Unlocking India's Gaming Market Potential: Opportunities & Challenges

1. Austin Game Conference India’s Gaming Market Potential: Challenges & Opportunities Board of Directors 06.19.07 Austin, TX Tuesday, September 18, 2008

2. Why India? Why India?

3. Questions/Concerns about India There are several preconceptions and views: • Is it really the 1 BILLION population argument? no and yes • Indians will not spend for games • There is no money in gaming in India • Indians are not gamers • What is the holdback? Infrastructure and policy

4. India Macro Views Indian market is poised to be a significant gaming market in 2-3 years’ time Macro factors: GDP hhh PC Growth hh Broadband h E-commerce hh • Overall economic growth will create a large user base with spend potential • PC placements are at a record level each year (3%) • Broadband & internet penetration, though fragmented, will increase with better government policy, lower prices, and last-mile competition • 2006 11.2 M, 2007 32 M, and 2008E 46 active internet users • E-commerce growth and spend is growing exponentially YoY

5. India Micro Views Indian market is poised to be a significant gaming market in 2-3 years’ time Micro factors: • Proliferation of interest in games throughout the country • Rise of PC gaming cafes • Increasing participation in tournaments throughout the country • Ad spending from many upcoming upstarts • Xbox Live and Sony PS3 launchings (CAVEAT) • Many entrants into the market, VC and corporate investment dwarfs revenues

6. Indian Demographics India’s pace of reform will be much larger than most other countries.

7. Indian Demographics: Internet As a result, India will have sizeable, young population with spending power. • About 50% of the population is below the age of 30 and with the Internet… • 15 million internet using School going children and college students (those below age 30), currently represent 35% of the internet audience in top 30 cities • 13 million non-school attending men (employed or non-employed men) aged 35 or below represent another 33%, or about (13 million) • True middle class is about 300 million and growing, with incomes up 6-7% p.a. in 2006 and 2007 Sources: India government websties, I-Cube (Indian research firm)

8. PC Penetration and Internet Adoption India’s PC placements and internet connections are increasingly rapidly to the point of becoming interdependent or near 1:1 • Online population grew from < 8M (2003) to > 60 M Dec. 2007 (www.internetworldstats.com) • Indian PC shipments crossed 6.5 M in Dec. 2007, >20% growth (IDC) • Internet connection points in India increased by 32% from 2006-2007 • includes cafes and homes (most café owners obtain home BB connections) • Fluctuations in the gap are due to uneven growth in Tier II and Tier III cities Sources: IDC, 2007 I-cube Internet in India Report with IMRB International

9. Broadband Penetration Rising The number of HH broadband penetrations will increase radically. Hence, by 2010-2012, India will become a sizeable market for many applications. • Currently (Jan 2008), 3.24 mm BB subs (256k/512k +) • By 2010, the number of households with bb will exceed that of Korea • Estimate currently 315 mm total households in India • Sources vary, but >20 mm HH connections by 2012 is consistent (Govt of India projects 20 MM by 2010) 4.4 mm, 5.5% monthly Growth 6/30/08 Millions % Penetration of Households 9% 6.1% 2.8% 1.9% 1% Sources: IDC, 2007 India Infoonline, India Gov’t Estimates

10. E-commerce Spend E-commerce growth has been phenomenal, with online subscriptions and digital downloads leading the growth Highest Growth • 2004-5 e-commerce revenues only $142 M, almost 13x growth in 3 years • 2009-2010 will double to $4.6 Billion of which online gaming is expected to hit $200M +!!!! Sources: IMRB, IAMAI

11. Overall Games Industry Videogame Piracy $200 MM Online! $1.3 Billion in 2007 (Financial Times) $400-475 mm 2010* • IAMAI, Pearl Research, IDC; NASSCOM predicts $300 m in 2009 & $424 m in 2010, about 72% CAGR over 2006-2011 • * thus the impetus for online gaming (ala Korea in the late 90s, The Financial Times, India) Growth of Internet Gaming Cafes No. Online Gamers & Revenues Millions of Online Gamers in India • Despite fast growth in PC/home internet, cafes will be main point of access • 200k total internet cafes in India; • expect 10k to be gaming in next 2-3 years • average seat capacity 8 to 25 • café will be main mode of access Subscription revenue • $1.7mm 2006 $3 mm 2007 • $6 mm 2008 $72 mm 2011 General Market Gaming Opportunity Data points to the Indian online gaming, while nascent, is poised to explode.

12. Show me the money! From the café sector alone, there is potential, in 2010:

13. Indian Market Outlook: Gaming • Player Base (mostly male, shifting to female (SevenSeas) • 400k+ FPS, 4-5 mm general online gamers; • in MMOs; historically A3 and Ragnarok (peak 2-3000 CCUs) • Web based or flash games will be most successful to reach the masses • 200,000 internet cafes, but gaming cafes maybe 5,000 (but growing) • LAN Based games, NFS, Counterstrike, Warcraft III (DOTA) • Will be the primary distribution method • Consoles: 37% tax, still a luxury good (PS2 is not, though) • Mobiles: carriers eat 70% of the revenue • Competition: many entrants (Zapak, Sify, Indiagames, Games2win) +many other funded startups • Sony, Virgin, EA and 20-30 others all active in Mumbai, Hyderabad

14. Current Online Layout In general most players are offering portals and MMOs to the casual sector KOL Dying Persistence/ MMO Rag narok A3 Zapak.com (2008) ? War Rock KrazyCarts CricketParty.com CT Race Dance Mela Multiplayer Nostale (SIFY) IndiaGames Games2win Zapak.com portal Indyarocks SIFY Portal Simple Games 0 $ Spend Online $$$ Circles represent approximate subscriber base Casual Serious Gamer

15. Evolution of the Indian Landscape The industry is on the verge of takeoff. Past Present Future + Casual (mostly males) + Subscription + 2 MMORPGS + Free2Play + Advergaming + 5 MMOGs most casual + Too many advergames + F2P + Micropricing + Web/Flash + Many MMOGs

16. Evolution of the Indian Landscape The industry is on the verge of takeoff. Past Present Future + Casual (mostly males) + Subscription + 2 MMORPGS + Free2Play + Advergaming + 5 MMOGs most casual + Too many advergames + Micro$, F2P + Web/Flash + Many MMOGs New Gaming Genres Localized Content Aware ness Advance Models (Rev. Share) Rise of Gaming Cafes. Game Portals Offerings for Gamers Casual Games New Entrants BBand Penetrat. Game Dvlprs Funding Industry Catalysts 2007 2009 2011 Underlying graph from IDC 2007

17. 5 10 15 20 25 30 Target Demographic: India is wide open EMERGING MARKET (INDIA) • Low End • Gaming exposure unknown • First stage: casual games • Low ARPU • High End • Habits are forming • Higher ARPU • Loves quality graphic • Loves community Wider because very little Distractions (Consoles AGE • Low End • Popular casual game for 35+

18. Pricing Success in India will come from the ability to price in small increments • Toothpaste, cigarettes, shampoo • 30%-40% extra margin!!! • “Hindustan Unilever is one of the jewels in the company's emerging-market operations. It is India's biggest consumer-goods company and biggest advertiser. One of its strengths is its ability to cater to all segments of the population by adapting products and prices. In laundry detergents, for instance, it makes Surf Excel for the affluent, Rin for the “aspiring” class and Wheel for poorer people, the vast majority of whom live in the countryside. It sells 70% of its shampoo in one-use sachets for the equivalent of a couple of cents.” The Economist Jan 31 2008

19. Pricing and Payment How do I get paid? India is a cash society, though… • Prepaid cards • ATM Debit cards • Credit cards (the Indian youth: in one generation have become like Americans) • ITZ cash • Mobile Payments (in India effective payment methods Oxygen, Paymate) • Cash via collection centres: internet cafes or other shops

20. Biggest Challenges Factors • Power, power, power; roads, roads, roads • Pune example during WR • India just does not have enough power to fuel GDP growth in some states, though many projects scheduled to come online in 5 years’ time (it will get worse before it gets better) • Reliable internet (both industry and government) • Connection speeds (1:4); Yes even DSL is shared unwittingly to consumers • Connections improving, but still lag and latency within India is spaghetti • Fiber is everywhere in metros, but noone can connect; LAST MILE ownership • Weather? • Yes. Monsoon season creates more havoc than anything • Local government regulations or political actions • Smashing of cafes because of bad posting on Orkut • Chennai – café regulations • How does one best collect cash payments?

21. India Map India is a vast place and a very complex country. + state differences + cultural + structural + infrastructure + gamer (café vs. home)

22. India Map: Cafe Cities Also 20-30 Tier II/Tier III cities, and numerous university towns Cite differences Ahmedabad Indore Baroda Kolkata Gwalior Mumbai (suburbs) Hyderabad Pune Bangalore Chennai Mysore

23. Graphical Journey

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26. Photos • Leave with this fact: the kid with no shoes and the construction worker at a Tier III café in India

27. Graphical Journey

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37. Graphical Journey: End

38. End Note Thank You!!!

39. Indian Market Outlook: Appendix • Consists largely of casual gamers who are mostly male ages 15-25; however this factor is shifting; many young males looking towards advanced games • over 400k First Person shooter players in India • university and college festivals of several thousands all have an advanced gaming focus • most games largely LAN focused – Need For Speed, DOTA, Counterstrike • Gaming tournaments are immensely popular in India, but still focus on old games – Counter Strike, racing, Warcraft III) • Competitors and investments – until date about $150 mm in Indian market space • Zapak has about has 3 mm registered users in about 8 months for its casual zapak.com portal • Plans to launch Zapak cafes throughout the country and 2 MMOs this year (I from Shanda, other undisclosed) • Level Up success of $15K/month on 2000-2500 CCUs; after $millions invested; revenues largely increased in switch from high subscription to lower item purchases for Ragnorak Online • SIFY is aggressively retooling its cafes with better BB and plans to launch its own portal • Games2win has 2mm+ registered users for its portal • Handful (Indyarocks –mobile and casual), Cricketparty.com, Seven Seas, Jump (mobile & casual games) 1)

40. Competitive Landscape: Appendix Competition in Online Games (Services and Publishing)