Gaming sponsors brace for impact amid GST turmoil

livemint.com:

₹3,800 crore for marketing and advertising, according to their filings with the corporate affairs ministry, the uncertainty surrounding a potential imposition of retrospective tax, has left many top firms anxious, as they fear a dip in the budgets of gaming companies in a knee-jerk reaction to the GST Council’s move. Leading gaming firms, including three fantasy sports platforms, such as Dream11, Games24x7 and MPL, may reduce their advertising budgets by ₹500- 600 crore for this year, while other major spenders, such as Winzo, Zupee and Junglee Games, grapple with the prospect of reducing their annual marketing expenses. According to All India Gaming Federation’s estimates, the size of the industry is at $2-2.5 billion (about ₹16,000 crore).

Unlike any other industry, gaming firms face the possibility of indirect taxes exceeding their own revenues, which will force them to cut their budgets drastically. “Everything is in a flux right now. Industry-wise, it could translate into 60-70% cuts of all advertising budgets.

For bigger players like us, the impact initially may be less at 40-50% reduction in budgets. If retrospective tax and deposits come in, everyone expects some of the smaller players to not survive. So, we may have to keep our advertising budgets a little high to capture market share," said a senior executive of a fantasy gaming company.

A second executive of another gaming company said: “The industry makes for a significant chunk of digital ads. The expenses by large operators like us include ads on TV, print, Google and OTT platforms, as well as payment gateways. If it comes through, it will have a drastic impact on our spending and we may have to change our business model.