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The Make-Or-Break Market Power Dynamics Of Game Engines And India’s AVGC Dream

The right set of interventions can boost the gaming sector in India and enable its capture of a significant share of the global market

The Make-Or-Break Market Power Dynamics Of Game Engines And India’s AVGC Dream
POSTED ON December 13, 2023 3:56 PM

India’s burgeoning game developer ecosystem has been at the receiving end of a lot of attention in recent times. Within the span of the past two months alone, the Korea based Krafton Inc, and US’ Niantic have both announced their intention to invest significant amounts towards testing and growth within the Indian market. This is hardly a surprise, given the success that recent games with a strongly Indian ethos like Raji: An Ancient Epic, and Venba have had with a broad audience. The growth and future of Indian gaming ecosystem will be decided by a multitude of actors and factors.

While government policies will set the stage for the sector’s growth, externalities created by the private sector, will also decide the sector’s trajectory. One such key externality is the pricing of supporting software infrastructure which has the potential to deeply impact the viability of the growing Indian sector and therefore needs to be paid close attention to.

The Indian government has noted the immense potential that the gaming industry holds and has actively been working towards its development and promotion. The AVGC (Animation, Visual Effects, Gaming and Comics) Task Force constituted by the I&B Ministry, released its first report in December 2022 making recommendations for developing domestic industry, and raising India’s soft power through the AVGC medium. The report has noted that the gaming industry is at the core of the AVGC sector, and drives growth across its entire ecosystem.

The right set of interventions can boost the gaming sector in India and enable its capture of a significant share of the global market. The need to upskill and develop Indian talent is crucial for the growth of the industry. The efforts of the AVGC Task Force towards this goal are well-placed, and the plans to institute National and Regional Centres for Excellence to deliver high quality AVGC education as well as promoting industry mentorships would help create more job-ready graduates for the sector. At the same time, the Indian gaming ecosystem relies on certain core support software, such as game engines, for which they rely on foreign software providers.

While game engines can technically be built from scratch for each game, the cost and complexity of the process has resulted in an evolution within the industry wherein, game developers license game engines, while separately developing game content. There are several game engines in existence, but the Unity engine (used by Studio Sirah to develop Kurukshethra: Ascension), and the Unreal engine (being used by Bangalore-based Mayhem Studios in developing its upcoming Underground Gang Wars) are the most favoured choices among game developers. 

On 12 September, 2023, Unity announced its decision to introduce a new Runtime Fee Policy of fees ‘per-install’ upon a game achieving certain thresholds. Within a span of ten days, they announced a partial backtrack on this announcement in the face of severe backlash from the game developer community. Game developers were concerned about their games that were under development or had been developed using the Unity engine, and rightly so. It is difficult to develop a game on a different engine, which could result in sunk costs, as well as issues in finding the requisite talent to develop a game on a new engine. While Unity had a royalty-free licensing structure thus far, allowing it to earn the goodwill of game developers, the proposed change is suggestive that Unity’s former licensing structure was also its means towards establish market dominance. 

Collecting ‘rents’ from market participants is not novel behavior from platforms holding significant market power. In a similar context, Google was hauled up before antitrust authorities including the Competition Commission of India in relation to its high service fee charges for paid apps and in-app purchases on its Play Store. Unity has backtracked on its announcement, and the new fees would only apply to the future version of their engine releasing in 2024, with limited impact on independent and small game developers. However, the power of a few dominant entities in making or breaking the future for Indian game developers and the collective AVGC vision, bears deep consideration.

India’s AVGC future will rely on a strong technical and regulatory foundation. On the technical front, this would mean heavily promoting R&D and investments towards developing Indian game engines, while on the regulatory level, legislations such as India’s proposed Digital Competition Act could contribute towards limiting the impact that dominant private actors can have on the gaming ecosystem. 

- Anna Liz Thomas & Dhruv Garg - Delhi-based lawyers with a practice in technology law and policy

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