NHN Entertainment (formerly Hangame) said on August 7 it recorded an operating loss of 7.3 billion won(US$7.08 million) for the quarter. (image: NHN Entertainment)
SEOUL, Aug. 11 (Korea Bizwire) — Korea’s online game companies posted disappointing results for the second quarter.
NHN Entertainment (formerly Hangame) said on August 7 it recorded an operating loss of 7.3 billion won(US$7.08 million) for the quarter. This is the first quarterly loss for the company since its founding as a gaming division of Naver in the early 2000s. Until last year, the company reported annual operating profit by the hundreds of billions won. Its quarterly sales revenue also shrank 21.3 percent to 119.8 billion won(US$116 million) from the same period a year ago.
This is largely because its PC online game sales revenue halved to 67.5 billion won from 120.8 billion won a year ago. An NHN Entertainment official said, “Even though mobile game sales rose 30.8 percent to 44.6 billion won from 34.1 billion won during the same period, it was not enough to make up for the loss in the PC online sector.”
Other game companies such as WeMade and Neowiz Games are also expected to make earnings reports much worse than before. According to the Korea Creative Content Agency, the first-quarter aggregate sales revenue of Korea’s publicly traded game firms fell 3.1 percent to 726.8 billion won from a year ago. What has happened to the game developers and publishers that have grown by leaps and bounds on the back of the Korean Wave fever overseas?
The reasons are two-folds: the first is related to the government’s excessive meddling in the business.
Beginning in February this year, the government started restricting web board games such as poker and go-stop (Oriental card game) in their playing time and ante. According to NHN Entertainment, the number of go-stop and poker game players has declined 40 percent during the first quarter, with the number continuing to drop in the second. Other rules restricting the play time for teens after midnight were also a factor for the poor results.
In addition, most domestic game publishers have focused for the past several years on selling foreign-made games at the expense of developing their own games. Indeed, no smash-hit game has been launched since 2012 when Blade & Soul (NCsoft) and ArcheAge (XLGames) were out on the market.
Instead of spending several tens of billions won in R&D, the companies were busy signing domestic sales contracts for popular overseas game titles. One of such well-known cases is FIFA Online 3 serviced by Nexon, which has enjoyed fat profit by selling the game for Electronic Arts of the United States.
Because of this behavior of Korean game publishers to focus excessively on short-term profit, Korea has become a playground for foreign game publishers and developers.
According to Gametrics, the game market research firm, the market share of foreign-made games in Korea’s Internet cafes is in excess of 60 percent. As of the end of July this year, League of Legends published by Riot Games was ranked No. 1 with a share of 36.36 percent, followed by FIFA Online 3.
By Sean Chung (schung10@koreabizwire.com)
