Online Game Publishers Rolling in Tough Times

NCsoft’s “Aion" has so far lived up to its pre-launch hype in Korea.

/ Korea Times

By Kim Tong-hyung
Staff Reporter

For South Korea's computer game companies, life seems easy ― as if operated by a joystick.

At a time when companies across the business sector are talking about shaving operations and shedding payroll, the country's online game publishers are finding it hard trying to keep a straight face as they swim in a record flow of profit.

It seems obvious that the economic downturn isn't hurting games, proving that when bad news hits, people seek escapist entertainment. And what better way is there to kill an hour or two mowing down terrorists and slaying aliens while spending just a little more than your pocket money?

Perhaps, its no coincidence that the Korean online game industry took off about a decade ago during the Asian financial crisis, the last time the country's economy was rattled to the bone.

``When money is tight, people look for cheaper sources of entertainment, and online games fit the bill perfectly,'' said Sung Hyun-sook, a researcher with the Korea Game Industry Agency (KOGIA), who says that the sector is now officially out of its mini two-year slump.

``The game industry has been maintaining growth since the later part of last year, and we expect the momentum to continue, as recent products have been setting a new bar in quality. The massive buzz generated by NCsoft's Aion certainly made a difference.''

The industry's vibrancy is obvious. According to the Games Rating Board, a sub-organization of the Ministry of Culture, Tourism and Sports, a total of 351 new game titles were reviewed during the first quarter of the year, the highest three-month total in three years.

A total of 970 games were reviewed for the whole year of 2008, the first time the number dipped below 1,000 and a 45-percent drop from the 1,678 in 2007, but that is now seen merely as the crouch before the jump. The rating board expects more than 2,000 games to be reviewed this year.

The increase in content could also bring a growth in exports. Korean online game publishers combined for $1 billion in exports last year, more than a 35-percent growth from the previous year, according to KOGIA figures.

Show Me the Money

One of the companies with mile-wide smiles on their faces is Neowiz Games (www.neowiz.com), which set all-time highs in quarterly profits for the first three months of this year.

The company, which publishes a number of popular games such as ``FIFA Online,'' ``Slugger'' and ``Crossfire,'' saw its operating profit jump 145 percent year-on-year at 16.3 billion won (about $12.7 million) during the first quarter. The revenue of 58.3 billion won represented a 64-percent growth from a year earlier, the company said, while net profit grew more than 162 percent at 9.4 billion won.

Korea is clearly not the only country where computer gaming is becoming more popular amid the economic downturn, and the Korean online game companies are intent on taking advantage of that.

About 11.6 billion won of Neowiz's sales were generated from foreign markets, with ``Crossfire'' and other titles gaining popularity in China, Vietnam, Japan and the United Kingdom, and the strong performance overseas makes Neowiz's annual targets for a 25-percent overall growth look more than manageable.

Industry analysts expect the company's royalty revenues to more than triple from last year's numbers at around 32.7 billion won for this year.

``The 11.6 billion won is already more than the entire amount of money we earned in foreign markets for the whole of 2008. We are successfully extending our strengths in overseas markets,'' said a Neowiz spokesman.

CJ Internet (www.cjinternet.com), the creator of mega hits such as ``Sudden Attack,'' a combat role-playing game, and ``Magu Magu,'' a multi-player baseball game, has also hit the gold trail.

The company's 56.3-billion-won revenue and 15-billion-won operating profit for the first quarter represented new quarterly highs and its 8.4-billion-won net profit was a 25-percent increase from a year earlier. CJ Internet could rake in money at a faster clip if its role-playing fantasy game, ``Prius Online,'' and other ambitious titles pick up in popularity.

Prius Online is expected to be published in Japan during the second quarter of the year, which is when ``YS Online'' will make its debut in Japan and China. CJ Internet is also expecting to release ``Mini Fighter'' in China during the first half of the year, and the company hopes that its revamped product lineup helps shed its reputation of being a stud at home, but a dud abroad.

``CJ Internet doesn't have a strong track record in development capabilities and never had a massive hit in foreign markets, but the company is starting to gain traction overseas just now, benefiting from the growth in the global market,'' said Shim Jun-bo, an analyst from Hi Investment Securities, who expects CJ Internet to generate around 8.6 billion won in royalties this year.

Hanbit Soft (www.hanbitsoft.co.kr), the Seoul-based company now owned by China's T3 Entertainment, reported 17 billion won in sales and 500 million won each in operating profit and net income, the third quarter in a row the company saw profit.

Return of the King

The impressive opening acts of Neowiz and CJ Internet could be overshadowed on Friday when NCsoft, the industry kingpin, reports its quarterly earnings. NCsoft, which built its reputation on the iconic role-playing series, ``Lineage,'' seems to have finally found a heir apparent in ``Aion,'' the company's new fantasy role-playing game that is actually managing to live up to its impossible pre-launch hype.

Aion's early success has analysts predicting around 120 to 130 billion won in revenue for NCsoft during the first quarter, which will easily blow its competitors out of the water.

Hangame (www.hangame.com), an online game portal operated by NHN, which also runs top search engine Naver (www.naver.com), is also expected to reach the 100-billion-won plateau in quarterly revenue.

Aion clearly impressed Korean gamers with its innovative game lay, which includes flight and aerial combat. And Aion getting off to an even better start in China than it did in Korea has NCsoft euphoric.

Since launching its open beta service in China, through local publisher, Shanda, Aion has recorded more than 500,000 in concurrent users, sending operators scrambling to add servers.

Should the bright start prove as an indicator for things to come, industry watchers believe that NCsoft could generate around 10 billion won per month in China from Aion royalties alone, and plus 100 billion won for the year. Aion's commercial launch in China is expected in May.

Aion is also gathering hype in other major game markets such as North America and Europe. Gamespot (www.gamespot.com), an influential U.S. Web site for video and computer games, has Aion ranked second behind Blizzard Entertainment's ``Star Craft 2'' as the most anticipated game title of the year.

Jung Woo-chul, an analyst from Mirae Asset Securities, expected Aion's strong performance overseas would contribute to NCsoft seeing nearly a 70-percent growth in revenue and more than a 270-percent increase in operating profit for 2009.

``Aion will provide the growth momentum for NCsoft for this year and beyond,'' Chung said.

thkim@koreatimes.co.kr