Austin, TX
Tuesday, September 18, 2008

There are several preconceptions and views:

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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

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

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

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)

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

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)
Millions
20
15
10
5
0
35
30
25
1%
3.24
2007
4.4 mm,
5.5% monthly
Growth
BB Connections
6/30/08
% Penetration of Households
1.9%
6
2008
2.8%
9
2009
6.1%
20
2010
9%
30
2012
Sources: IDC, 2007 India Infoonline, India Gov’t Estimates

E-commerce growth has been phenomenal, with online subscriptions and digital downloads leading the growth
Figures in millions
Online Travel Industry
Online Non-Travel Industry
- eTailing
- Online Classifieds
-Pain Content Subscription
- Digital Downloads
Total B2C/ C2C E-Commerce Market
2006-7
1,375.0
395.0
212.5
135.0
5.0
42.5
1,770.0
2007-8 % YoY
1,750.0
27%
552.5
276.3
40%
30%
205.0
7.5
63.8
2,302.5
52%
50%
50%
30%
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

Data points to the Indian online gaming, while nascent, is poised to explode.
Overall Games Industry
$400-475 mm
2010*
$200 MM
Online!
Videogame Piracy
$ 1.3 Billion in 2007
(Financial Times)
 IAMAI, Pearl Research, IDC; NASSCOM predicts $300 m in 2009 &
$424 m in 2010, about 72% CAGR over 2006-2011
Growth of Internet Gaming Cafes
 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
 * thus the impetus for online gaming (ala Korea in the late 90s, The
Financial Times, India)
No. Online Gamers & Revenues
Millions of Online Gamers in India
16
14
12
10
8
6
4
2
0
Subscription revenue
 $1.7mm 2006 $3 mm 2007
 $6 mm 2008 $72 mm 2011
2006 2007 2008 2009 2010 2011

From the café sector alone, there is potential, in 2010:
Cafes
Seats per café
Total Seats per hour hours/day days/year
% spending extra
Year
10,000
10
100,000
$1
4
300
$120,000,000
10,000
10
100,000
$2
4
300
50%
$180,000,000

 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

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

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 adv ergames
+ F2P
+ Micropricing
+ Web/Flash
+ Many MMOGs

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

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

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

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

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?

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

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

 Leave with this fact: the kid with no shoes and the construction worker at a
Tier III café in India

 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)

Competition in Online Games (Services and Publishing)
Competitors
I-nrgizer/Acclaim/Others
Zapak
Games2win.com
Indiagames.com
Seven Seas
CricketParty.com
Level Up
SIFY
Kreeda
Other
Core Offering
Outsourcing Services
Casual/Portal/MMO
Game Cafes
Casual/Portal
Racing MMO
Casual/Exent Model
Host of WGC/Tournaments
Casual: women casual MMOG unknown
Ragnorak
A3, GunzOnline, Portal
Game Cafes dance casual MMO design studios, artwork, basic game design
User Base
NA
4 million
3 million
2 million
unknown
1.5 million
24000/day
500/day unknown
NA
Funding History
$100 mm Reliance
$6 mm tom online bought out by Bollywood private private
$10 mm internal
$10 mm