Kim Jung-ju

By Kim Yoo-chul

After Nexon became the largest shareholder of NCsoft by acquiring a 14.7 percent stake in it, attention is turning to why the two long-time rivals in the domestic game industry have joined hands and what steps they will now take.

Although there is speculation following the acquisition, many experts believe that the alliance aims to cope with the expansion of global game firms such as Blizzard and become a leading company worldwide. Nexon is the nation’s No. 1 game firm, while NCsoft is just behind. Blizzard is gaining more influence after unveiling its latest game Diablo III.

On Friday, Nexon said that its founder Kim

Kim Taek-jin

Jung-ju signed an agreement with NCsoft CEO Kim Taek-jin to buy a 14.7 percent stake or 3.218 million shares worth $685 million in NCsoft.

``Because Nexon and NCsoft have different strengths, chances are quite high that the combination could create synergy by using each other’s patents,’’ said an official from the local game industry on Sunday.

Nexon offers free online games that make money by selling virtual items used within them. This is how Nexon makes money. Such strategy has so far been effective. Last year, Nexon notched up $342.4 million in profit from $1.1 billion in sales.

Nexon’s popular games, which include MapleStory, Dungeon Fighter Online and KartRider, had 82.8 million monthly players as of March 31 this year, according to the company.

Nexon went public in an initial public offering (IPO) on the Tokyo Stock Exchange in December last year, raising $1 billion. It was founded here in 1994, although its headquarters are currently in Tokyo, and has had more than 1.3 billion players register to play its games. Nexon has published more than 50 online games in 100 countries.

In contrast, NCsoft specializes in massive multiplayer online role-playing games (MMORPG) such as Lineage or Aion where users pay on a monthly basis.

NCsoft was founded in 1997 and is based in Seoul, Korea. NCsoft generated 608.8 billion won in revenue in the fiscal year 2011. Nexon said the deal is part of a long-term partnership between the two companies.

``As Nexon becomes the biggest shareholder of NCsoft with a 14.7 percent stake, NCsoft has secured a chance to learn about Nexon’s pricing strategies. In casual games, Nexon’s pricing strategies are more effective than those of NCsoft’s. Therefore, NCsoft, which was struggling in the local casual game market, has a chance to raise its profile in the sector,’’ said the official.

Nexon has so far failed to secure killer titles in MMORPG and analysts say that’s the main reason why Nexon’s major clients are aged under 20s. NCsoft hit the jackpot with Lineage and Aion, however, NCsoft’s major customers are over 20s.

``Literally, the acquisition looks ideal. NCsoft is good in developing gaming software, while Nexon has strengths in distribution channels and faster development of platforms,’’ said Choi Kwan-soon, an analyst at SK Securities.

The ambitious deal comes after Diablo III is seeing huge popularity locally, according to experts and analysts. Diablo III’s sales are off to a great start, as it managed to move over 6.3 million copies around the world in just a week.

That success has surprised many in Korea, as evidenced by a survey of 230 local game developers and professionals. Ninety percent of participants said the game's popularity has exceeded their expectations.