Newcomers are taking South Korea’s gaming industry by storm
The landscape for South Korea’s gaming industry has been turned upside down over the past year, as new entrants have taken the market by storm as traditional power plants have slipped.
Krafton, developer of the online multiplayer shooter PlayerUnknown’s Battlegrounds, and Kakao Games, maker of the massively multiplayer online role-playing game Odin: Valhalla Rising, have seen their sales soar year on year, as both games have gained ground. in popularity around the world.
Meanwhile, the country’s three big game makers – Nexon, NCSoft and Netmarble, also known as “3N” who have led the industry for years – have faltered due to weak sales of their games. in the absence of new titles. An increase in major operating expenses, such as salary increases to secure talented developers and higher marketing costs, has also added to the burden on first-generation game makers nationwide, according to industry watchers. .
Sales reports from the five companies indicate how the shape of the gaming industry began to change.
Annual growth estimates for the top five game companies based on a fourth quarter forecast from financial reporting firm FnGuide showed that Krafton and Kakao Games are expected to see their annual sales increase by 25.4% and 116, 2%, respectively. Netmarble’s annual sales are expected to grow 2.6%, while Nexon and NCSoft’s annual sales are expected to decline 9.2% and 2.1% from 2020, respectively.
While actual numbers may not match estimates when the fourth quarter reports and game company annual reports were announced in February, the third quarter numbers have already highlighted growth in newcomers.
Leading all game companies on the main Kospi exchange in terms of market capitalization, Krafton posted 521.9 billion won ($ 437.8 million) in third-quarter sales, up 42.3 percent from compared to the same period last year. Kakao Games also recorded 466.2 billion won in sales from July to September, a whopping 210% year-on-year jump.
In contrast, the cumulative sales of Nexon, Netmarble and NCSoft at the end of September show negative growth rates year over year.
As Krafton and Kakao Games reported their big third quarter profits last month, both game developers highlighted the importance of the hottest trends in the industry – the metaverse, blockchain, and non-fungible tokens ( NFT) – and hinted where they seemed to be heading.
“Krafton had previously viewed the creation of an interactive virtual world instead of the metaverse as a major focus for long-term growth and had made relevant investments and research. Strategic focus and confidence grew as the metaverse received high attention while forming a market, ”said Bae Dong-geun, CFO of Krafton.
Bae also stressed the importance of integrating NFTs into a game to help expand the fun and ecosystem of the game, adding that Krafton will continue to conduct research on blockchain and deep learning technology.
“We plan to enter the metaverse sector more actively through the synergy of Neptune’s tangible and intangible assets and the various content owned by the Kakao community. We are preparing content, such as games and virtual idols, as well as an open platform with our own business model, ”two Kakao Games co-CEOs, Namkoong Whon and Cho Kye-hyun, wrote in the letter. to shareholders.
Kakao Games is the largest shareholder of Neptune, a local game developer with a strong portfolio of casual and social casino games.
Shortly after the release of quarterly game makers figures, Morgan Stanley Capital International added Krafton and Kakao Games to the investment research firm’s regional emerging markets index, a move seen as having solidified the legitimacy of the new arrivals.
THE KOREA HERALD / ASIA INFORMATION NETWORK