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Interview with Milestone Interactive Biz dev head Sachin Naik and Biz Director Sunil Menghrajani

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Sunil Menghrajani

“Having a growing community of gamers is essential to growing
the game development business in India”

Gaming is a phenomenonal industry internationally, surpassing Hollywood and other entertainment industries. Inspite of having all the necessary talent parts, India has not been able to realise its potential in this industry which is a $32 Billion industry globally.

While popular gaming website Gamasutra has 160 Indian gaming companies listed with it, a majority of these are more into smalltime related services like porting and testing etc. Amongst the few handful companies that are majorly into gaming and have some critical mass is Milestone Interactive.

The company which is into development, services and gaming software and hardware distribution has been amongst the early entratnts in this field. As part of Gaming Gyaan series, Animation ‘xpress’ Anand Gurnani recently met up with Milestone Interactive Business Development head Sachin Naik and Business Director Sunil Menghrajani.

Here are Excerpts from an insightful conversation…

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Sachin Naik

Lets begin with some insight on Milestone?
Milestone began 8 years ago in 1997. We represent leading global games publishers in India including Sony Computer Entertainment, Atari, Codemasters, Eidos, and Novalogic. We are also a full-fledged developer of hardcore & casual games for PC, console & wireless platforms. As the exclusive distributors for Sony Computer Entertainment, Europe (SCEE) in India, we market, distribute and sell PS2 game consoles, peripherals and software across the country. Soon we will be launching the PSP (PlayStation portable), which is a hand held gaming and digital media entertainment device from SONY.

Right since inception, Milestone has been making legitimate software available in the Indian market. Not only have we imported the titles, but in most cases have made sure that they are made available day and date alongside the international launch. We have closed the gap between local and international game release dates as well as brought price points down, bringing some of the catalogue titles to India in the price range of Rs 199/- to Rs 499/-

Milestone has also gone into the first phase of localization; we have locally produced boxes, local manuals, and local docs. We are also doing stamping and replication locally for some of the titles.

Prior to our entering the field, the history of legitimate game distribution in India would be roughly a decade old. Jayant Sharma the CEO of the company is a pioneer in this field and he has played a large role in getting gaming off the ground in India, he’s got a background in Music, Entertainment Hardware, IT and International trading. Actually even before starting Milestone Interactive, we started with distribution of Edutainment Software.

What was that?
It was a company called Eduteq. Launched 2 years before Milestone Interactive, Eduteq distributed edutainment titles. The ground realities back then, some of which haven’t changed yet, were that people were not willing to pay the hi end prices (1499/-), also the international syllabus was not suitable for Indian students. Besides, the PC penetration was much lower than what it currently is.

We were always an entertainment company so we shifted from edutainment to gaming.

Coming Back to Milestone, what’s your business structure?
Our business is broadly divided into 4 areas, they are Game Development, PC Games Distribution & Licensing, Playstation Game Consoles and Software, and finally theatrical and home video distribution of Movies.

The focus areas for our Game development business are Product creation & 3rd party development for PC & Console, Artwork Outsourcing and Creation of Mobile and Wireless Games. We will release a combat-racing game for the PC platform in the fourth quarter of 05. This game has also been approved for leading consoe platforms and will consequently be released for these console platforms too.

As part of our PC Games Distribution we reach out to over 1000 stores across the country from various segments such as Music, Video & Home Entertainment, Books, Toys, Cell Phone stores, Photography, Computers, Departmental, Specialist stores etc. A large number of lateral accounts are serviced by our regional & local distributors whereas Key National Accounts such as Planet M, Music World, Lifestyle, Landmark and Sony World are serviced directly by us.

As regards Playstation Game Consoles and Software, I have already dwelled upon it in the beginning of the interview. Here I would like to point out that the Sony Playstation is the only gaming console that has official representation in India, Nintendo and Xbox do not have any representation here. Even in the grey market Playstation outsells the other consoles.

How many companies are into gaming in India?
More than 160 Indian companies are listed as gaming companies with Gamasutra, however it is unclear what they do within the games industry! There are only a handful of Indian companies that are seriously into game development & publishing on a substantial scale such as Milestone, Dhruva, Indiagames and Paradox.

What is the size of the local market?
There are a lot of impediments in getting the right figures. A guess estimate and this is mine, is that PC and Console games market should be roughly around Rs 60 -70 Crore annually. The pirated market would be an additional Rs 50 crore in value terms. The PC Penetration in India is around 1.6 million homes (TOI 30 JULY : Source MRUC/Hansa research) Even amongst these there is a small percent that is equipped with game video cards etc.

“PC and Console games market should be roughly around Rs 60 -70 Crore annually. The pirated market would be an additional Rs 50 crore in value terms”

If the legitimate market is in the range of 60-70 crore, wouldn’t the pirated market be much more?
It depends on whether you are talking in value terms or volume terms. The cost of a pirated CD is just Rs 50, which is on an average a tenth of the price of an original title and sometimes a fifteenth of the legitimate cost. While the ratio in terms of unit sales (Volumes) between pirated and legitimate ones would be 1:15 in favor of pirated, the overall value of pirated sales is nearly as much as that of legitimate fare.

What is the size of the wireless games market in India?
It should be roughly around Rs 20 Crore and primarily mobile games. There are around 50 million handsets in India, of which around 4to 5 million handsets are Java enabled with color screens. 2% of the total handset population has downloaded games. Wireless games tend to be license driven and attract occasional gamers.

Titlewise, what are the volumes like for PC & Console?
For PC, The bestsellers sell anything between 20 and 25,000 units over a period of 2-5 Yrs (So far 10 -15 TITLES have fared like that in India) Also the prices of titles lower after the initial strong periods of sale, where a title priced at 1299 could be reduced to 499 after a few years. Good Sellers are titles which do 3-4,000 units. And regular staple fare sells around 1,000 -1,500 units.

For console software, it would be too difficult to even hazard a guess. In terms of the hardware (PS2) the installed base in India is around 100,000 units, give or take a few.

LAN Gaming?
Lan gaming is just about taking off, not more than 500/600 game rooms across the country (Sify / Reliance etc). Considering each of these has around 15 PCs on an average then you have about 9000 pcs in LAN gaming.

From 97 to 2005. What has the experience been like?
PC Penetration has grown, the prices have fallen. So far video games have had a limited impact on the market, however this is growing. There are various reasons for this –

– Limited Exposure, Video gaming is not part of the core Indian culture

– Only recent generations (Mid 80’s onwards) have any real exposure to PC gaming

– Availability & Installed base of the platform is still relatively low

– The price of software is also a barrier (This thanks the software being imported and the amount of duties and levies, besides the volumes of legit sales are pretty low hence higher costs. Console hardware and software have high import duty + taxes (ranging between 25 to 50%). The heavy taxes and duties coupled with the low volumes raise the prices as compared with the pirated content which is available at Rs 50 – 150/- a title.

While the only positive aspect to piracy is the sampling opportunity & exposure it gives to consumers, the menace of Piracy has too many adverse side effects for the industry as a whole.

“Piracy has too many adverse side effects for the industry as a whole”

Like?
Not only is piracy a loss of revenue for distributors, but it’s a prohibiting factor for new entrants too. Bigger international players stay away due to this. In turn this means that market development activities will suffer. Second thing is because distributors/importers like us dont find the volumes to be growing the localization quotient will be low.

Low localisation means lack of a developed domestic market of gamers, which means you cannot compete in the international arena. Until and unless we have a proper dedicated and growing community of gamers, we will not be able to understand the psyche, which means Indian companies end up doing bits and pieces of service work.

The gaming industry worldwide is $32 Billion and a substantial part of this business can come to us. All the components are there in this country but the talent has never considered gaming as a career, thanks to gaming not being in our culture. Having a growing community of gamers is therefore essential to growing the game development business in India.

Another thing we have observed is that since Gaming is not a mainstream activity, simple games which are easy to play do well. Hardcore gamers are more prone to pick up pirated stuff as they are technically savvy and well informed of which games they can pick up locally. It is usually more of the first time users that pick up legit games. Though there are a few serious gamers too who pick up legitimate stuff.

What is the cost of developing a game internationally?
Depending on the platform a game the costs of making a game vary. Typical ranges for a game being built from scratch are as follows

PC – US $ 200,000 – US $ 5 million
Console – US$ 1 – 4 million
Wireless / Mobile Games – US$ 30,000 – US$ 200,000

Costs can vary fairly significantly beyond this typical range based on the following factors
1. Game Design / Genre / Target audience / Play duration etc.
2. Place of development
3. Experience & skill levels of team members

Are there any companies involved in developing physics engines, engines or AI for international game developers?
Typically to develop an engine it takes around 5 man years and development time of about a year. So in cases like India where things are still in infancy stage it is best to license an engine as you get something stable and cutting edge.

Internationally, there are several companies making everything from all-in-one game engines to specific technology components such rendering engines, physics engines & even AI middleware. A few examples are as follows

GAME ENGINES

Source from Valve (Half Life 2)
Doom 3 Engine (Id Software)
Quake 3 Engine (Id Software)
NetEmbryo from NDL
Jupiter Engine (Monolith/Warner)

MIDDLEWARE

Renderware Graphics from Criterion
Renderware Physics from Criterion
Havok from Havok (Used in Half Life 2)
Novodex
Intrinsic Alchemy (Vicarious Visions/Activision)

Renderware is now owned by EA (was acquired for US$ 47 million recently).

The buzz that one hears around games is that they are getting more complex and realistic. Does that also involve the physics and math engines in terms of simulations. Please comment?
Academic math and dynamics are very different from the realtime simulated math and dynamics applied for games. From a gaming point of view, it becomes difficult to simulate theoretical physics unless the hardware can keep pace.

Gaming is going towards reality, but it is alternative reality just like in Cinema and TV – Reflections of a culture rather than observed behavior. There is a certain level of dramatization to make it interesting. With nex gen hardware it is increasingly becoming possible to do real world simulation, but the point is ‘Would it be interesting’? The reality thrust is on the CG side and not necessarily on the physics side. It is about finding the right balance between realism and fantasy.

“It is increasingly becoming possible to do real world simulation, but the point is ‘Would it be interesting’? “

Crystalgazing into the future, what do you foresee?
The day an Indian game does well abroad it will kick off the Industry. Somebody will get that right and people will follow. Even for us, we distribute the games and we know the potential. We are passionate about games and their quality as well. The gameplay experience is most crucial – Does it bring anything new? Either improving on an existing game or a completely new concept.

There are some positive trends that we foresee – enlisted below

* Number of PC owning households has more than doubled from 7 lakh homes in 2001 to 16 lakh homes in 2005 (Source MRUC/Hansa research : TOI 30.07.05)
* Increasing penetration of Java enabled / gaming capable cell phones; current installed base is 50 million handsets
* Greater awareness for games due to increased crossover between films / TV / literature & games
* More technology savvy attitudes
* Greater disposable income
* Emergent economic trends & their impact
* Growing internet penetration (particularly broadband)
* MMP gaming comes to India Ragnorak online & A3

Thus we see growth in all areas – Wireless gaming, PC gaming, Console gaming, MMOG (Massively multiplayer Online gaming) etc.

We expect the industry to employ over 5000 professionals in 5 years time.

“We expect the industry to employ over 5000 professionals in 5 years time”

Milestone’s future business plans include?
Milestone’s entry strategy has been product development which will continue into the future. We will continue to develop products for various platforms such as PC & console in addition to making games for the downloadable segment. We will continue to make games for international market as well as the Indian market.

2 areas we have diversified into include Wireless & Services. We plan to release 6 wireless games this year. Our services business will create artwork for leading publishers worldwide. We are putting in place a dedicated team for this.

Moving forward our 3 primary businesses will be

1. Making products for PC & Console
2. Making games for wireless
3. Providing artwork creation services for current & next generation consoles

Anything specific to look out for from Milestone?
We will be launching our game within the next 2-3 months and it will be upto international standards. Very likely to set a new benchmark in terms of price of game vs game quality.

Gaming is a phenomenonal

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