Game firms' profitability hit by soaring marketing costs
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The main poster for Netmarble Games’ “Blade and Soul Revolution,” which is scheduled to be released within the latter half of the year. As the game firm is expected to show a weaker-than-expected performance in the second quarter, brokerages said the release of the new game and its reception is important for the company to rebound. / Courtesy of Netmarble Games
By Jun Ji-hye
Netmarble Games, NCSOFT and Pearl Abyss are expected to have weaker-than-expected performances in the second quarter, due to the burden of rising marketing costs before the release of new games, according to a local market tracker, Monday.
FnGuide said the market's estimate for Netmarble's operational profit during the second quarter is 97.6 billion won ($88 million), down by 7.17 percent year-on-year. The firm's sales for the April-June period is estimated at 578.6 billion won, up by 7.13 percent.
The market's estimate for the firm's operational profit and sales decreased by 9.2 percent and 2.7 percent, respectively, compared to the data compiled by FnGuide in April. At the time, the market information provider said the market's estimate for the game company's operational profit and sales was 107.5 billion won and 594.4 billion won.
“Netmarble's second-quarter performance is expected to be below market expectations,” said Kim Dong-hee, an analyst from Meritz Securities. “The release of Blade and Soul Revolution and its results in the latter half of the year become very important.”
NCSOFT's performance is also expected to fall short of market expectations.
FnGuide said the market's estimate for NCSOFT's sales and operational profit is 442.9 billion won and 167.3 billion won, up by 71.27 percent and 344.91 percent year-on-year, respectively.
The estimated sales and operational profit decreased by 3 percent and 0.2 percent compared to the data provided in April.
The market tracker expected sales for NCSOFT's mobile megahit game “Lineage M” on a daily basis to fall by 14 percent to 2.5 billion won compared to the first quarter. This was attributed to the increase in operating expenses due to expanded marketing activities and rising labor costs.
Pearl Abyss, a developer of “Black Desert,” is no exception.
FnGuide said the market's estimate for Pearl Abyss' sales and operational profit during the second quarter is 114.9 billion won and 61.9 billion won, up by 248.24 percent and 178.75 percent year-on-year, respectively.
The estimated sales and operational profit was also reduced by 21.5 percent and 22.8 percent, respectively, compared to the data released in April.
Brokerages attributed this to the firm's burden of rising marketing costs before the release of new games as well as rising labor costs following its personnel recruiting. But they added that Pearl Abyss could expect improved performance during the third quarter as “Black Desert” is scheduled to be released in Taiwan.
“Pearl Abyss' performance in the second quarter is expected to grow in the second quarter compared to the previous quarter but still fall short of market expectations,” said Ahn Jae-in, an analyst from NH Investment & Securities. “But expectations for the release of new games will continue as two new games are scheduled to be released and the firm is preparing to make a foray into Southeast Asia, Japan, North America and Europe.”