Will major Korean game companies bounce back?

Local firms urged to diversify platforms, expand overseas businesses

By Baek Byung-yeul

NCSOFT, Netmarble, Krafton and other game companies, which have been struggling with an industry-wide downturn over the past two years, are urged to make changes to regain growth momentum, such as expanding service platforms to PCs and consoles and diversifying genres beyond role playing games, according to industry officials and experts, Monday.

They said that the basic aim of games is to provide entertainment to users and through various channels, citing Nexon, which did well in the second quarter by diversifying its platforms and genres.

“As the technology to make games has leveled up, more and more companies have entered the mobile game industry. The market is limited and the number of games released is increasing, but Korean game companies have released too many MMORPGs (multiplayer online RPGs), so the competition has intensified,” Ju Woo-suk, a professor of Game Technology at Dongseo University, said.

The professor said that while the rise of games as a form of stay-at-home content during the COVID-19 pandemic has led to a significant increase in earnings for companies that produce such content, Korean game companies are too focused on mobile games, especially MMORPGs, making it difficult for them to make a profit in what has now turned into a red ocean.

“During the pandemic period, people had no choice but to do a lot of things online, so the proportion of games among the content consumed online increased, which led to higher sales for game companies, but the end of the pandemic has led to a decline in profitability. Except for the big companies, the competition is more intense because the smaller companies have been focusing on mobile, not the big companies that are able to invest a lot of capital,” he said.

Ju added that Nexon did well in the second quarter because the company made a variety of high-quality games that were fun, setting a path for other companies to follow.

“Nexon's solid performance is due to its brand power, but the biggest reason is that its games are fun and well-made,” he said.

Unlike other game companies, which have mostly focused on MMORPGs as their cash cow, Nexon released games in various genres such as adventure role-playing and shooting, and released them on mobile platforms and also on console platforms such as PCs and Nintendo Switch, leading to a 22 percent year-on-year increase in operating profit to 264 billion won ($198 million) in the April-June period.

Seen is a poster for Nexon's action RPG game, “Dave the Diver.” Nexon said it sold more than a million copies of the game since its June launch. Courtesy of Nexon

Nexon posted strong sales across all genres, from PC to mobile to console. “Dave the Diver,” an action RPG game, became the No. 1 paid game on global PC game platform Steam within a day after its release in June. As of last month, “Dave the Diver” sales surpassed 1 million copies.

“FIFA Online 4,” an online football game, posted its sixth straight quarterly record in terms of sales and “Blue Archive,” a subculture game, is gaining popularity in Japan, while “War of Prasia,” a MMORPG that was launched on PC and mobile in March, also contributed to the stellar performance.

Unlike Nexon, other game companies did not fare as well.

Last week, most big name game firms released their second quarter earnings results, with NCSOFT reporting an operating profit of 35.3 billion won, down 71 percent year-on-year, and Netmarble posting an operating loss of 37.2 billion won. Krafton, known for the popular multiplayer online battle game, “PUBG: BATTLEGROUNDS,” posted an operating profit of 131.5 billion won, down 20.7 percent year-on-year.

An industry official said users are increasingly losing interest in domestic game companies that have been boosting sales by selling paid in-game items in MMORPGs, and that opening up various overseas markets such as North America, Europe, and Japan, as well as releasing games in various genres, will be a breakthrough for these companies.

"Users are no longer attracted to MMORPGs, which used to dominate the domestic game market. This is confirmed by the performance of the game industry,” the official said on condition of anonymity. "In order to overcome this, game companies are increasingly accelerating their efforts to release games of various genres through a variety of platforms and challenge not only the domestic market but also more overseas markets.”

As part of efforts to find a breakthrough, NCSOFT, best known for the “Lineage” MMORPG franchise, is scheduled to release a new MMORPG called “Throne and Liberty” in December in the Korean market first. The new role-playing game will be available on various platforms, such as PC, Sony's PlayStation 5, Microsoft's Xbox X and S and mobile.

Neowiz is also gaining attention with its action game, “Lies of P,” which will be launched on September 19. With the action game, to be launched on PC, PlayStation and Xbox, Neowiz won the Best Action Adventure Game, the Most Wanted Sony PlayStation and the Best Role Playing Game awards at last year's Gamescom trade show in Germany.

Netmarble, which posed six straight quarterly losses until the second quarter of 2023, is trying to regain momentum by releasing eight new games in different genres in the second half of this year. In particular, the company will release three games in the Chinese market ― “The Seven Deadly Sins: Grand Cross,” “Ni no Kuni: Cross Worlds,” and “A3: Still Alive” ― to help turn around its operating loss in the world's largest game market.