Mixed Fortunes in Q1 Earnings of the 'Big 3' in the Game Industry

A3: Steel Alive Weekly Active Users Surpass 370,000
Netmarble Operating Profit Expected to Increase by 71%
Lineage2M Revenue Impact Reflected in Previous Quarter
NC Operating Profit Likely to Increase by 264%
Dungeon Fighter Mobile China Launch Delayed to Q2
Nexon Stalls Despite V4 Success

[Asia Economy Reporter Jin-gyu Lee] The 3N (Nexon, Netmarble, NCSoft) of the gaming industry showed mixed results in the first quarter earnings. Netmarble and NCSoft are expecting an 'earnings surprise' thanks to the success of their mobile games. With reduced outdoor activities due to social distancing measures, mobile games have played a key role. On the other hand, Nexon is disappointed as the release of 'Dungeon & Fighter (DNF) Mobile' in China has been postponed to the second quarter, despite the success of 'V4'.

◆ A3: Still Alive surpasses 370,000 weekly active users = According to the industry on the 1st, Netmarble, praised by Chairman Bang Jun-hyuk, is confident of an earnings surprise in the first quarter as the hybrid genre game 'A3: Still Alive' has gained popularity. According to mobile big data platform company IGAWorks, the weekly active users (WAU) of A3: Still Alive from the 16th to the 22nd of last month reached 374,251. This figure only counts Android OS devices and is similar to the weekly active users of NCSoft's 'Lineage 2M' in December last year. Released on the 12th of last month, A3: Still Alive ranked 5th in Google Play revenue as of the 31st, maintaining an estimated daily revenue of 500 million to 800 million KRW. The industry estimates Netmarble's first quarter revenue this year to be around 590 billion KRW, a 23% increase from 477.6 billion KRW in the same period last year, and operating profit to be around 58 billion KRW, a 71% increase from 33.9 billion KRW last year. Annual revenue is expected to reach about 2.4 trillion KRW, up approximately 21% from last year, and annual operating profit is projected to increase by about 68% to around 340 billion KRW. Hwang Seung-taek, a researcher at Hana Financial Investment, said, "Rather than the impact of COVID-19, the performance of new games like A3: Still Alive and the expansion of coverage of existing games will improve Netmarble's earnings."

◆ NCSoft's Lineage 2M revenue fully reflected in the quarter = NCSoft is also expected to achieve an earnings surprise in the first quarter as the revenue effect of Lineage 2M is fully reflected. The securities industry expects NCSoft's first quarter revenue to increase about 89% from 358.8 billion KRW last year to 680 billion KRW, and operating profit to increase 264% from 79.5 billion KRW to 290 billion KRW, thanks to the sustained popularity of Lineage 2M and Lineage M. Since reaching first place in Google Play revenue rankings on December 1 last year, Lineage 2M has maintained the top spot domestically for four consecutive months. Its daily revenue last month remained in the 4 billion KRW range. Although the daily revenue of Lineage 2M slightly decreased compared to the launch season in Q4 last year (4.5 to 5 billion KRW), marketing costs decreased by about 20%. Oh Dong-hwan, a researcher at Samsung Securities, explained, "Despite the COVID-19 situation, NCSoft's PC and mobile game revenues are being maintained steadily." Jung Ho-yoon, a researcher at Korea Investment & Securities, also said, "The decrease in outdoor activities due to social distancing has relatively led to an increase in the usage of online content such as games."

◆ Nexon's V4 shows a modest performance domestically and abroad = Released domestically in November last year, V4 serves as Nexon's cash cow. As of the 31st of last month, V4 ranked 6th in Google Play revenue. It has maintained a top-tier position in Google Play revenue rankings for five months since its release. From the 26th of last month, official service also started in Taiwan, Hong Kong, and Macau to expand revenue. However, with the PC game 'DNF' slowing down in China and the ambitious DNF Mobile's release in China postponed to the second quarter, Nexon is internally taking a conservative view on first quarter earnings. Nexon recorded revenue of 949.8 billion KRW and operating profit of 536.7 billion KRW in the first quarter last year. Nexon stated, "The expected revenue for the first quarter this year is about 820 billion KRW, which is at least a 13% decrease compared to the same period last year."