Game firms turn to non-game business models

By Jun Ji-hye

Netmarble, NCSOFT, NHN and other game companies here have been increasingly turning their eyes to non-game businesses in a bid to secure a future growth engine amid the slowdown in growth of the game industry, local analysts said Tuesday.

Game companies are also facing the possibility of stricter regulations following the World Health Organization's (WHO) endorsement of the revised 11th International Classification of Diseases (ICD-11) in May, which classifies game addiction as a disease in the same category as substance abuse and gambling addiction.

Most recently, Netmarble was selected as a preferred bidder to buy a controlling stake in Woongjin Coway, the nation's largest home appliance rental service provider.

In explaining the reason for participating in the bid, the nation's leading game company said it wanted to make inroads into the so-called smart home subscription economy market, noting that it will integrate its artificial intelligence (AI) and big data technologies as well as operational know-how accumulated from its gaming business with Woongjin Coway's devices.

But industry analysts said growing uncertainties inside and outside the country have led Netmarble and other game companies to attempt to diversify their business portfolio.

"Netmarble has been expanding its business portfolio in various ways due to exports of Korean games to China being blocked since 2017. Furthermore, the global mobile game industry is losing its strong growth momentum," said James Kang, a home and tech analyst at Euromonitor International Korea.

Kang said Netmarble's acquisition of Woongjin Coway is expected to deliver synergy in both the gaming and connected-consumer appliances industries, and will also enable the game company to secure a stable cash flow.

NHN, which had focused on providing online games and services, has also been making a foray into new businesses such as electronic payment and database security systems.

The company changed its name from NHN Entertainment earlier this year to "make a new leap forward as an IT company," according to an NHN official.

This year, the firm is concentrating its energy on the cloud computing business, vowing to offer its TOAST Cloud services to more financial companies and online shopping malls.

For its part, NCSOFT has selected AI as a category for its new business, significantly expanding its investment in research and development.

The company currently operates two relevant institutes ― the AI and NLP (natural language processing) centers ― under the direct control of founder and CEO Kim Taek-jin. About 150 software engineers specializing in AI are working at the two institutes.

The firm has also been aiming at the character market by creating new characters, Spoonz and Twotuckgom.

An official from a Seongnam-based game company said an increasing number of game companies are moving to secure stable sources of income by seeking new business opportunities as it is difficult to guarantee the success of a new game though it takes years of development.

But she also expressed concerns, saying, "Excessive expansion of the business could lead to financial difficulties. Thus, companies need to make the right choice."

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