GST Shockwave Hits IPL 2024 Marketing Fund for Fantasy Gaming Apps

GST Shockwave Hits IPL 2024 Marketing Fund for Fantasy Gaming Apps
GST Shockwave Hits IPL 2024 Marketing Fund for Fantasy Gaming Apps

The recent imposition of a 28% GST on fantasy gaming apps in India has disrupted the industry, particularly during the Indian Premier League (IPL) 2024 season.

This unexpected move has hindered marketing efforts and user engagement strategies, posing significant challenges for fantasy gaming platforms during one of the most anticipated sporting events of the year.

The high tax rate imposed by the Centre has caught many gaming operators off guard, compelling them to reassess their strategies and business models.

Previously, these platforms were operating without any tax implications, but since October 2023, the sector has faced a significant financial burden. 

The implementation of the 28% Goods and Services Tax (GST) translates to users needing to allocate Rs 28 for every Rs 100 spent on online games, regardless of their skill-based or chance-based nature. 

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Why Is GST a Deterrent?
How Did Fantasy Gaming Begin?
Impact of the GST on Fantasy App Operators
Who Are the Key Players in the Fantasy App Business?
Potential Consequences for Fantasy App Users
Responses From Fantasy App Operators and Industry Experts
Exploring Alternative Revenue Models for Fantasy Apps
Marketing Strategy for Fantasy Apps During Ipl With Gst in Place
The Future of Fantasy Apps in the Wake of the GST
Tips for Fantasy App Operators to Navigate the Changing Landscape
Strategies for Fantasy App Users to Continue Enjoying the Ipl Season
Adapting to the New Reality of Fantasy Apps in the Post-gst Era

Why Is GST a Deterrent?

This tightened taxation policy has raised concerns among gaming companies, particularly regarding its adverse effects on their ability to invest in new game development, hindered cash flows, and constrained business expansion opportunities. 

Compounded with the current IPL season, where marketing budgets are already constrained due to the tax implications, gaming companies find themselves facing additional challenges in promoting their platforms and attracting users.

In October 2023, the blanket GST tax was implemented by the Indian government to streamline taxation and bring more transparency to the booming fantasy gaming industry. 

According to a report by the All India Gaming Federation, India's online gaming market has experienced remarkable growth in recent years. It is forecasted to surge from USD 1.6 billion in 2022 to a projected USD 5 billion by 2025. This growth is attributed to the rising penetration of smartphones and the internet across the country.

While the intention behind the move may be noble, its consequences for fantasy app operators and users have yet to be fully realized. Before learning further about the implications, let’s delve into the history and origin of fantasy gaming operations.


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How Did Fantasy Gaming Begin?

Fantasy sports involve creating teams of real players from different sports and earning points based on their actual game performance. It started after World War II, initially focusing on golf, then expanding to football and baseball.

With digital advancements, fantasy sports have become a big industry. Applications now support multiple games, including popular franchise-based leagues like the NBA (National Basketball Association), AFL (Australian Football League), NRL (National Rugby League), and IPL (Indian Premier League). Dedicated game lobbies for these tournaments have further expanded the fantasy sports market.

As per a recent study released by Allied Market Research titled ‘Opportunity Analysis and Industry Forecast, 2021–2027,’ the worldwide fantasy sports market was valued at USD 18.6 billion in 2019 and is anticipated to attain USD 48.6 billion by 2027, showcasing a compound annual growth rate (CAGR) of 13.9% from 2021 to 2027.

Fantasy sports platforms team up with big sports leagues like the ICC Cricket World Cup, the Indian Premier League (IPL), and the Pro Kabaddi League to get more visibility and connect with a larger audience. These partnerships also boost user engagement and participation. However, during IPL 2024, fantasy gaming apps are finding it difficult to maintain their marketing and sponsorship efforts as they grapple with the burden of GST.

Indian Online Gaming Sector from the Year 2019 to 2023 With Forecasted Value for the Year 2025
Indian Online Gaming Sector from the Year 2019 to 2023 With Forecasted Value for the Year 2025

Impact of the GST on Fantasy App Operators

The rate of GST tax has left fantasy app operators scrambling to assess its impact on their businesses. 

The sudden increase in tax rates from zero to 28% has significantly increased their operational costs. This, in turn, may lead to a decrease in revenue and profitability for these platforms.

According to market reports, more than four months following the enforcement of a 28% GST on the sector, gaming companies have witnessed a staggering increase in operating costs, ranging from 4x to 6x. This surge in costs has significantly impacted profitability, leading to diminished or non-existent returns for many players in the industry.

As per Inc42 Weekly Brief, over 500 employees were laid off by Mobile Premier League (MPL), Hike (Rush), and Spartan Poker, with Bengaluru-based Gameskraft's Gamezy Fantasy, MPL-backed Striker, Fantok, and Quizzy ceasing operations.

 “The new rules will increase our tax burden by as much as 350-400%. As a business, one can prepare for a 50% or even a 100% increase, but adjusting to a sudden increase of this magnitude means we need to make some very tough decisions,” the co-founders said in an email to the employees,” MPL CEO and co-founder Sai Srinivas had said in an internal email to employees.

Who Are the Key Players in the Fantasy App Business?

App Name Ratings Type
Big Cash 4.7 Stars Multi-Gaming RMG
Dream 11 4.5 Stars Fantasy Gaming
My Team 11 4.3 Stars Fantasy Gaming
MPL 4.1 Stars Multi-Gaming RMG
Howzat 4.4 Stars Fantasy Cricket Gaming
Fan2Play 4.3 Stars Fantasy Cricket Gaming
Paytm First Games 2.7 Stars Multi-Gaming RMG
BalleBaazi 3.3 Stars Multi-Fantasy Gaming
Vision11 2.3 Stars Fantasy Cricket Gaming
11Wickets 4.1 Stars Multi-Fantasy Gaming

The higher tax rate means that fantasy app operators may have to make tough decisions such as reducing marketing budgets, cutting down on user acquisition initiatives, laying off employees to streamline costs, or even increasing the fees charged to users. 

All of these measures could have a negative impact on the overall user experience and may deter new users from joining these platforms.

Potential Consequences for Fantasy App Users

The retrospective GST tax has the potential to affect fantasy app users in several ways. 

Firstly, the increased costs incurred by app operators may be passed on to the users, making participation in fantasy games more expensive. This could lead to a decline in user engagement, as players may be hesitant to spend more money on these platforms.

Additionally, the higher tax rate may also result in reduced prize pools and rewards for winners. Fantasy app operators, burdened by the additional tax liability, may be forced to cut back on offering attractive incentives to users

This could further dampen the enthusiasm of fantasy gaming enthusiasts and discourage them from actively participating in the games.

A media report quoted Aman Gupta, VP of Finance at Witzeal Technologies, a new-age gaming tech company, as saying, “Already, several startups in the gaming sector have ceased operations following the 28% GST adjustment. If the government’s anticipated review post-March fails to yield favorable results, I anticipate dire consequences for numerous gaming companies, including major players.

With the Lok Sabha polls announced and the government in election mode, it's unlikely there will be any changes to the GST rate for fantasy gaming before June.


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Responses From Fantasy App Operators and Industry Experts

Fantasy app operators have expressed concerns about the GST tax and are seeking solutions. Many are disappointed with the abrupt implementation of the tax and are urging a reconsideration of the tax rate.

Industry experts have also weighed in on the matter, highlighting the need for a balanced approach that takes into account the impact on both operators and users. 

With around 71 show-cause notices issued by the government and approximately Rs 1.12 lakh crore at stake, clear regulations and a unified legal approach nationwide are crucial.

Forecasts suggest that revenues from this sector are poised to reach an impressive Rs 29,000 crore.

The industry suggests that a lower tax rate or a phased implementation could help mitigate the negative consequences of the tax and ensure the continued growth of the fantasy gaming industry.

Our legal advisors have indicated that the current environment creates uncertainties that we cannot ignore. The recent imposition of a 28% GST on the entire realized amount, coupled with high TDS and issues related to payment gateways, has further compounded these challenges. Additionally, the substantial cost of customer conversion has placed a significant strain on our resources,” a social gaming platform, FanTok said on the professional networking site LinkedIn before ceasing its operations temporarily.

Exploring Alternative Revenue Models for Fantasy Apps

To overcome the challenges posed by the retrospective GST tax, fantasy app operators are exploring alternative revenue models

One such model is the introduction of in-app purchases or subscriptions. By offering additional features or premium content at a nominal cost, operators can generate revenue without solely relying on participation fees.

Another approach is strategic partnerships and sponsorships. Fantasy app operators can collaborate with brands and advertisers to create mutually beneficial campaigns. 

This not only diversifies their revenue streams but also enhances the overall user experience by providing engaging and relevant content.

Marketing Strategy for Fantasy Apps During IPL With GST in Place

Opt-In Registration Campaigns

Launch enticing campaigns across digital channels to encourage users to subscribe for SMS and WhatsApp updates, emphasizing real-time updates and exclusive offers.

Timely Updates and Reminders

Send regular updates on IPL matches, trade deadlines, and player news directly to subscribers' phones to keep them engaged and informed throughout the season.

Exclusive Offers and Discounts

Offer special promotions, such as discounted entry fees and referral bonuses, exclusively to subscribers to incentivize participation and foster loyalty.

Real-Time Player Insights

Deliver instant updates on player performance, injuries, and trade rumors to empower users to manage their fantasy teams effectively.

Interactive Engagement

Engage subscribers with interactive contests, polls, and surveys related to IPL matches, rewarding active participation and valuable feedback.

Responsive Customer Support

Utilize SMS and WhatsApp for quick and convenient customer support, addressing queries and resolving issues promptly to enhance user experience.

Strategic Cross-Promotions

Partner with sports brands and media outlets to amplify reach and promote the fantasy app's subscription service, leveraging collaborative opportunities during the IPL season.

Implementing these strategies will enable fantasy apps to leverage SMS and WhatsApp marketing effectively, driving user engagement and participation despite the challenges posed by GST implementation.

The Future of Fantasy Apps in the Wake of the GST

The fate of fantasy apps in this Indian Premier League season and beyond hinges on their ability to adapt to the new tax regime. 

While the initial shock of the retrospective GST tax may have caused disruptions, operators and users alike are resilient and eager to find viable solutions.

Despite the challenges, the IPL season remains an evergreen golden opportunity for fantasy app operators to attract new users and retain existing ones. 

The thrill of the games and the spirit of competition continue to captivate cricket fans, making fantasy apps an enticing platform for engagement and entertainment.


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Tips for Fantasy App Operators to Navigate the Changing Landscape

To navigate the changing landscape of the fantasy gaming industry, app operators need to be proactive and strategic. 

Here are some tips to help them stay ahead:

Focus on User Retention

Prioritize the needs and preferences of existing users by enhancing their experience through personalized recommendations, rewards, and exclusive content.

Invest in Marketing

Despite the increased tax burden, allocate a portion of the budget to marketing efforts, targeting potential new users and expanding the user base.

Leverage Data Analytics

Utilize advanced analytics tools to gain insights into user behavior, preferences, and trends. This data can be used to refine marketing strategies and improve the overall user experience.

Strategies for Fantasy App Users to Continue Enjoying the IPL Season

For fantasy app users, the retrospective GST tax shouldn't deter them from enjoying the IPL season and participating in their favorite games. 

Here are some strategies to make the most of the season:

Plan your Budget

Set a budget for fantasy gaming and stick to it. Be mindful of the increased costs due to the tax and allocate your funds accordingly.

Explore Alternate Platforms

Consider trying out different fantasy apps to find the one that offers the best value for your money.

Take Advantage of Promotions

Keep an eye out for promotions and special offers from fantasy app operators. They may provide an opportunity to maximize your winnings and offset the increased costs.

Adapting to the New Reality of Fantasy Apps in the Post-GST Era

The retrospective 28% GST tax has undoubtedly posed challenges for fantasy app operators and users alike. However, it is crucial to adapt to the new reality and find innovative solutions to sustain the growth and popularity of fantasy gaming.

While the fate of fantasy apps in this IPL season remains uncertain, one thing is clear - the spirit of competition and the love for cricket will continue to drive users towards these platforms. 

By embracing change, exploring alternative revenue models, and prioritizing user experience, fantasy app operators can weather the storm and emerge stronger than ever. 

With Dream11 already having a big piece of the pie, smaller companies might feel the heat. This could lead to a pure monopoly as Dream11 grows even bigger, giving them more control over platform costs. If the decision to remove GST is made, Dream11 could emerge as the eventual winner,” a cricket enthusiast posted on networking site LinkedIn.

And for users, the thrill of creating virtual teams and competing against friends and fellow cricket enthusiasts will keep the excitement alive, despite the financial implications of the GST tax.

Conclusion

In conclusion, the decision by India’s GST Council to levy a 28% GST on online gaming has stirred debate and apprehension among industry professionals.

While the government's intention to prevent gambling is understood, industry stakeholders fear catastrophic repercussions, including job losses, restrictions on foreign investment, and a potential shift towards illegal offshore platforms. 

The future of the online gaming sector hangs in the balance, with the industry pleading for reconsideration of the high tax rate. Only time will reveal whether the government will heed these concerns and revisit its decision, ensuring a more balanced approach that fosters both regulatory compliance and industry growth

So, as the IPL season unfolds, let us embrace this new reality and continue to enjoy the magic of fantasy apps, creating unforgettable moments and memories that will last a lifetime.

FAQs

What are the top fantasy apps in India?

The top fantasy apps in India include Dream11, MPL (Mobile Premier League), MyTeam11, BalleBaazi, and FanFight, among others.

These fantasy apps boast millions of users and have a significant presence in the Indian gaming market. Dream11, in particular, has emerged as a market leader and official partner of major sports leagues like IPL.

What types of games do these fantasy apps offer?

These apps primarily focus on cricket, but they also offer fantasy leagues for other sports such as football, basketball, kabaddi, and more. Users can create virtual teams of real players and earn points based on their performance in actual matches.

How do these apps generate revenue?

These apps generate revenue through various channels, including entry fees charged for participating in fantasy leagues, advertising, sponsorships, in-app purchases for premium features, and partnerships with sports leagues and brands.

Yes, fantasy sports apps operate legally in India under the exemption provided for games of skill in state gambling laws. However, they must comply with certain regulations and guidelines set by regulatory authorities to ensure fair play and responsible gaming practices.

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