This was primarily due to the high price point of games. However, that equation has witnessed a tremendous change in the last two years.
A number of factors have contributed to this – console prices have come to affordable levels and compare favourably with international prices, while software cost has come down and releases are now dated with their European launch.
Additionally, the rapidly increasing footprint of modern retail across the top 20 cities has led to heightened consumer awareness for the category.
But pricing and piracy of software are still a big barrier to growth. PC and console software have high import duty and local taxes (adding up to over 40 per cent).
This, coupled with relatively low volumes, has a cost spiral impact on consumer prices as compared to pirated content which is available at low prices, or even the grey market. Not only is piracy a loss of revenue for publishers and all the players in the chain, but also becomes a prohibiting factor for new entrants.
Additionally, Indian consumers are spoilt by the low cost of entertainment. Music, home video, cinema and cable and satellite TV subscription are all cheaper than gaming – it's an expensive entertainment proposition compared to other options.
Also culturally, gaming is a new phenomenon for the Indian consumer and video gaming is largely driven by teenagers who depend on their parents for financial support when purchasing products.
At the moment, PS2 sales are surging month-on-month and this should continue for the next couple of years – owing to retail channel expansion, competitive pricing, strong anti-piracy initiatives and advertising support. The fact that it's an entry level and affordable console further enhances its consumer appeal.
The local manufacturing strategy implemented by SCE for PS2 software in India has enabled a competitive pricing strategy – which further supports consumer choice. The launch of localised social gaming products like SingStar: Bollywood and Buzz: Maha Quiz has helped take the PlayStation 2 to a wider audience.
Also, the PSP has caught the fancy of teenagers and young adults in metro-cities and is witnessing a huge spike in sales, making it the second largest category driver.
After a slow start last year the PS3 is gaining ground and now leads next gen format sales on a month-by-month basis. We are hopeful it'll gain substantial traction once hardware and software prices are more affordable.
The next year looks extremely exciting for gaming in India. With new publishers entering the market and the existing ones ramping up investment, we'll see the industry post continuous high two digit or even three digit growth for the coming three to five years.
A strong foundation for bringing consoles and games to consumers is now in place. Further retail expansion, wider distribution, right pricing coupled with added investment by publishers, and anti-piracy initiatives will help sustain the growth.
For the current financial year, Milestone is tracking 200 per cent growth and hopes to continue growing in three digits for the coming years.
To support this ambition, we are substantially enhancing resources and investment to cover people, processes, infrastructure, content and brand – leading to the highest level of satisfaction for our principals and customers alike. We hope these initiatives will further strengthen and reinforce Milestone as the leading game distribution company in India.