Mobile Premier League (MPL), one of the only two esports and online gaming unicorns in India, has now responded to the fresh 28% tax on online real-money games by laying off 50% of its workforce in the country. According to media reports, around 350 employees have been axed owing to the startup’s steps to “survive” the newly-unveiled tax.
The development was confirmed by an internal memo circulated to MPL employees on Tuesday, and comes after it had initially announced its plans to enact job cuts last week. According to Reuters, the product team is set to be the most affected with more than 60 job cuts. This also marks the second round of layoffs at MPL in recent years – last year, it exited the Indonesian market and sacked over 100 employees. The layoffs are aimed at reducing variable costs, particularly personnel expenses, in order to maintain business viability.
“As a digital company, our variable costs predominantly involve people, server and office infrastructure. Therefore, we must take steps to bring these expenses down in order to survive and to ensure that the business remains viable,” Sai Srinivas, founder and CEO of MPL, informed the Bengaluru-based startup’s employees on Tuesday. He added that the new tax significantly increased the company’s tax burden, and estimated a rise of up to 350-400%.
“As a business, one can prepare for a 50 percent or even a 100 percent increase, but adjusting to a sudden increase of magnitude means we need to make some very tough decisions,” the internal email read. MPL was last valued at $2.3 billion last year.
For those who need a refresher, the GST Council had earlier introduced a new taxation rule that levies an indirect tax of 28% on online gaming, including casinos and horse racing. The tax makes no distinctions between game of skill and chance, and marks a whopping increase on the 10% GST that gaming platforms currently pay on platform fees.
Unsurprisingly, the tax prompted concerns from the gaming industry and investors alike, wherein the likes of the All-India Gaming Federation criticized it as “unconstitutional, irrational, and egregious.” Later, several high-profile investors in the Indian gaming industry, such as Tiger Global, DST Global, and Steadview Capital, wrote a letter to PM Narendra Modi expressing their concerns that it would lead to a write-off of $2.5 billion and a loss of 1 million direct and indirect jobs, but to no avail.