The news about Mobile Premier League (MPL) laying off 350 employees is indeed a significant development in the context of the Indian online gaming industry.
Here are some key points to note from the information provided:
- MPL Layoffs: MPL, an e-sports and skill gaming startup, has laid off around 350 employees, which amounts to 50 percent of its total workforce in India.
- GST Implication: The layoffs come in response to the proposed imposition of a 28 percent Goods and Services Tax (GST) on the entire amount spent in online gaming.
- This hefty tax applies to both skill-based and chance-based games. Previously, gaming companies were paying an 18 percent GST on platform fees.
- Tax Burden: MPL co-founders, Sai Srinivar and Shubh Malhotra, mentioned in a letter to employees that the new tax rules would increase the company’s tax burden by 350 to 400 percent.
- They indicated that while the company could prepare for a 50 percent or 100 percent increase in costs, such a substantial increase in tax burden necessitated difficult decisions.
- Variable Costs and Layoffs: The company explained that its variable costs primarily include employees, servers, and office infrastructure.
- Despite efforts to revisit the costs of servers and office infrastructure, MPL found it necessary to reduce its personnel costs, leading to the layoffs.
- Previous Layoffs and Valuation: This marks the second round of layoffs for MPL in less than a year. In May 2022, the company laid off more than 100 employees and exited the Indonesian market.
- However, in September of the previous year, MPL’s valuation reached $2.3 billion after reportedly raising $150 million in funding, allowing it to join the Unicorn Club.
It’s essential to understand that the imposition of higher taxes on online gaming can have significant financial implications for companies operating in the sector, leading to adjustments in their workforce and operations.
Additionally, the online gaming industry in India has been subject to regulatory changes and scrutiny in recent years, impacting various aspects of the business.