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Few Indian esports veterans would deny that gaming cafes have played a massive role in the evolution of the Indian esports scene. In many ways, they were the places where competitive gaming emerged. These cafes allowed players to compete in multiplayer games on high powered PCs with a stable internet connection; conditions which were prohibitively expensive for most Indian gamers circa 2010.
The local LAN tournaments hosted by these esports cafes were among the first endemic esports initiatives that served as a proof of concept for larger tournament organizers that exist today. They were one of the first avenues to explore the concept of competing on computer games for monetary/material prizes. However, this has gradually changed over the years. Home computers and stable internet connections have steadily become less expensive and far more reliable in the country. With the growth of the Indian economy, the burgeoning middle class typically has enough disposable income left over to purchase games and computer systems. Not many gamers have to exclusively rely on esports cafes to satisfy their gaming needs.
Despite these recent advances, esports cafes in India continue to flourish and grow across various regions, throughout the country. According to a report published by Nvidia in 2017, India has an estimated 350 gaming cafes across the country, with the potential to add at least 4,000 cafes to this number.
With Nvidia revealing that they were expecting to add at least 100 Gaming cafes to this list in 2019 alone, it is indicative of the Indian esports cafe business continuing to be lucrative.
How Do These Cafes Continue to Attract Customers?
Many cafe owners believe that the allure of an esports cafe is not technological but rather the active fostering of the social and cultural aspects of it, that ensures its success.
Shravanth Reddy, managing director and CEO of the League of Extraordinary Gamers (LXG) agrees, stating that his esports cafes continue to attract customers because of the culture and the community in them, which encourages players to play there, despite having PCs at home. LXG was founded in 2013 and is perceived by many as one of the best esports cafes in India. They currently have two cafes in two different cities in India (Chennai and Bangalore).
“The idea is to provide them with zones which we create around the whole gaming experience. It is quite simple, we don’t make them (the cafes) look like those small, cramped up facilities with no amenities or services,” Reddy said. “We try to indulge our customers by employing community managers and cafe managers to help them. Many new customers in our cafes are hesitant to ask other players to party up. Our floor staff helps them to connect with each other by starting conversations and getting them into private game lobbies or parties. The chance to try out multiple AAA games which are prohibitively expensive for many in India also plays a factor in attracting new customers to esports cafes.”
LXG takes a unique approach to attract new gamers to its cafes. The company has collaborated with different colleges and run workshops on various campuses to promote its cafes.
Harish Suri, founder of Arknemesis Gaming, also believes that building a relationship between the cafe and the customers is the key to success. “I get a lot of customers who have no idea on how to play PC games, we put it on us to teach them how to play. We take it upon ourselves to make sure that everyone is comfortable,” he says. “That’s one of the reasons that we’re doing so well from a service perspective”. Arknemesis Gaming was founded in 2017 and claims to be India’s biggest LAN cafe with state-of-the-art hardware and futuristic ambiance.
In fact, cafe owners believe that the word-of-mouth marketing generated thanks to this community they’ve built is superior to other forms such as digital marketing and tournament-led activations. Suri believes that “Digital marketing can only take you so far. But nothing beats word of mouth.”
This is a sentiment echoed by many including Samkit Shah, owner of Circle Gaming, one of the largest cafe chains in India with 26 different cafes across the country. In fact, he claims that he doesn’t utilize digital marketing at all to promote his esports cafe. Rather, he relies on word-of-mouth marketing along with hosting LAN gaming events to bring in new customers.
Have Marketing Efforts Yielded Efficient Results in India?
The general consensus among owners that we spoke to indicates that Indian esports cafes currently average a 50-60% occupancy rate in the PC gaming sections. On the other hand, console gaming, which is inherently geared toward the more casual gamer, has a wider range of variance. In Circle Gaming cafes, the average occupancy rate is around 40% while Arknemesis Gaming boasts near 100% occupancy rates. The fact that, unlike PCs, one console can be used to monetize multiple gamers by simply adding joysticks and accelerates the break-even time for console gaming in cafes. Most successful esports cafes in India recover their capital expenditure and become profitable in approximately two years on average.
For instance, LXG Chennai, which is a 3,800 sq. ft esports cafe hosting 50 gaming PCs, four consoles, a soundproof studio room, an in-house kitchen, and a viewing area with projectors, had an initial investment of INR 15 Million ($211K USD). Two years was the duration it took for the cafe to offset its capital expenditure. Arknemesis Gaming, which is a 6,500 sq. ft space, hosting 68 PCs, six PS4 Pros, snooker tables, a full-fledged restaurant, and 21 4K TVs also recouped its initial investment of INR 70 Million ($986K) in two years.
However, cafes with significantly lesser amounts of capital expenditure can recoup these costs more rapidly. Case in point, Circle Gaming’s first cafe in Goregoan, Mumbai, managed to recoup its initial investment in just six months. Furthermore, LXG’s next gaming cafe, which is set to open in Vellore, India, is expected to offset its INR 13 Million ($183K) investment in just 15 months allowing it to become a profitable venture.
The chief sources of revenue for the majority of Indian esports cafes are PC and console gaming time as well as food and beverages. According to Reddy, LXG Bangalore pulls in INR 500,000 ($7K) from PCs and consoles each month, while food and beverages bring in INR 325,000 ($4.5K) per month on average. In addition to this, cafes employ different strategies to bring in additional revenue.
LXG, for instance, hosts corporate events, birthday parties, and does over-the-counter sales in each of its LAN cafes. The brand also does e-commerce sales, B2B sales, and cafe consultation for additional revenue. The organization also hosts a massive esports tournament called Indian LAN Gaming (ILG) across the country, which raises money from sponsors. This lead to the LXG brand pulling in over 5 Crores ($704K) in revenue in 2018.
Arknemesis Gaming has become more than an esports Cafe, says Suri. In fact, he says that the restaurant attached to his esports cafe pulls in more revenue for the brand than PC and console gaming combined. The restaurant space hosts match screenings, bands, corporate events, birthday parties, and board gaming events amongst numerous other activities.
Circle Gaming employs a different strategy to bring in additional revenue. While the cafe-chain has only recently started adding food and beverage divisions to its cafes, it has done exceedingly well in sales and has become a recognizable Indian vendor with PC components like keyboards, power supply units, and cabinets as well as Gaming Chairs. It also rents out PCs to esports tournaments as well as other customers. Other services from Circle Gaming include maintenance contracts for PCs, hosting birthday parties, and corporate events.
The major operational costs for these cafes are rent, electricity, internet connectivity, salaries, upkeep costs for the cafe space, and maintenance of PCs. They also refresh the components of their computers every two years.
The Road Ahead for Indian Esports Cafes: Expansion and Growth Plans
Thanks to healthy profit margins, esports cafes are planning to innovate and continue to expand their business in the coming months.
LXG is set to open multiple LAN cafes, concentrated near massive universities. Reddy believes that there are thousands of gamers in these universities who have resorted to playing on low-end laptops because of the lack of proper esports cafes in the vicinity. These young gamers are yearning for good esports facilities to fulfill their gaming requirements while exploring opportunities to compete in the pro circuit in India. He plans on bridging this gap, with his new cafes that he operates via a franchise model with local partners.
He insists that these are state of the art facilities which they’ve built from the ground up featuring digital servers instead of physical hard drives, custom-built modular tables with PCs inside them, and monitors directly mounted on tables, amongst many other features.
Given the low disposable income of college gamers, LXG will adopt a differentiated price strategy for this target market where they intend to charge an average price of INR 60 ($.85) per hour. To sustain this, he plans to bring down operating expenses for the new location. In order to achieve this, LXG has applied a new concept of not renting out a built-up space. Instead, the organization has leased out empty land and has built a whole cafe from the ground up.
Circle Gaming is also planning to add more esports cafes to its portfolio in the coming months. Shah revealed that they too were embarking on a fresh concept. The cafe chain is expanding and opening new esports cafe facilities in bars, “You can sit, eat, and drink while you continue playing on your PCs or consoles,” he says. The first cafe with this concept will be opening at Agent Jack’s Andheri, Mumbai in the first week of October, and is expected to house ten PCs, three consoles, and two VR stations. He states that they will be opening esports cafes in multiple bars at different locations over the next few months as well.
Opportunities and Threats Due to Mobile Gaming
With the Indian mobile gaming market continuing to grow at a rapid pace to a point where it can no longer be ignored, Indian esports cafes will need to strategize and account for this new segment.
LXG believes that mobile gaming will indirectly have a positive impact on its business. “We believe that the gaming evolution happens in three phases: there’s mobile, there’s console, and then PC,” says Reddy. “If I start my gaming journey on mobiles, say from PUBG Mobile there is a high probability that I would start playing PUBG on consoles or PCs, later down the line. The chances of converting a mobile gamer into a PC gamer to experience high-end graphics and a better form of gaming are high.” He also states that mobile gaming is good for the gaming community in general since it is educating parents while opening up gaming to the masses through tournaments, influencers, and streamers.
Shah says that Circle Gaming, on the other hand, is directly exploring opportunities to monetize the mobile gaming market. He states: “We are exploring newer verticals to promote mobile gaming inside cafes. We’re already working on a couple of things.” He also echoed the sentiments of Reddy, stating that mobile esport titles are slowly destigmatizing gaming as a whole in India. “Mobile gamers will grow the number of PC gamers in the near future. They have made games like PUBG a household name. Earlier gaming was seen as taboo or a shady activity. Due to the penetration of mobile games, where you see kids or even parents playing today, gaming has become normalized.”
But not all cafe owners are convinced by this concept. Suri believes that esports cafes will not be viable in the near future. “I do not see esports cafes being extremely profitable after the next two to three years, with the advent of mobile gaming. Before, when people got bored they went to play in gaming cafes. Whereas now, with mobile gaming in the picture, people just connect with their friends on a mobile device and play. They just go to cafes on the weekends instead. That’s the mentality I am slowly seeing here. So with a lot of competition from the mobile gaming industry, unless any cafe has something unique to offer, two to three years down the road I don’t see the whole cafe model working.”
The next few months will be crucial from the perspective of Indian esports and esports cafes. The rise in mobile gaming has created a whole new demographic of casual gamers. A demographic which will likely explore other forms of gaming. A lot hinges on whether these cafe chains can take advantage of this new demographic and convert them into PC or console gamers allowing them to expand their businesses. It will be interesting to see how these esports cafes evolve in the face of these new challenges.
Vignesh Raghuram is a staff writer for AFK Gaming.
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