Wheel of fortune: why the explosion in skill gaming in India shows no sign of fizzling out

Boasting a population of 1.4 billion, which is expected to soon overtake China for the title of world’s most populous country, India has long been earmarked by online gambling industry observers as a market to watch. As things stand, sports betting and games of chance are outlawed, yet what are considered skill games – chiefly daily fantasy sports (DFS), rummy and poker – are permitted for real money in most of the country’s 28 states.

The result is dozens upon dozens of homegrown companies have sprung up to ride a skill games wave that has swept the country in recent years. According to a report published in early 2022 by the Federation of Indian Fantasy Sports and Deloitte, the fantasy sports industry alone in India is worth INR33,000 crore (one crore = 10 million), or almost £3.7bn, and there are some 130 million registered users.

This user base ballooned at a compound annual growth rate (CAGR) of 130% between 2016 and 2021 and is expected to grow at a CAGR of 32% in the coming years. India’s obsession with cricket has been the main driver behind all this growth. “Cricket is a religion in India,” says Sameer Barde, CEO of the E-Gaming Federation (EGF), a trade body for online gaming in India.

Deloitte says the sport accounts for at least 85% of revenue across the fantasy sports sector, with other sports like football, hockey and kabaddi making up the remainder of revenue. However, the creation of professional leagues like football’s Indian Super League (established in 2014), the Pro Kabaddi League (2014) and the Hockey India League (2013) have raised the profile and professionalism
of these sports.

Sweet dreams

Some of the most well-known DFS brands include the likes of MyTeam11, Mobile Premier League (MLP), My11Circle and Fantasy Akhada. By far the largest and most popular site is Dream11. In fact, KPMG put its market share at a whopping 90% in 2019, while Dream11’s parent company, Mumbai-based Dream Sports, was India’s first sports tech unicorn. And last year the company raised $840m from investors led by Falcon Edge and Tiger Global in a deal which valued the operation at $8bn.

Quite clearly, DFS has become big business in India. A main reason for its steep trajectory is the fact it fills the legal sports betting void in India much in the same way DFS did before PASPA was struck down in the US in 2018. “Betting is illegal so skill-based games like fantasy sports have had phenomenal growth,” confirms Santosh Smith, director of Capital Group, the parent company of Indian DFS operator Khelo Fantasy, on a Zoom call from Mumbai.

On the player demographics Khelo Fantasy sees, he says: “Players are mostly males, mostly aged between 18 and 45. But we are seeing increasing numbers of females playing as well.” Smith, who is also a governing council member of the Federation of Indian Fantasy Sports, adds that all forms of skill-based gaming have seen “tremendous growth” of late, yet his company has no plans at this stage to expand into poker or rummy.

Played with 13 cards and involving two to six players, rummy was already huge in this South Asian country long before the internet. In 2015, the Supreme Court declared rummy played for money as a game of skill rather than gambling, prompting Bobby Garg to co-found rummy games studio Passion Gaming soon after the ruling.

India’s online rummy sector is expected to be worth $1.4bn in 2024

Rummy Passion launched the following year. Today, Passion Gaming has amassed more than five million registered users, of which 10% are real-money players. Monthly active users (MAUs) are currently around 40,000 to 45,000. “We are touching $7m or $8m of net gaming revenue right now,” Garg states. And he sees plenty of runway for growth ahead. “Rummy is extremely popular in India, more than any other card game. The market is huge – it is the number one card game.”

Some of the biggest rummy sites and apps include Rummy Circle, Junglee Rummy and Ace2Three, however it has become an extremely crowded arena as companies look to tap into an online rummy market expected to be worth $1.4bn in 2024, more than a fourfold increase on the $335m in 2019.

It may not be as popular as rummy or another prevalent Indian card game called Teen patti (meaning three cards in English), but poker is growing across the country. The PokerStars brand is available in India through PokerStars.in and competes with domestic operators like PokerBaazi, Adda52 and Pocket52. Local personalities have been hired by the main sites as brand ambassadors.

“At a macro level, this industry is still fairly nascent,” says Barde of the EGF when commenting on the scale of the skill games market. “There are upwards of 450 million gamers in India, although most games are free-to-play. We think up to 100 million people play fantasy [sports] but this varies due to seasonality. The [T20] World Cup is coming up [in October and November] and numbers will skyrocket.” Barde suggests DFS and rummy account for roughly 85% of real-money skill game revenue across the sector, with poker a “distant third”.

Press play

Parts of the skill games industry received a shot in the arm when, in September, Google rolled out a pilot programme allowing DFS and rummy apps from companies incorporated in India access to the Play Store. The one-year pilot excludes poker, though, no doubt much to the vexation of poker games developers. Other casual games that can be played for money online in India, such as quizzes, pool and chess, were also excluded. Rummy and DFS companies have hitherto been forced to offer Android apps as downloadable APK files direct from their websites. Having to sideload apps isn’t particularly conducive to a smooth user experience, plus the device’s software displays a message warning the user about installing files from outside the walled garden of the app emporium. UK bettors had a similar awkward user journey before the ban on gambling apps in the Play Store was lifted in 2017.

Those people with iOS devices are able to install real-money skill games apps from the App Store in India, which is just as well as Apple doesn’t allow sideloading. However, iPhones are a rare species in India; Android-powered smartphones dominate the space with around 95% of market share. Such ubiquity makes the pilot programme a big deal for DFS and rummy operators.

Having a presence in the Play Store not only helps with product visibility and top-of-the-funnel marketing but it also reduces the cost per acquisition, which Garg of Passion Gaming says has been “broadly $50”. “Users will be able to window shop to compare apps and reviews,” he adds.

Rummy Passion has racked up four million app downloads to date, so Google’s pilot is bound to provide a material boost to these numbers. Moreover, for Garg, it legitimises the sector. “This [Google’s decision] is a validation that rummy and DFS are skill games,” he remarks. “People will now be able to search for Rummy Passion in the Play Store, so it makes it an easier process.”

Some EGF members offering rummy and DFS have not managed to be included in the pilot for whatever reason, yet Barde still welcomes it as a “good first step”. “Obviously we hope that eventually all games of skill will be onboarded. But we understand it is a pilot and Google is starting with these two [verticals].”

Frustrated by just the inclusion of rummy and DFS, homegrown social games platform WinZO has challenged Google’s policy in the Delhi High Court. WinZO argues that the tech titan is
implementing what WinZO perceives to be arbitrary classification which will impact the reputation of its business.

“Google Play, as a market leader, has a duty to act in a fair, reasonable and non-discriminatory manner,” WinZO’s co-founder, Saumya Singh Rathore, was quoted as saying by local media. “There does not seem to be a reason for selecting only DFS and rummy.”

A passage to India

This explosive growth of skill games in India hasn’t gone unnoticed among traditional gambling operators. For example, Passion Gaming is 51% owned by London-listed online and land-based operator Rank Group. This came about when, in 2019, Rank Group snapped up Stride Gaming, which had originally acquired the majority stake in Passion Gaming in 2017 for $3.75m.

“Cricket is a religion in India,” says Sameer Barde, CEO of the E-Gaming Federation

Then, in March 2021, Flutter Entertainment swooped to acquire a 50.1% majority stake in India’s Junglee Games for £48m. The FTSE 100 giant later exercised call and put options to purchase an additional 7.2% stake for $7.5m and has call and put options that could mean 100% ownership of the business in 2025. Junglee, which offers rummy, a fantasy cricket app called Howzat and other games, has been described by Flutter as the fastest-growing and number two rummy brand in the market (was in third place before the acquisition).

Junglee has also been able to call on Flutter-owned FanDuel’s tech expertise and knowhow with DFS, while PokerStars’ version of the lottery-style poker jackpot variant, Spin and Go, has been repurposed for rummy. Junglee’s GGR jumped from £11m in H1 2019 to £58m in H1 2022, while average monthly players soared 92,000 to 869,000 in the same period. During Flutter’s financial results presentation for the first half of 2022, group CEO Peter Jackson talked up skilled gaming in India.

“The Indian market has many attractive characteristics,” he told investors. “It’s one of the fastest growing markets through significant increases in disposable income and a doubling of internet and smartphone penetration. This has driven CAGR of 54% in the real-money gaming market over the past three years, with rummy the fastest-growing vertical with 57% of the market in 2021.”

Jackson also highlighted how despite the Supreme Court ruling protecting rummy as a game of skill, rummy has defended challenges in a number of states over the past 18 months, “providing positive regulatory momentum”. Flutter’s successful bolt-on acquisition means we could see other traditional online gambling operators target India as a means of diversifying from stagnating and increasingly regulated European markets. For instance, it wouldn’t be a major shock if Flutter’s main UK rival, Entain, eventually entered the fray with some Indian M&A of its own. After all, the multi-brand giant’s growth playbook has been to snap up local heroes in regulated markets.

True, India doesn’t have regulated gambling, but rummy has that important Supreme Court protection. Plus, Entain recently acquired Seattle-based esports betting operator Unikrn in a bid to become more of an entertainment business than a pure gambling firm.

In the meantime, local companies continue to ride the skill games wave in a country where, despite India being the world’s second-largest phone market, smartphone penetration is around just 42%. There is a clear pathway to growth, with Deloitte predicting India to have one billion smartphone users by 2026 as 5G is rolled out. In fact, 5G-enabled devices are expected to account for 80% of devices sold there in 2026. This adoption of smartphones and a burgeoning middle class could help to explain why Flutter is so bullish about the market.

Indeed, a slide within the firm’s H1 2022 results presentation showing data compiled from Redseer Strategy Consultants forecasts India’s real-money online gaming market (rummy, DFS, poker and casual games) to swell from £1.39bn for full-year 2021 to £4.2bn for full-year 2026. “As a country and as an industry, we are just about starting out on this journey,” Barde says. “There is tremendous potential; we are the fastest growing form of entertainment.”

As for India ever legalising sports betting and quelling the huge illegal market run today by underground bookies and organised criminals, this does seem a long shot. That said, few people a decade ago were optimistic the US would overturn PASPA, paving the way for regulated sports betting live today in 31 states plus the District of Columbia.

On the prospect of legal sports betting in India, Smith of Capital Group says: “I don’t see it happening, but you never know what is coming.”