stickyfeet's Open Salon Blog

Mobile Gaming India

Fri, 10 Sep 2010 18:09:17 -0400

If you are a young gamer with thoughts of making millions by developing a game of your own, one of the most exciting opportunities has to be the Indian mobile gaming market. On the back of rapid mobile telephony and mobile internet growth, the Indian mobile gaming market is growing by 50%-100% per year. It comprises a significant opportunity for both large and small game developers who can apply the expertise gained in developing sophisticated games overseas towards a product attuned to Indian tastes.

The Indian gaming market remains small, with one or two key developers and a raft of young upstarts. In 2006, mobile gaming in India comprised a $15 million industry; in 2010 this increased to $100 million. Compared to the billions in mobile gaming revenues earned by carriers overseas, there is significant room for growth. And growth there will be – India completed 3G auctions earlier this year and this will enable carriers (or rather, their game developer partners) to expand from the realm of single player games against artificial intelligence to multi-player games that require faster networks. And Indian telecom carriers are open to working with a host of developers, because the carriers realize the only way they can increase revenue is through value added services (VAS), since they are battering each other on voice revenue competition with some of the lowest rates in the world.

What sets the Indian market apart from developed country markets is that for a vast swathe of the population internet access is and will be gained through mobile devices. While India has some 50 million land line internet connections, there are nearly 700 million mobile phone subscribers and this number is growing rapidly. Within a few years, 1 billion Indians may well have mobile phones and many of these devices will be internet enabled. In fact, mobile telecom operators and device manufacturers are working hard to provide reasonably priced VAS solutions, including internet access, through mobile networks, as it's the only way to quickly bring internet access and connectivity to the masses.

Those foreign firms seeking a toehold in Indian gaming should however beware that success in the Indian market may not be a simple matter of marketing their overseas games to Indian mobile subscribers. That may work in some cases, but if recent history is a guide, some of the most popular and successful games have been based on Indian themes and passions, namely Bollywood and cricket.

Further posts on this topic from StickyFeet:

India Connects - Mobile Internet Revolution

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Oil Wars and Socialism. Tea Party Feeding Frenzy

Sat, 4 Sep 2010 07:09:33 -0400

Der Spiegel, the German Magazine, is reporting on a leaked draft German Military study that predicts drastic and near term consequences as a result of Peak Oil, which it acknowledges may occur in 2010. This German report is another in a series of recent government studies warning on Peak Oil, all of which have received far too little attention from the mainstream media. The German study is the first I have seen from a government that so starkly lays out the severe political and economic crises that Peak Oil could spark.

The dire highlights of this German government study include:

warnings about shift in global balance of power and decline in importance of Western power
potential for a total collapse of markets and serious economic and political crisis
possibility of Peak Oil in 2010, with significant political, economic and security challenges present within 15 years
Oil will determine national power even more so than it does now and increase the power oil exporters, who will more aggressively assert national interests
in the medium term oil shortages could cause the global economic system and every market economy to collapse; relapse into planned (read "socialist") economies (lovely!...Tea Party types will tack it to Obama)
there will be cascading economic effects from the least prepared countries to those better prepared because of global economic integration; ie. there will be no national Peak Oil safe havens
potential for collapse of democracy because of general systemic crisis; possibility of rise of ideological and extremist political alternatives

This German report lays out the economic, political and security implications of Peak Oil in starker language than any other government report seen before. And since government report typically couch their conclusions in rather bland, safe diplomatic language (ie. pull their punches), I see no other way to interpret this report than to take it as a serious warning. It follows in the footsteps of other significant business and government Peak Oil studies/reports/warnings:

see this Rogues Gallery of Peak Oil Cassandras which includes Kuwait University and Kuwait Oil Company, the CEO of Petrobras (the Brazilian national oil company), the CEO of Total (the French national oil company), the International Energy Agency, the Welsh National Assembly, a senior executive of Saudi Aramco (the Saudi national oil company), the Government of Sweden, the Government of Ireland, Jeff Rubin (former Chief Economist and Chief Strategist for Canadian Imperial Bank of Commerce and Matt Simmons (deceased former Chairman of Simmons and Co, a Houston based energy industry investment bank, former advisor to Dick Cheney's energy task force)
American Energy Innovation Council report sponsored by, among others, Bill Gates (Microsoft), Jeff Immelt (General Electric) and John Doerr (Kleiner Perkins)
U.S. Department of Energy Peak Oil report
U.S. Department of Defense Joint Forces Command report on energy security and the U.K. Industry Task Force on Peak Oil and Energy Security (sponsored by Sir Richard Branson's Virgin Group and other large British companies), both discussed in National Governments Remain Silent on Peak Oil.

And I don't believe this German report exaggerates the political, economic and security ramifications of Peak Oil. As this blog has argued before (Post Peak Oil World: A Description and Deflation, Inflation or Hyperinflation in Peak Oil World?), mild, sustained but increasingly acute oil shortages can have impacts that quickly cascade through the economy and push it over a tipping point towards large-scale collapse of existing political and economic systems. It doesn't have to turn out this way; collapse it is not a certainty; but, since we are doing almost nothing to officially prepare for a Peak Oil scenario the probability of dire negative systemic crisis is significant. In hindsight, we may wish we were Soviet!

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Inclusive Growth, Energy & the In[s]anity of MassConsumption

Mon, 30 Aug 2010 04:08:19 -0400

For its 2007-2012 Five Year economic plan India incorporated the concept of “Inclusive Growth”, which, in the most basic terms, is defined as pursuing the goal of bringing the benefits of rapid economic growth to the masses through government policy. This includes, but is not limited to, assisting lagging regions catch up, improving agricultural technology and infrastructure and empowering the poor through proactive policies that enable their fair and equitable participation in the market economy. The policy of Inclusive Growth is laudable and necessary, for what is the point of India's economic development if the gains are not shared widely?

The pursuit of Inclusive Growth is insufficient as a policy unto its own and India must decide a second question: what does it want to be when it grows up? On a purchasing power parity basis (ie. adjusted for local prices), India's gross domestic product is about $3,000 per capita and China's is about double this level, compared to thirty or fourty thousand dollars per capita in most developed countries. At their current GDP growth rates per capita incomes in the two Asian giants will approach the current levels of developed countries within two or three decades. But India and China need to overcome the enormous barrier of energy scarcity to achieve this much growth (among other barriers). The Age of Cheap Energy, fossil fuels, critically oil, is over: it is impossible for the world to produce the three or four times current oil supply it would take for these Asian giants to sustain carbon copies of the energy glutton U.S, or even European, economies. India and China have no choice but to grow based on alternative energy.

The character of an economy's energy supply is a significant determinant of its economic structure. But even as India, China and much of the rest of the world launch alternative energy initiatives in deed or in spirit as the case may be, there is little discussion about how the way we live needs to change. For developed countries, Mass Consumption fueled by Cheap Oil has been the defining economic theme for more than fifty years. Developing countries are following in the footsteps. Well, the cost of energy in the foreseeable future is going to be higher, no matter how many solar cells and wind turbines we plant next month. The math is simple: more people chasing fewer resources equals higher prices. And no one selling miracle technological fixes to this problem has yet credibly demonstrated he is more than a captivating huckster. Add in global warming to all this and it should bring a tear to your eye or an exasperated head shake at humanity, depending on your disposition. And yet more, it (Mass Consumption) might all have been for naught...

American President Herbert Hoover's 1930s depression era slogan “a chicken in every pot” has today morphed into the sentiment of a T.V in every room and a car for every biped by Sweet Sixteen. But even as Mass Consumption became a reality in developed countries after World War II, it has had little impact on improving the underlying human need for happy, enriching lives. By many measures developed country workers are no happier today than they were fifty years ago. To make matters worse, during the last three decades median incomes in many developed countries have stagnated (productivity gains have been absorbed by the wealthiest strata), leisure time has been clawed back, dual income families have become the rule, debt has increased significantly as families try to maintain stable living standards and keep up with the Joneses, and constant stress is a defining malady of life. It's been a good time for therapists and shaman.

We in the developed world have become self-obsessed ninnies forever absorbed by multiple mid-life crises, combating our inner depletion through attempts to gain euphoria by maintaining a sense of constant titillation on the bandwagon of limitless escapist Consumerism. Politically docile addicts of ornamental novelty. This era is over, emphatically brought to a close by the collapse of the Cheap Oil Bubble, a side effect of which was to also end the related Cheap Credit Bubble thirty years in the baking. The band is gone; the hangover remains.

But at current developed country GDP levels surely it is possible to do better than to be caught up in a continuous cycle of consumption and accumulation of Stuff. Digestion of said Stuff has not durably lifted the individual human condition. At the dawn in the 1950s of the era of Mass Consumption and its counterpart Mass Production, hopeful futurists envisioned the advent of an increasingly productive society where basic needs and many wants would be met even while workers gained increasing amounts of leisure time that they would devote to nurturing interpersonal relationships and pursuing fulfilling creative endeavors. This was not a foolish prediction – it was based on how historical productivity gains had benefited the average person since fifty years before World War II: improving living standards, shorter work weeks. It didn't work out that way. The futurists were made fools. We did not climb atop Maslow's pyramid. But don't blame capitalism. The errors are all political and public policy; that is, in how vast productivity gains were divvied across the population.

And even while we now seek alternative energy solutions in the face of energy shortages and rising energy prices we are trying to continue the Mass Consumption theme not realizing it must and will change. So while India has established a National Solar Mission and China is a leader in the field of alternative energy, from India's Tata motor vehicle company came the $2,000 Nano, a 21st century version of the Ford Model T designed to bring car culture to India's middle class, and China was recently witness to a 65 mile long traffic jam outside Beijing that in Chinese style pales in comparison to any “rush hour” that has come before. And, continuing the car culture example, the belief that gasoline burning engines can simply be replaced on a mass scale by electric engines, bio-diesel or some other novel yet impractical technology rests on faulty assumptions about what kind of lifestyle currently foreseen technology and resource availability will enable for another 3 billion people.

For Inclusive Growth to be a sustainable long-term policy requires that India acknowledge and pursue proactively through policy an economic theme different from Mass Consumption. The market, through higher energy prices, will encourage much change on its own, but why waste resources clinging to an outdated economic structure as a goal? In practice this means Indian policy makers should not blindly support massive road-building to fuel a car culture, cookie cutter suburbs and ex-urbs and the mindless mass consumption and accumulation of, well, Stuff. Consumption and pollution ought to be taxed appropriately (with value added and GHG taxes), while investment, education, social safety nets, income/productivity, leisure time and public goods such as mass transit and transport are encouraged. With the goal of creating an economic structure that is super energy efficient, highly environmentally sustainable and frugal in resource use and where the gains from economic growth are widely dispersed.

To many an ideologue such economic planning smacks of too much government interference. But such ideological criticisms conveniently ignore the fact that the cheap energy, fossil fuel driven mass consumption economy has received much government support for decades. And the fact of energy scarcity means it is neither wise nor possible to copy the West. So India's choice is rather to either wait and let the market impose the change over time, wasting resources in the meantime, or to proactively encourage change in that direction. And because markets fail, the transition without guidance may be haphazard. Within two decades India's economy will quadruple in size at current growth rates – this represents a wholesale makeover. It seems silly to waste a few of these crucial years going in the wrong direction against the grain. Indian policy makers ought consider how the nation will become self-actualized.

And investors may be wise to consider how coming changes in energy sources and costs will impact their ventures. Aside from getting into the alternative energy or energy efficiency game, every company today needs a continuous plan to operate more energy efficiently and environmentally sustainably, and to develop their products keeping these themes in mind. It may be enlightened thinking. But it's also good business planning.

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India Connects - (Mobile) Internet Revolution

Tue, 17 Aug 2010 17:08:56 -0400

The Indian mobile telephone subscriber base is growing by double digits. By the end of 2010 India will have nearly 700 million mobile telephone subscribers, out of a population of 1.15 billion, making India the second largest mobile telephone market behind China and the fastest growing. The growth of Indian mobile phone penetration intersects the worldwide trend away from land-line internet connectivity towards internet connectivity through all types of mobile devices, so it should not be surprising that India's mobile internet traffic growth is among the highest in the world and places India second behind only the United States in mobile internet traffic (according to Admob). What this all means is that the Indian internet space, particularly mobile internet, provides wide open possibilities.

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The following is a post that first appeared at NRIMatters.com, where I am a regular contributor.

NRI Matters is a new effort by digital agency Experience Commerce, the Confederation of Indian Industry and the Ministry of Overseas Indian Affairs to reach out to NRIs (non-resident Indians), PIOs (persons of Indian origin) and other global citizens.

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While Indian mobile internet connectivity is growing quickly, the current active user base is low – about 11 million users compared to about 51 million land-line connections (according to JuxtConsult). However, device manufacturers are bundling social networking applications and internet browsers into new phones (about 30% of mobile phones are internet ready, Admob), and many people believe India's active mobile internet user base could reach several hundred million users within five years.

The growth of mobile internet connectivity in India has implications within India and outside. I am aware of at least three new North American mobile social networking and commerce platforms that are making India a key part of their strategy – one chose India as its first and primary market; the second is looking to India as a significant target market behind the U.S.; the third is receiving requests from clients that it provide an India solution (names cannot be disclosed due to confidentiality). Established players, such as Facebook, Google, YouTube, Wikipedia and Linkedin are seeing some of their highest traffic growth from India and are responding by increasing their local presence. The unique circumstances that make India an attractive (mobile) internet connectivity market are its large population and its openness to information in comparison to other developing markets, some of which regularly seek to restrict citizen connectivity (to their own long term detriment). And further, given that many of India's users will interact in English, India is set to have a significant and disproportionate impact on the mobile internet globally.

From an investment standpoint entrepreneurs with a scalable web-based business model would do well to factor in India as a target market. Or going further, you might do well to specifically target India with a product or service that provides a solution tailored for the local population – at this early stage there are likely few competitors, so the opportunities are wide open for first movers to hitch themselves to a high growth user base. Finding local partners may be key for entering the Indian market, but identifying such a partner is not a significant barrier. For example, from the world of application developers who find it daunting to approach mobile service providers, they can choose to identify and reach an agreement with one key Indian VAS (value added service) provider that can assist with the launch of a product across several mobile carriers. These VAS service providers will already have relationships and agreements with the major mobile telcos, and it can all be accomplished under a revenue share model. Of course, your product or service should be something that can gain significant traction across a large user base to be attractive to the telcos, otherwise it will rightly be relegated to channels where it can be downloaded and/or subject to traditional marketing methods where it may get lost among a forest of competition.

But there is more to the mobile internet revolution than application development for social media, games and the like. At the highest level, all services available on the Internet can, should and will have to be provided via mobile devices, a space that covers all information and commerce. The easy ones are being done – information about weather, news, social networking, sports and entertainment – but sometimes not done well. Commerce/shopping remains at an early stage as vendors, service providers and consultants work out kinks in mobile internet payment processing and transaction systems, but these solutions are coming. And when they do India will open its vast “unbanked” consumer market to mobile internet commerce.

But while the mobile internet trend overtakes India, businesses and investors ought not to neglect existing opportunities open through land-line internet connectivity and telephony. India earned a positive reputation as an outsourcing hub for information technology and BPO (business process outsourcing), which includes the gamut of IT, back-office/middle office/front office development and management. More recently India has become a hub for research, including tech and pharma, among other industries. And increasingly you can see captive and non-captive India based service providers in the fields of law (eg. document review and drafting), accounting (eg. bookkeeping and financial statement preparation), medicine (eg. file management, limited diagnosis and medical services “tourism”) and engineering.

So it appears that if you have not considered BPO for some of your company functions or, even more significantly, if you are a professional firm, it is an issue which should be put on the schedule for your next corporate strategy session. Admittedly, results from BPO can be mixed for a variety of reasons, (according to several studies), but I believe the best way to view an India BPO strategy is to evaluate not only the savings that might be realized but what additional opportunities might open by creating a footprint on the ground in India. Those opportunities include new business derived from your home country clients themselves seeking to move into India and new Indian clients seeking assistance for ventures abroad. This may sound all too intangible, but measure it against the cost of seeing your competitors entrenched ahead of you.

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Solar Palooza India

Sat, 14 Aug 2010 05:08:55 -0400

In July, 2010, the Indian federal government released detailed guidelines for new grid connected solar power projects as part of India's Jawaharlal Nehru National Solar Mission. The issuance of these guidelines marks the beginning of a six month process for solar project sponsors to submit applications and exit the process with a power purchase agreement (“PPA”) signed by the relevant government agency. These PPAs are highly coveted and ought to be printed on gold leaf paper. The feeding frenzy over Indian solar has begun in earnest.

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The following is a post that first appeared at NRIMatters.com, where I am a regular contributor.

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India's National Solar Mission sets an aggressive goal of achieving 20 GW of solar power generating capacity by 2022 from nearly zero today. By comparison, India today has about 150 GW of total installed electricity generating capacity (across all fuel sources),and Canada, the United States and China have 125 GW, 1,000 GW and 750 GW, respectively.

The opportunities within the Indian solar power space are several. While the grid connected national solar plan has received the most recent media attention, there are initiatives and government support for off-grid solar (rooftop and other micro power plants for neighborhoods, buildings and small manufacturing units), State-level grid connected programs (Gujarat, Punjab, others), supply of solar appliances and charging devices to households/cottage trades/small-scale retail establishments, and the manufacturing supply chain for all these applications. The investment potential and risk across these opportunities varies significantly.

Within grid connected solar, the national solar plan offers better terms under PPAs – 25 year agreements at a very reasonable tariff level – than any of the State level programs. In fact, several projects planned for their respective State programs chose instead to resubmit under the national program. Some projects that had already been awarded PPAs at the State level are grandfathered into the national program. Most industry players expect applications for Stage One of the national solar mission to oversubscribe the PPA capacity that will be issued (total of 300 MW). Where is the opportunity? - Several prospective applicants are seeking investors and joint venture partners to make sure they can meet the minimum financial benchmarks under the application guidelines. Lest you fear that you are ruled out if you are not in the solar industry already, take note that many project sponsors have already secured key suppliers and engineering expertise and have other power project experience, so they seek only financial support, which can be provided by direct investment or balance sheet support (JV), and can be done through a corporate entity or individual. For a 5 MW project (the maximum any one entity can win), the sponsor and its investment partner need to show only a $3.5 million net worth, which is well within reach for any medium size business or some high net worth individuals. With a federally backed PPA, these projects face significantly reduced risk and are expected to provide a relatively high ROI.

Many project sponsors who are unable to win a PPA under the national solar mission may revert back and apply under State programs. Projects issued PPAs under some state programs have a higher risk profile, as subsidized tariffs provided under the State PPAs are generally lower and for shorter periods. Nevertheless, many projects sponsors will choose to proceed under State programs to ensure they can claim to have an operating project when it comes time to award the next set of PPAs nationally or to reallocate Stage one PPAs from failed projects (under the national plan, you must have an operational solar farm within 12 months or face stiff penalties).

Small-scale off-grid solar power, such as rooftop installations and micro power plants that can service small neighborhoods, buildings and small manufacturing units and the residential/retail market for solar-powered products provide another opportunity. The big player within this space is Tata BP Solar, but many small and new players have entered the space with aggressive growth plans. And....a theme is emerging here...are seeking investment to drive such growth. The most successful players here will be those who (a) have a well-researched consumer needs driven product offering, taking into consideration the various needs of rural and urban households across all rungs of the income scale; (b) provide a financing mechanism for purchases, including to low income households; and (c) have the ability to build out and manage a robust retail distribution channel that can get the product into not just the cities but also into India's rural villages. There are a few management teams in India which have built or are building business models that pass these tests. Unless a foreign player has significant resources with which to hire its own team to accomplish the same, the better investment potential is in seeking out one of the local players seeking growth capital. There is room for small investors who can provide $1M-$10M over time, including angel investors.

In my view, manufacturing of solar products and components carries the largest risk in India's solar space from an investment perspective. A year or two ago, many manufacturers emerged with proposals for solar cell and module manufacturing, which in part was the result of fairly stringent Indian content regulations in the face of huge demand under the prospective national and State-level solar plans. These Indian content requirements have since been relaxed, but many of those manufacturing proposals remain on the books and new projects continue to emerge too. While there may remain room for small manufacturers and assemblers of retail solar products, there is a significant risk that solar cell and module manufacturing will become the purview of larger entities that can sustain the big price and profitability swings that will accompany a sector that may quickly succumb to commoditization, contract manufacturing and stiff international competition, like much of electronics manufacturing. Be wary as a small investor.

Disclosure: The author is engaged in various aspects of the Indian solar power sector.

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