South Korea’s Gaming Industry Starts to Separate between the Rich and the Poor

Aug 13, 2019

South Korea’s gaming industry, which has been criticized for not having a ‘waist’ as it is divided into NCSOFT, Nexon, and Netmarble and other mid-sized gaming companies, is now showing a sign of polarization between mid-sized gaming companies. While there are gaming companies that are continuing to make steady growth due to popularity of their games or rebound through new games, there are also gaming companies that are struggling to come out of long slump due to delay in release of their new games and lack of popularity of their games. The gap between the rich and the poor is getting worse even amongst mid-sized companies.
Only Pearl Abyss, DoubleUGames, and WeMade can truly say that they are experiencing growth.
Pearl Abyss is a mid-sized gaming company that is performing the best out of all mid-sized gaming companies. Although sales have become thin for the most within the gaming industry, Pearl Abyss is the only exception. In second quarter alone, it made $125 million (152.3 billion KRW) and $46.7 million (56.9 billion KRW) in sales and operating profit respectively. Compared to the second quarter of 2018, its sales and operating profit increased by 35.1% and 3.8% respectively. Compared to the first quarter of 2019, its operating profit increased by 213%.
Its performance comes from global expansion of the intellectual property (IP) of ‘Black Desert’ and diversification of its platform. Number of simultaneous log-ins doubled after Pearl Abyss changed the PC version into its own service. It is currently providing service for Black Desert in foreign countries through publishers. Percentage of its foreign sales from Black Desert is responsible for 73% of entire sales from Black Desert. ‘Black Desert Mobile’, which is bringing in more sales than the PC version of Black Desert, is continuing its stable service. Pearl Abyss is planning to release Black Desert PlayStation 4 version and Black Desert Mobile globally on the 23rd of this month and during the fourth quarter respectively. Pearl Abyss is also focused on developing new games through new engines. It is currently working on a private project along with Project K and Project V. It is also looking into Chinese market through its subsidiary CCP.
DoubleUGames, which is a gaming company specializing in social casino, made $107 million (129.9 billion KRW) and $33.1 million (40.3 billion KRW) in sales and operating profit respectively in the second quarter. Compared to the second quarter of 2018, its sales and operating profit increased by 9.4% and 16.9% respectively. DoubleUGames has grown steadily as the amount of payments made by mobile users in the second quarter increased by 16.5% compared to the second quarter of 2018. Amount of payments made through DoubleU Casino, which is its main game, in the second quarter was $37.8 million (46.1 billion KRW) that is 7.3% increase compared to the second quarter of 2018. Sales from DoubleDown Casino (DDC), which is provided by DoubleUGames’ American subsidiary called DoubleDown Interactive (DDI), in the second quarter was $62.8 million (76.5 billion KRW) that is about 10% increase compared to the second quarter of 2018.
WeMade, which was going through restructuring and crunch mode at one point, is finally seeing positive performance after a long time. It made $27.8 million (33.9 billion KRW) and $2.3 million (2.8 billion KRW) in sales and operating profit respectively in the second quarter. Compared to the second quarter of 2018, its sales and operating profit increased by 22% and 3,255% respectively. Although the amount of its operating profit is not much, WeMade was able to turn a profit after three quarters.
Sales from its licenses helped its performance. Amount of sales from its licenses in the second quarter was $15.6 million (19.055 billion KRW) that is 58% and 22% increase respectively compared to the first quarter of 2019 and the second quarter of 2018. Fact that seven new games based on the IP of ‘Mir’ were released in Chinese market proved to be effective for its second quarter performance. $2.46 million (3 billion KRW) loyalty it received from Shanda Games, which has continued to provide its service for ‘The Legend of Mir 3’ even after a contract ended at the end of September of 2017, also contributed to its performance.
WeMade is expecting that its sales from licenses will continue to increase even during the second half of this year. It is predicting that four to five new licensed games will be released in Chinese market per quarter. Since Chinese Government resumed issuing rating for foreign games at the end of last year, about ten new licensed games based on the IP of Mir received internal ratings.
It is also expecting to see its sales grow due to continuous crackdown of illegal games that infringe copyrights, new contracts for its licenses, and legalization of illegal servers. While it is going through lawsuits with Shanda Games, Tencent, 37 Games, 9377, and Tanwan, it is also negotiating settlements with them. It is estimating that it will receive $164 million (200 billion KRW) in profit from loyalty annually if its copyrights are acknowledged by these five companies.
It is also working on development of sequels. It is planning to introduce Mir Trilogy that combines ‘Mir 4’, ‘Mir M’, and ‘Mir W’ sequentially. It is first going to carry out tests on ‘Mir 4’ before it is released during the second half of this year and release it in South Korean market by end of this year. ‘Mir M’ will require selection of a partner before it is released in Chinese market. NDREAM that has carried out strategic investment will develop ‘Mir W’.

South Korea’s Gaming Industry Starts to Separate between the Rich and the Poor

COM2US made $102 million (124.2 billion KRW) and $26.5 million (32.3 billion KRW) in sales and operating profit respectively in the second quarter. Compared to the second quarter of 2018, its sales increased by 0.1% while its operating profit decreased by 11.3%.
Its operating profit decreased as it was trying to acquire subsidiaries. It acquired a story-game company called ‘Day7’ and an unattended-type RPG developers called MANACORE and NOVA Factory in February and March respectively. It is looking to expand its portfolio by diversifying IP-related businesses through these newly acquired subsidiaries.
First, it is going to introduce games with various stories. It is currently working on a story RPG called ‘Wannabe (working title) and a Netflix drama ‘Kingdom’-based game through a story game platform called ‘Prism (working title).
Its main game called Summoners War saw number of average daily users increase by 22.7% in June compared to May as it celebrated five years anniversary. As a result, COM2US recorded its highest June sales ever. Number of average daily users of its baseball games also increased by 40% in the second quarter compared to the first quarter. COM2US, which has 80% of its sales come from foreign markets for 18 quarters in a row, is planning to expand globally through Summoners War in the second half of this year as well.
Neowiz’s second quarter performance was similar to the second quarter of last year. It made $49.2 million (60 billion KRW) and $7.55 million (9.2 billion KRW) in sales and operating profit respectively. Its sales increased by 1% while its operating profit decreased by 4%. Domestic sales had helped maintain its performance. Amount of its domestic sales in the second quarter was $27.6 million (33.6 billion KRW) that is 24% increase compared to the second quarter of last year due to the growth of its board games. On the other hand, amount of its foreign sales was $21.7 million (26.4 billion KRW) that is 18% decrease compared to the second quarter of last year.
It is currently preparing for the second half through its new PC online game called ‘Army and Strategy’, which is expected to be available globally through Steam, and a mobile game called ‘Come On Knights’. It is going to increase number of users for its major mobile game called Brown Dust through new updates and various events with other popular IPs starting from the third quarter.
Gravity, which recorded its biggest quarterly performance, made $64.1 million (78.1 billion KRW) and $10.6 million (12.9 billion KRW) in sales and operating profit respectively in the second quarter. While its sales and operating profit decreased by 41.5% and 45% compared to the first quarter, they increased by 24% and 56.2% compared to the second quarter of 2018. Its sales and operating profit regressed due to reduced effects from its new game ‘Ragnarok M: Eternal Love’. However, it is expecting to see effects of this game again by releasing it in few European countries, Turkey, and Russia during the third quarter. It made $30 million (36.6 billion KRW) in operating profit in the first half that is 179.4% increase compared to the first half of 2018.
Although JOYMAX saw its sales grow compared to the first quarter, amount of its loss increased even more due to advertisement fee and payment commission. However, its performance improved compared to the second quarter of last year. It made $6.15 million (7.5 billion KRW) and 2.87 million (3.5 billion KRW) in sales and operating loss respectively in second quarter. Compared to the second quarter of 2018, its sales and operating profit increased by 3% and 12% respectively. During the second half, it is going to focus on securing new sales by actively releasing its current games globally and developing new games.
Webzen that had experienced its heyday through the IP of MU saw its performance falter in the second half. Its sales and operating profit in the second quarter were $35.5 million (43.3 billion KRW) and $7.63 million (9.3 billion KRW) respectively and they reduced by 11.3% and 27.5% respectively compared to the second quarter of 2018. Although MU Origin 2 is currently at the top 20 of Google Play, amount of domestic sales from MU Origin 2 in the second quarter was $20 million (24.4 billion KRW) that is 14% decrease compared to the second quarter of 2018. Its second quarter performance was not great due to absence of popular new games.
It is looking to rebound starting from the second half. It is going to release a SRPG (Simulation RPG) called ‘Helix Saga’ in South Korean market sometime during the third quarter. It is also going to diversify foreign partners in order to introduce many games through its own development and publishing starting from 2020.
Although Gamevil saw its second quarter sales increase by 15%, it failed to turn in a profit. It made $23.1 million (28.2 billion KRW) and $4.84 million (5.9 billion KRW) in sales and operating loss respectively. Devsisters recorded an operating loss for 17 quarters in a row. Its sales and operating loss in the second quarter were $6.89 million (8.4 billion KRW) and $5.01 million (6.1 billion KRW) respectively. Its sales decreased by 2.2% compared to the second quarter of 2018 while its operating loss increased by 142%. It desperately needs a cash cow after popularity of its major game called ‘Cookie Run: OvenBreak’ died off. It is currently working on improving level of completion ‘Cookie Run Jelly Pop’, which is a puzzle game released in five countries in May, and developing six new projects such as RPG, strategy, city construction, fashion celebrity simulation, and social network.
Many predict that most of mid-sized gaming companies did not make significant growth in the second quarter compared to the second quarter of last year while many mid-sized gaming companies have yet to make announcements on their second quarter performance. Delaying an announcement on poor performance is a common practice. Listed companies have to submit their quarterly performance within 45 days from the end of a quarter. This Wednesday is the last day to turn in results from second quarter performance.
Staff Reporter Lee, Hyeonsoo | hsool@etnews.com

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