties posed by the lack of appropriate regulation, the Government of Nagaland has passed the Nagaland Prohibition of Gambling and Promotion of Online Games of Skill Act, 2015 (hereinafter referred to as "Nagaland Act") and Rules, 2016 (hereinafter referred to as "Rules"). The license issued under the Nagaland Act and Rules ensure the fact that a particular online game is a game of skill and not an act of gambling.

The license issued in accordance to the Nagaland Act and Rules is valid for the operation of the game throughout India except in the states expressly prohibiting betting/ wagering of any sort i.e. Assam, Odisha, Telangana and Gujrat.

Nagaland:
  1. The applicant should submit an application to the Finance Commissioner identifying the games for which the licence is sought. The application must be accompanied by documents in support of the credentials of the promoters, audited financials, the software technology platform, a proposed business plan, and financial projections.
  2. If the Finance Commissioner is prima facie satisfied with the application, they may issue a Letter of Intent to the applicant. The Finance Commissioner will then forward the application to certain "Empanelled Firms" (lawyers, financial experts, etc), who assist the state government to scrutinise all applications. The Empanelled Firms will then come back with either their certification or recommendations to the applicant, within 30 days.
  3. The Finance Commissioner will also have the right to refer the application to an "Ad Hoc Committee" or an "Expert Committee" to determine whether the recommendations of the Empanelled Firms are required to be adopted. These committees are required to make their recommendations within 14 days. Once the Finance Commissioner receives the recommendations, he/she is to issue the licence within 14 days.
  4. Timeline – some operators have received the licence in a month or two, but in practice there is no strict timeline that is followed.
Sikkim – Online Games:
  • The licensee is to submit an application in the form specified in the Sikkim Act and Rules, along with the application fees
  • The State Government will then conduct an enquiry if it deems it appropriate before issuing or rejecting the licence.
Daman and Diu: an application may be made by an individual/firm/body corporate to the Director (Tourism) of Daman and Diu, who will then appoint an "Inspection Officer" to inspect the licence premises. Once the Director is satisfied with the inspection, he will recommend to the Administrator of Daman and Diu that the licence should be granted; the Administrator will then grant or reject the licence.
 
West Bengal: an application for a permit to host games of skill in a public place must be submitted to the Commissioner of Police if the permit is sought in Kolkata, or to the District Magistrate or Sub-Divisional Magistrate if the permit is sought elsewhere in the state.

Investment by Foreign Investors into the Online Gaming Business:
  • One can invest in India - either under Automatic Route which does not require approval from RBI or under Government Route, which requires prior approval from the concerned Ministries/Departments via a single window - Foreign Investment Facilitation Portal (FIFB) administered by the Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce and Industry,Government of India.
  • Apart from specified 11 sectors/activities where Government approval is mandatory, applications where there is a doubt over which Ministry should the application fall under, DIPP has the responsibility of identifying who would be the concerned authority. Proposals from NRIs and Export Oriented Units, applications relating to issues of equity for import of capital goods/equipment, pre-operative/pre-incorporation expenses, etc. are also handled by DIPP.
  • For effective handling of cases, monthly reviews by the concerned Ministries/Authorities and quarterly review meetings, co-chaired by Secretary, Department of Economic Affairs and Secretary, DIPP are also proposed to be undertaken to discuss pendency of proposals with the Government.
  • Various categories of foreign investors - Foreign Portfolio Investors, Foreign Institutional Investors, Foreign Venture Capital Investor, Non-Resident Indians can hold stakes in Indian business entities (company, partnership firms, proprietary concerns, LLPs) subject to conditions and sectoral caps on ownerships.
  • FIIs/FPIs are allowed to invest and trade in equity securities, with a maximum total investment of 24 percent of the issued and paid up capital of a company. This limit can be raised up to the prescribed sectoral cap of that particular industry by passing a special resolution to the effect.
  • Every non-resident entity is allowed to invest in India either under Automatic or Government Approval Route, except in prohibited sectors. However, individuals or entities of Bangladesh and Pakistan can invest only under Government Route.
  • FDI is a capital account transaction and any violation of its regulations attracts penal provisions under FEMA. RBI administers FEMA and Directorate of Enforcement, Ministry of Finance - Government of India has the authority to investigate in case of any violation of its rules.




Application of IP laws in accordance with Gaming in India

1.  Cinematographic work: As far as India is concerned, no specific regulations have been provided under the IP laws prevalent in our country which have thereby created several ambiguities for the game developers. The Copyright Act, 1957 ("CA 1957") provides for cinematograph film as a work of visual recording analogous to cinematography. According to the definition, video recording would imply recording in any medium of moving images or representations. Meaning, a video game may be presented in the form of a movie but will still be created through computer programming codes which cannot be construed as video recording. Even if a game gives the perception of being a video, it is the action of the player caused through the pressing buttons which runs the game, thereby questioning whether a video game can be a cinematographic work at all. It can thus be summaries that video games cannot be presented as a movie but rather require the interaction of the player with the console for it to function at all. Therefore, it can be assumed that it does not come under the ambit of cinematographic works.

2. Author: A developer can either be an individual or it could be a team  comprising of a group of people who develop the game. According to the CA 1957, an author is defined with respect to literary, dramatic, musical, artistic, photographic and cinematographic works. Further, section 2(o), defines literary work to include computer programmes, tables and compilations including computer databases, which implies that the author, with respect to a video game can be assumed to be either its developer, producer or whosesoever has caused the work to be created.

The interpretation of the above definition can only cover the coder, programmer or any other person using a computer to run the game. The producer, game animator, creative director, etc. will not be covered under the definition of an author. This means that their contribution may not necessarily get the monetary reward they deserve through royalties which, assuming the eventual success of the game, may be significant to say the least. The challenge will lie in the ability to do the apportionment linked with every individual's contribution and how that can be allocated internally, assuming that the copyright is in the name of the company for which they developed the game.

Further, a contract of service and a contract for service create ambiguity in the rights of the developers. Under the former, an employer is the owner of the copyright created in the course of employment unless any contract is signed contrary to the same and is also entitled to the royalties. In the latter, the contractor or developer who is specifically hired to create all or the varied components of a game ought to be the first owner of the copyright. A contract for service would give both the employer and the contractor royalties created during the course of work. It would include outsourcing done by the employer for getting the game created and developed by a person or a company which has the required skills and expertise. The issue here would be when both the employer and contractor have a joint IP right over the game. As seen from the act itself, the CA 1957 does not specify the clear definition of an author when there are multiple developers in the gaming industry and which invariably has the potential of creating ambiguities regarding the allocation of royalties.

3. Computer Programme: Section 2(ffc) of the CA 1957 explains the concept of computer programmes and the copyright protection attributed to it. It is primarily a set of instructions in the form of codes which causes a computer to perform a particular task or achieve a particular result. A gaming console or a particular game does not provide instructions to the computer or any other electronic device for performing any tasks. It is the software which performs such functions. A game and a gaming console only receives instructions from the player who is playing the game.

4. Patents: The very essence of a game lies in its game play i.e. how a person reacts to the various aspects like the controls, story, video, audio, etc. Section 3(m) of the Patents Act, 1970 ("PA 1970") provides that the method of playing a game does not count to be an invention. However section 2(l) provides that any invention or technology which does not exist in the country can be patented. Moreover, section 2(ja) provides that an inventive step which leads to technological advancement and having economic significance shall attribute towards an invention. Therefore, the method of playing a game should be allowed to be patented since it is a technological advancement with economic significance. Compared to the 1970's, games have developed a lot, play methods have changed and there is a lot of economic significance on account of the revenues that gaming can generate. Thus, whether the players like or dislike it,  depends upon the particular method created by the developer enabling the player to carry out various stunts, actions, character selection etc. to perform its personalized qualities.

5. Designs: A game consists of various designs. This means that creating various levels within a game, designs for the location, where it is played, the natural environment, etc. However, the Designs Act, 2000 ("DA 2000") does not cover this under the definition of a design. Section 2(d), provides that a design includes the features of shape, configuration, patterns, composition of lines applied to the article in two or three dimensional forms by any industrial process etc. No design created through technology has ever been covered by the statute, which only provides for designs created through an industrial process.
 
 
Foreign investment in India’s gaming market

A few examples of the businesses setting up and already set up in India’s online gaming sector are mentioned below:
  • French video game company Ubisoft has two development studios in India.
  • American video game publisher Rockstar Games acquired Dhruva Interactive, an Indian video game development company headquartered in Bengaluru in 2019. It was later merged into Rockstar India Studio and has around 500 employees in India.
  • Kolkata-headquartered online games platform Baazi Games plans to invest US$5 million in India’s gaming market in 2020. Investment will focus on gaming start-ups to nurture the latest gaming technology. The online portal offers card-based games, such as Poker Baazi and Rummy Baazi, and fantasy cricket Balle Baazi, on its online platforms. Indian Olympic medalist boxer Vijender Singh has been the brand ambassador of Poker Baazi.
  • Noida-headquartered ecommerce and payments firm PayTM and Alibaba Group’s Hong Kong based AGTech Holdings formed a joint venture in 2018 to launch Gamepind – a localized platform hosting popular casual and sports games. PayTM (through its parent company One97) invested US$8.8 million for 55 percent holding while AGTech Holdings invested US$7.2 million for the remaining 45 percent shares.
    Chinese gaming company Youzu Interactive entered the Indian market in 2017 with plans to invest US$10 million to develop local games and forge partnerships.
  • Vietnam-based game developer StomStudio has partnered with Indian game distributor and publisher, Gamesbond, to develop casual arcade games.
  • Indian gaming companies like Moonfrog labs and Octro have seen investments from top venture capitalist firms, such as Sequoia Capital.
  • The Chinese internet and gaming giant, Tencent, is also considering investing in India’s gaming market.
It is evident that foreign companies have taken note of India’s gaming preferences, growing userbase, and market opportunities.

Conclusion:

From the foregoing, it is clear that the current statutes do not provide protection to the game developers in India. While the development of the gaming industry has seen a massive growth, the laws are yet to provide unambiguous IP protection to the developers. Modern interactive gaming includes characters, levels, story line, game plays etc. that are a whole new category for the authors. The definition of an author leaves out creative elements of technology used for creating video games. Increasing number of gamers have found ways to get games at a lower price in order to play it on the consoles. Downloading of games and uploading it on a disk to play it on computer and game consoles, make it necessary for the laws to provide adequate provisions for preventing infringement. The absence of legislative protection creates problems amongst Indian and international developers since a large number of video games which are developed outside are played in India. The lawmakers needs to examine, agree and implement a law on legal classification of video games, developed in India and outside India which, in turn, will afford the necessary protection to the developers.