By Dr Rajat Sharma, and Dr Vikash Gautam
Dr Rajat Sharma and Dr Vikash Gautam discuss their latest research which offers unique insights into users' behaviour in three key digital services sectors, that is, social media, over-the-top (OTT) content, and online gaming. The findings emphasize the need for governance that aligns with user engagement levels and evolving consumption patterns. The authors discuss key results from a survey of 20.4 lakh users across 143 apps, to highlight contradicting assumptions about unwanted user behaviour, especially in online gaming and OTT content. As India navigates a path towards creating a trillion-dollar digital economy, the authors highlight the need for enhancing the country's statistical architecture to make data-driven policy decisions in the evolving digital landscape.
India’s increasing smartphone penetration and availability of affordable broadband connectivity, have transformed the digital entertainment landscape over the past few years. The associated consumer insights offer many lessons for the governance of sectors such as social media, over-the-top (OTT) content and online gaming - which feature in our latest working paper on New-Age Digital Media Consumption.
After analysing 20.4 lakh users, who used 143 apps, the paper presents a first-of-its-kind consumer insights on these digital services. The findings are timely and warranted in the context of responsible consumption, service delivery as well as innovation, with the ultimate objective of increasing the contribution of emerging technology services in a trillion-dollar digital economy.
Need of the Hour: Governance in tandem with User Engagement
Since the introduction of the Information Technology Rules in February 2021, Indian policymakers have aimed to address various user security and content-related risks through an industry-led framework. However, research suggests that regulations are often benchmarked against a “status quo”. For instance, in the context of digital markets, policymakers often fail to account for the nuanced differences in the consumption of digital services as opposed to traditional media. Hence, it becomes important to vet pre-conceived notions considering evolving consumption patterns.
Consider the fact that online gaming is often associated with traditional PC/console games which are expensive and time-consuming. However, the landscape of gaming today looks very different. With a wide range available in pay-to-play formats and for free, they can also be used to learn, share, socialize and collaborate.
Changes in the regulatory landscape of these markets are another important reason to study consumption patterns. A new regulation can impact the consumption pattern of a consumer, such as the amount of time or money they spend on a given service or substitute it for another. Therefore, it is important to capture users’ response to these new developments.
The recent increase in the Goods and Services Tax (GST) rate for online games is a good example of how a regulatory overhaul can limit participation. The new tax architecture, which changed the GST rate from 18 percent on commission to 28 percent on deposits, is expected to lead to a significant drop in user participation due to increased costs. Businesses have already started cutting down on expenses, anticipating a decrease in engagement. Mobile Premier League (MPL), a leading online gaming company in India, recently laid-off of 350 of its employees.
Advancements in data collection may render status quo-based interventions naïve
Nearly five decades ago, Nobel Laureate Robert Lucas Jr. argued that it is naïve to expect or predict the effect of a policy change based on historical data – a paradigm known as the Lucas Critique. In contrast, policies should be based on “deep parameters” such as preferences, the state of technology, and resource endowments, among others. Our paper presents empirical evidence based on this framework, through three key lenses that can inform policymaking for digital markets.
First, concerns about consequences such as user addiction, especially for online gaming and OTT content, are unwarranted. Users’ engagement on social media is the highest, at 194 minutes a day, compared to 46 minutes on online gaming and 44 minutes on OTT content. This finding came as a surprise to us because it contradicts the prevailing assumption that OTT content and online gaming lead to excessive screen time and addiction. The minimal session duration on these platforms suggests that users are aware of the time they allocate to these activities.
Second, users are the most price sensitive in the online gaming market. 71 percent of the surveyed gamers said they would spend less time on platforms if the participation fee was increased by 30 percent. In contrast, only 17 percent users would decrease their time on OTT content in the event of a similar increase in subscription fee. In the context of the recent increase in GST for online gaming, such a scenario highlights the need to comprehensively understand consumer behaviour before finalizing regulatory measures. The RBI’s ongoing pilot projects, to study the design and adoption of CBDCs, is a good example of how to understand customers’ habits.
Third, 28 percent users consider online gaming important for their career prospects and 50 percent consider it important for skill-building. Such reasoning goes against the notion that online gaming is just a form of entertainment. It can also act as a gateway for employment opportunities in gaming-adjacent sectors such as augmented reality, animation, and graphics design.
Way Forward: Statistical Journey to Maturity
Our research highlights the pivotal role of data in generating policy-relevant insights. This is in line with several findings on the impact of statistical capacity on different aspects of development, including technological attainment, democracy and corruption control. In fact, a recent article in the World Development Journal suggests that it influences not just short-term but even long-term growth.
For India, there are four major areas where it can improve vis-à-vis statistical architecture for efficient policy making, a la the World bank’s Statistical Performance Indicators. These include (a) greater availability of administrative and geospatial data, (b) development of data reporting standards and methods, (c) availability of rich statistics on social, economic, environmental, and institutional characteristics, and (d) improved online access to data services. There is an urgent need to address these aspects, as the digitisation of activities across sectors such as education, healthcare, finance, and entertainment gathers momentum.
Dr Rajat Sharma is an Associate Professor of Marketing at IIM Ahmedabad; and Dr Vikash Gautam is an Adjunt Fellow at Esya Centre (these are their personal views)