Gaming Cos Stare at Cost Stress as Google Starts to Levy Listing Fees

Real money gaming (RMG) companies, such as Dream11, Games24X7 and Mobile Premier League (MPL), are staring at cost pressures with Google starting to levy service fees for listing these apps on the Playstore from July 1.

The levy shall be a double whammy for these companies struggling to get their unit economics right as they continue to absorb the increase in GST to 28%. Although gaming companies are beneficiaries of Google’s move to onboard pay-to-play apps on the Playstore, potentially scaling their access to 600 million-odd Android smartphone users in India, RMG companies are apprehensive of the service fee likely in the range of 15-30%.

Google had earlier disallowed some apps to be hosted on the playstore but reversed its stand earlier this year “We support the progressive decision by Google. We have been advocating the same for and believe that this will give a big boost to the Indian online gaming industry, where over 70% of the revenue is generated by pay- to-play platforms” said Roland Landers CEO All India Gaming Federation (AIGF), the representative body of top RMG Companies. The decision will substantially bring down the customer acquisition and other associated costs, he added.

“However, the reception and adoption of this policy will ultimately de pend on Google’s consideration to wards two critical aspects of the industry firstly, the existing tax bur den in light of the new GST regime and secondly, the unique business and revenue model of pay to play games,” he said.

The industry contends that the gaming model is different from any other er app app operations such as Shaadi .com or which depend on one-time subscription payments or in-app purchases. In gaming, money comes in and goes out depending on the user’s gameplay.

Let’s say, for a simple Ludo match, “four players are putting in ₹100 each, there is a 28 charge as goods and service tax, which the platform or the app provider is currently absorbing and not passing on to players. Whoever wins the game, takes home roughly ₹370 as the winning amount after deducting some platform fee,” one gaming executive explained.

Google must consider that a flat 15-30% service charge merely on deposits by players would be a damaging proposition because deposits are not the revenue for app publishers. Their actual revenue is only 30 in the above example, he added.

After running a successful pilot with rummy and daily fantasy apps in India for over two years, Google in January, said it will allow more RMG operators to list their apps on the Play Store starting June 30, and will also “evolve” its service fee model. This means companies could face a levy between 15%-30% of their revenues.

S-ET Image Source: Google

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