NCSoft Pangyo R&D Center (Image courtesy of NCSoft)
SEOUL, Nov. 5 (Korea Bizwire) – In response to its first quarterly loss in 12 years, South Korean gaming giant NCsoft has pledged to undergo a drastic restructuring by year’s end to revitalize its performance.
During the third-quarter earnings call on November 4, NCsoft CFO Hong Won-jun promised that from 2025 onwards, the company would focus on its core business to deliver improved financial results.
The company reported an operating loss of 14.3 billion won in the third quarter, marking a sharp reversal from the 16.5 billion won operating profit recorded in the same period last year.
Warning signs had been apparent, with operating profits steadily declining since the first quarter of last year, with NCsoft barely avoiding a loss in the second quarter of this year.
Market analysts attribute the declining performance to falling mobile game revenues and unsuccessful new releases. The company’s “Lineage” mobile game series, which had been NCsoft’s primary revenue driver, has faced increasing competition and market saturation.
The “Lineage” franchise, including “Lineage M” (2017), “Lineage 2M” (2019), and “Lineage W” (2021), had previously served as the company’s revenue backbone through their probability-based item systems and competitive gameplay mechanics.
In 2022, NCsoft recorded its highest-ever annual revenue of 2.57 trillion won, up 11.4% year-over-year, with operating profits of 559 billion won.
The Lineage mobile game series has been a key revenue driver for NCSoft. However, the success of the franchise has led to competitors flooding the market with ‘Lineage-like’ games, or ‘Lineage clones,’ that have begun to put a dent in its performance. (Image courtesy of NCSoft)
However, the market has become increasingly crowded with “Lineage-like” games from competitors, leading to user fatigue. While “Lineage W” alone generated approximately 1 trillion won in revenue in 2022, its earnings have fallen to just 195.2 billion won in the first three quarters of this year.
Recent game launches have also struggled. “Throne and Liberty” (TL), released late last year, saw rapid user decline despite initial interest, though its recent global version has shown promise with 336,000 concurrent users.
“Battle Crush,” a fighter action game released in June, will end service this month after poor performance, while “Project HOF,” launched in August targeting younger players, quickly dropped from revenue rankings despite extensive marketing in Korea and Japan.
In response to these challenges, NCsoft announced a comprehensive restructuring plan that includes the spin-off of four subsidiaries, including NC AI and game development studios, the cancellation of six new game projects, and the implementation of a voluntary retirement program for the first time in 12 years.
The company plans to streamline its operations while focusing on upcoming titles like “Journey of Monarch,” scheduled for release by year-end, and major releases planned for 2025 and beyond.
However, the restructuring faces internal challenges, with the company’s labor union planning a rally on November 28 to demand job security and improved communication with employees.
Industry observers suggest that NCsoft’s prolonged focus on high-paying users in PC and mobile MMORPGs may have caused it to miss broader market changes. The company now faces the challenge of adapting to evolving gaming trends while maintaining its core business strength.
Ashley Song (ashley@koreabizwire.com)
