28% GST: RMG companies likely to slash advertising budgets, avoid upcoming cricketing season

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Recent announcement to levy GST on full face value have sent online real money gaming companies in a conundrum. Companies have cited that the tax will end several small startups as well as slow the growth of the gaming sector.

Amidst all this, the ICC ODI World Cup 2023 is also about to begin, but speculations are now airing that people might not see any advertisements for online real money games this year during the broadcast.

Advertisements are the most integral part for these gaming brands, with around 50% of the revenue is focused towards adverts during big sports events. This results in increased revenue as seen the last IPL 2023 season which have over 25% increase in revenue compared to previous year.

With an increased tax rate, companies will have to cut down on various expenses, including advertisements. This may result is fewer adverts for RMG games during the upcoming cricketing season, which includes Asia Cup, Asian Games, World Cup, Women’s Premier League, etc.

The ongoing India vs West Indies test series also does not have any adverts for online games, according to a digital media company, who revealed strict restriction to be one of the cause.

Gaming industry folks speak against newly implied GST rates and its impact

Talking to afaqs, the company said, “Brands cannot take the risk of going all out in advertising. The uncertainty surrounding the sector calls for a cautious approach.”

Speaking on the situation, CEO of MyTeam11, Vinit Godara said, “If this new taxation proposal goes through, it will adversely impact the cash flows of the business. Also, advertising spends will have to be severely curtailed. We have currently paused all our campaigns. I believe it’s not just us. Many other players have also done so across platforms – social media or television or digital.”

Godara further revealed that marketing advertisements took 50% of the total spendings. While no advertisements will have impact on new user acquisition and growth, they do not have any other choice until clarity on the matter.

The revelation by Godara and a previous report by Fintrackr does confirm that advertising is the most essential part for these companies. Only the top 15 RMG firms spent over 5,000 crore on adverts in FY22.

President of Dentsu Creative, Sahil Shah, said, “Nobody will spend Rs 50 crore during the festive season without knowing the outcome.”

Popular entrepreneur and CrickPe’s co-founder Ashneer Grover said that the newly imposed GST on online gaming has made the industry an existential issue. CrickPe has even taken a pivot by giving a hint at CrickPe 2.0 with the company hiring for multiple positions at its Chandigarh office.