Online gaming industry looking at layoffs, hiring pause after 28% GST move

The online gaming industry has been experiencing a significant shift in talent demand following the approval of a 28 percent Goods and Services Tax (GST) rate on online gaming, which also includes casinos and horse racing. This decision by the GST Council has resulted in a substantial drop in job postings within the industry.

Staffing firms and job portals are reporting job postings decreasing by anywhere from 22 percent to 60 percent, spanning across companies of various sizes, both established and startup, particularly in junior to mid-level roles. Additionally, some companies have already initiated layoffs in response to the impact of the GST rate.

Esports and skill gaming companies like Mobile Premier League (MPL) and Rush Gaming Universe have also not been immune to this trend. Reports have indicated that these companies, both of which were previously considered unicorns in the industry, have been forced to lay off a significant portion of their workforce due to the financial repercussions of the GST rate decision.

Overall, the GST rate on online gaming, along with casinos and horse racing, has led to a noticeable reduction in the demand for talent within the online gaming sector. Companies are adjusting to the new financial landscape and making strategic decisions to navigate the challenges posed by this change in taxation.

According to data compiled by specialist staffing firm Xpheno for Moneycontrol, leading companies in the Indian gaming industry have witnessed a substantial increase in their workforce by approximately 30 percent in the past year. Notably, around 20 percent of these new hires have been onboarded within the last three months. This indicates that the pace of hiring remains consistent with the earlier part of the year.

Kamal Karanth, co-founder of Xpheno, highlighted that the recent hiring activity in the industry has remained relatively stable without significant fluctuations. This suggests that the gaming sector is being cautious in its approach and has not initiated a sudden pause or freeze on hiring during this timeframe.

Despite the challenges posed by the introduction of a 28 percent Goods and Services Tax (GST) rate on online gaming, casinos, and horse racing, the industry seems to be maintaining its recruitment momentum. The data indicates that companies are strategically managing their talent needs, likely in response to the changing economic landscape brought about by the new taxation policy.

Conversely, the current demand for talent from major Indian gaming companies has declined to just under 90 job openings. This is a significant reduction compared to the previous figures in the mid-three-digits. The staffing firm Xpheno, which compiled this data, is anticipating a potential slowdown or pause in hiring in the near future due to this decline.

A similar trend has been observed on the job portal “foundit” (previously known as Monster APAC & ME), where the active demand for talent within the gaming industry has decreased by 22 percent. Notably, roles in quality assurance (QA) testing and product management seem to be the most affected by this decline in demand.

Moneycontrol attempted to gather information from six online gaming companies regarding their hiring plans for the upcoming six months, but none of them had responded to inquiries at the time of the article’s publication.

These developments suggest a potential shift in the hiring landscape of the Indian gaming industry. The reduction in active talent demand, particularly in certain roles, along with the lack of responses from gaming companies about their future hiring plans, indicates a level of uncertainty and caution within the industry. This could be a result of factors such as the introduction of the GST rate on online gaming and its impact on the industry’s financial outlook.

According to a report from TeamLease Digital, the gaming industry in India currently employs around 50,000 individuals, with about 30 percent of them working as programmers and developers.

Furthermore, the report projected that the sector could potentially create nearly 100,000 new jobs by FY23, with expectations of this number increasing by 50 percent. This growth trajectory was predicted to result in an overall industry growth rate of more than 113 percent by the year 2025.

Despite the immediate challenges of layoffs and hiring freezes being faced by the online gaming industry, there are still opportunities for professionals within the sector to transition to other companies and industries. Xpheno’s data indicates a significant amount of lateral movement within the gaming sector itself, as well as transitions to e-commerce and IT service companies.

Kamal Karanth from Xpheno mentioned that skills gained from the gaming sector are highly relevant for app-based product and service ventures. He also pointed out that the requirements of IT service enterprises could lead to absorbing talent from the gaming industry.

While the overall pace of IT hiring might be relatively slow, the IT services sector stands to benefit from any potential movement of talent from the gaming industry. This suggests that there could be a shift of skilled professionals from gaming to other sectors, especially those that require similar technical and creative skills.

Professionals from the gaming industry possess a valuable skill set that is well-suited for the creation of immersive and interactive digital environments. This expertise aligns closely with the objectives of the virtual reality (VR) and augmented reality (AR) industries.

Market experts highlight that the skills of gaming professionals can be effectively applied to the development of VR and AR experiences. These technologies have applications that extend beyond gaming, including virtual training simulations for various sectors such as healthcare, aviation, and manufacturing. They can also enhance remote collaboration and communication.

An analysis conducted by market research firm MarketsandMarkets indicates that the demand for talent with knowledge of the metaverse (which includes virtual worlds, AR, and VR) is expected to be highest in the consumer vertical, followed by the commercial vertical. In 2022, the consumer vertical held a significant market share of 50 percent within the metaverse market. This segment encompasses gaming, social media, sports, live entertainment, and concerts.

Sekhar Garisa, CEO of foundit, pointed out that the skills possessed by game developers and designers can be repurposed to create innovative and practical VR and AR experiences. This crossover of talent has the potential to accelerate the development of more sophisticated and meaningful applications in the VR and AR space. Ultimately, this could enhance user experiences and broaden the applications of these technologies beyond the realm of gaming.

This concept of talent cross-pollination highlights the versatility and adaptability of professionals in the gaming industry, as their skills can be leveraged to contribute to advancements in other industries such as VR and AR.