Third-quarter figures from financial information company FnGuide have highlighted the growth of newcomers to South Korea’s game industry. PIXABAY
The landscape of South Korea’s game industry has been shaken up in the past year, as newcomers took the market by storm while traditional powerhouses slipped.
Krafton, developer of online multiplayer shooter PlayerUnknown Battlegrounds, and Kakao Games, maker of massively multiplayer online role-playing game Odin: Valhalla Rising, saw their sales soar year-on-year, as the two games gained popularity around the world.
Meanwhile, the country’s big three game makers – Nexon, NCSoft and Netmarble, also known as the “3N” that had ruled the industry for years – faltered with the sluggish sales of their games in the absence of new titles. An increase in major operating expenses, such as salary hikes to secure talented developers and higher marketing costs, also added to the burden on the country’s first-generation game makers, according to industry watchers.
The sales reports of the five companies indicate how the shape of the game industry has begun to change.
The estimates of the top five game companies’ yearly growth based on the fourth-quarter predictions from financial information company FnGuide showed that Krafton and Kakao Games are forecast to see their annual sales increase by 25.4 per cent and 116.2 per cent, respectively. The yearly sales of Netmarble are expected to grow by 2.6 per cent, whereas the annual sales of Nexon and NCSoft are projected to decrease by 9.2 per cent and 2.1 per cent from 2020, respectively.
Although the actual figures may not match the estimates when fourth-quarter and annual reports of the game companies are announced in February, the numbers from the third quarter have already highlighted the growth of the newcomers.
Sitting at the top of all game companies on the main bourse Kospi in terms of market capitalisation, Krafton recorded 521.9 billion won ($437.8 million) in sales in the third quarter, up 42.3 per cent from the same period last year. Kakao Games also posted 466.2 billion won in sales from July through September, a whopping 210 per cent jump year-on-year.
On the other hand, the cumulative sales of Nexon, Netmarble and NCSoft as of September posted negative growth rates year-on-year.
As Krafton and Kakao Games announced their big third-quarter earnings last month, both game developers stressed the importance of the hottest trends in the industry – the metaverse, blockchain and nonfungible tokens (NFT) – and hinted at where they seemed to be headed.
“Krafton had already regarded creating an interactive virtual world instead of the metaverse as a major axis of long-term growth and carried out relevant investments and researches. Strategic direction and confidence have grown as the metaverse has been receiving great attention while forming a market,” said Krafton chief finance officer Bae Dong-geun.
Bae also pointed out that it is important to integrate NFTs with a game to help expand the fun and ecosystem of the game, adding that Krafton will continue to conduct research on deep learning blockchain and technology.
“We plan to enter the metaverse business more actively through synergy from Neptune’s tangible and intangible assets and various contents held by the Kakao community. We are preparing contents, such as games and virtual idols, as well as an open platform with our own economic model,” two co-CEOs of Kakao Games, 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 in casual and social casino games.
Shortly after the posting of the game makers’ quarterly figures, Morgan Stanley Capital International added Krafton and Kakao Games to the investment research firm’s regional emerging market index, in a move considered to have solidified the legitimacy of the newcomers.
THE KOREA HERALD/ASIA NEWS NETWORK