Ken Nakazawa, divisional head at Sony India Private Ltd.

JULY 24, 2007 • A huge change from previous video game hardware cycles has been the swiftness in which gamemakers have launched their next-generation consoles globally outside of Japan, the U.S. and Europe. Now Latin America, the Middle East and wider points in Asia are receiving the PlayStation 3 and the Xbox 360.

One of those new Asian markets is India. The PS3 arrived there on April 26, less than a month after the European and Australian releases. Neither is the console priced cheaper for this developing market, landing with an MSRP of 39,990 rupees ($992). To understand the Indian market better, and to more accurately gauge global prospects for next-generational consoles such as the PlayStation 3, DFC went to Ken Nakazawa, divisional head at Sony India Private Ltd., to describe the business of selling video game hardware and software there.

DFC: Can you educate us a little on the current state of the game market in India? Where do you see this market going over the next five years?

Ken: India is fast emerging as a key destination for gaming. While the market is still in its infancy, market researchers have predicted a big boom in the near future. According to a Nasscom report, the market for gaming is expected to witness a 78% growth rate and reach $300 million by 2009. An explanation for this estimate could be taken from the fact that the Indian population is comprised mainly of young people, which is positive for the gaming business. With the majority of people in the age group of 14 years – 34 years, the gaming market in India is going to grow at a fast pace over the next few years.

Our study highlights the fact that with the increase in number of jobs, disposable income and Internet users in India, more people are inclined towards a digital lifestyle. And since gaming is a part of entertainment as much as music and movies, it’s just a matter of how much fun content can be provided for the Indian consumers for them to invest in the alternate means of entertainment. India consumers – who have surprised the globe in adopting mobile phones at such a fast pace – might catch everyone unawares by bridging the gaming gap with the developed markets more quickly than anyone could have imagined.

DFC: What’s different about Indian retailers and consumers; what is the same about them; compared to the rest of Asia, Europe and the U.S.?

Ken: What makes the Indian market unique is the fact that it does not have a history of gaming as an industry. While in most other markets across the globe, gaming has been prevalent through gaming arcades where kids used to go and play games for a small fee, in India gaming emerged with the advent of platforms like online gaming (broadband) and mobile (wireless) gaming. So while developed markets saw the exciting revolution of gaming being brought to homes with the invention of the home gaming consoles (such as PlayStation, etc), India did not get a chance to experience this shift from arcade to home, which played a very crucial part in Console gaming.

As differences in markets exist, so do similarities. In terms of audience enthusiasm to this sector, people are the same no matter where you are. People will always want to enjoy some sort of entertainment. And India is no different. Even if India did not experience the arcade game era that has not impeded the consumers from playing games at home.

DFC: How does the global PlayStation brand fit in India? What did you have to adapt in your marketing to promote and launch platforms like the PS2, PSP and PS3 in India?

Sony is already known for edgy marketing for the PS2 in India.

Ken: Even before the PlayStation officially came to India, people knew what PlayStation was all about. This is probably one of the biggest advantages that PlayStation had in India. With a brand awareness that is phenomenal the world over and synonymous in India with gaming as well, there is really nothing special that was required to be undertaken to promote the brand.

DFC: How does distribution work in India? Who are the players, and what are the ground rules? How much of your sales are direct to retailers, and can/will that change during the next five years?

Ken: In India, each region has its own set of individual distributors leading to an extremely varied and disorganized system. While national retail chains are yet to emerge as a strong force in this market, exclusive company branded stores have set up a strong base for their respective companies. For Sony, we distribute PlayStation products through the same channels as our other electronic products. We offer PlayStation though both our direct dealers as well as other channel partners (format stores). In a rapidly changing retail environment such as that of India, it would be difficult to foresee on what would happen in the next five years, but there is no doubt for sure that the reach of the PlayStation will only increase as the gaming business expands further.

DFC: China has grown a significant legitimate game business focused mainly on online games and new forms of digital distribution. The market has grown without the console systems. How does this compare to India?

Ken: The gaming industry is comprised by many forms of content and platforms. In India, there are already signs of those various forms/platforms, whether it be online gaming, mobile phone gaming, or console gaming, every platform has its reason and place to exist in the industry. The main platform for gaming is yet to be determined as the market is in the nascent stage, and it would be too early to rely on a single platform. Since the characteristics and dynamics of both countries are different it would be difficult to make a comparison between both country markets.