In part two of our interview with Jayont R Sharma, chariman and CEO of Milestone Interactive, he tells us about the company's new business ventures - namely retail and game development - as well as the opportunities for venturing into video game rentals and digital distribution.
You can read part one of the interview here.
MCV: Milestone has started distribution of peripherals and merchandise of late. Is that something you intend to get into further?
Jayont R Sharma: It's a marginal category and something we did to complete the eco-system. Figurines were in demand, and this the feedback we got from our (Game4u) stores, and we thought this was something that could be built into a scalable business. But figurines have had average success, and once again it's got to do with pricing. So it's restricted to the hardcore guys.
MCV:Game4u has an online store as well as an offline presence. Do you plan to continue to expand your physical presence with more stores or are you looking to make online your main focus?
Sharma: Our goal is to have 50 stores across the 25-30 markets, but we are approaching the physical roll-out with a lot of caution. With the difficult retail environment and cost of real estate, lots of malls haven't delivered on their promises. As a specialist, you don't have too much of a fall-back, so it is a difficult space. That said, we've had success with our stores, especially the ones in the metros. What e-commerce does is give us a multi-channel opportunity and helps our consumers talk to a single brand. We can also use our retail stores as possible distribution centres. We're careful about which cities we set up our stores in, because with the kind of investment we put into our stores, we can't afford to be in every catchment area. It's a slow process, but we've got a couple of other properties signed up. The online store will continue to get substantial investment behind it.
MCV:Considering the size of the market and how much competition there is in games retail - both specialist and large format – does it justify the amount of expansion that's happening, not only through Game4u, but other specialists?
Sharma:I think we need more and more stores. We've got some major retailers contracting their games focus now, so where does the consumer go? Online retailers have come and plugged a lot of holes in the market. So if somebody is going to contract, somebody else will expand, and that's what's happening. And overall, the market is still growing.
MCV:Lots of retailers are doing trade-ins and preowned sales now; Game4u does it too. As a distributor whose mandate is to push new products and a retailer who is offering cheaper used games, how do you find a balance?
Sharma:As I said, I would love to see new console games at Rs 999. Given the limited purchasing power of the Indian consumer, it was critical to allow them to be able to recycle their money. If someone can't afford to buy a brand new game, but can get that game for a much lower price, that will only help grow the market. It also gets a lot of gamers to try out genres or franchises that they wouldn't otherwise touch.
MCV:Are you also looking into rentals? That would make it even easier for someone who wants to try out new games?
Sharma:It's not something we've looked at yet, but if that becomes the need of the hour, and if it's permissible within the legal framework, then we're open to it.
MCV:Are preowned and rental businesses a cause for concern to publishers?
Sharma:We know that internationally publishers have a certain stance on preowned, and I think everyone is trying to get a piece of that revenue. I think the publishers also realise that if it's something that the consumers want, one needs to have it there. How they can make money out of it is something they need to look at.
MCV:All retailers are really pushing preorders these days and offering bonuses, DLC, etc as incentive. That's not quite being backed up with timely deliveries, which is an age-old issue in India. So with retailers making such a push for preorders, isn't there something publishers can do to support that?
Sharma:As a distributor, we try to ship games to all our retailers at least 12 hours before release date, if not 24-48 hours. In some cases, we're not successful, but there are lots of logistical issues that cause that. The shipping date from the publisher is set for all markets, so everyone's goods get shipped at the same time. Then there's the problem of managing the process at customs, and there are no guarantees that the goods will clear customs a set amount of time after arriving. Then we have to prepare the product (stickering, etc) and segregating into smaller lots to ship to retailers and sub-distributors. We do what we can, but the time it takes to get from the publisher to our warehouse is not always under our control.
MCV:Digital distribution, especially on PC, is picking up fast. Steam is getting popular in India. Is that something you've thought about getting into through Game4u?
Sharma:We will make the announcements at the appropriate time, but there are rumours that we're getting into it, so I'll just leave it at that.
MCV:You announced a while back that you were getting into game development on mobile and DTH platforms. How close are you to getting your first game out?
Sharma:We will soon make some announcements regarding our games that are ready, but that's not too far away.
MCV:Are these mobile games? Are you developing these games in-house or simply publishing?
Sharma:Yes, mobile. We're publishing these games through third-party developers. We're not setting up our own studio just yet, although I'm not ruling that out. That depends on how our publishing model works out and what sort of IP we're able to build through these alliances we're working on. If that requires us to make further investments in those teams, we will.
MCV:Are you working with Indian studios?
Sharma:At this point, we have a shortlist of Indian studios that have the capability of delivering a certain quality, who can make the kind of games we'd like to add our name to. But we're also in talks with a host of international developers. At the right time and with the right project, we may expand.
MCV:With a new generation of consoles set to come out next year and with all of Milestone's varied businesses – distribution, retail, development - where do you think Milestone's main focus will be in the coming years?
Sharma:We have a multi-category strategy. Distribution has been and always will be our backbone. It is our largest revenue generator and will continue to get the attention and focus that it deserves. While people may play up the doomsday scenario for packaged goods internationally, I don't see things turning down so fast as far as India is concerned. We are still in the early stages of our growth cycle. From 2 per cent, if we can even get to 10 per cent market penetration, we've still got a 5x growth opportunity. At the same time, we acknowledge that we cannot be a single play company. Ever since our failed attempt at PS2 and PC game development years ago, the ambition has always been there to create games. With the high performance mobile hardware now and the quality gaming experiences they can afford, we think it's the right time to do that. We're distributors and we're in retail, so with development and publishing, we're just completing the value chain.
Our ambition is to be an end-to-end gaming company out of India, and not just restrict ourselves to the Indian geography. For packaged goods, India will always be a large market for us, but the digital opportunity opens up the world market to us.
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