Despite Noise Around Probability-Based Items... NC's New Releases Generate More Excitement Than Regulatory Concerns

Most Item Drop Rates Already Disclosed
Users Continue Purchasing Items Despite Low Rates
Blade and Soul 2 and Other New Releases Rush... "Revenue Diversification Possible"

Kim Taek-jin, CEO of NCSoft

[Asia Economy Reporter Minwoo Lee] Despite concerns over regulations on probability-based items, there are forecasts that NCSoft will continue to perform well. Customers are purchasing items even though they know the purchase probabilities, and with multiple new releases planned, revenue diversification is also possible.

As of 9:49 AM on the 4th, NCSoft's stock price rose 1.04% from the previous day to 972,000 KRW. It has been showing an upward trend since the sharp drop on the 22nd of last month. At that time, amid controversy over regulations on probability-based items, the closing price fell 6.62% in one day?the largest single-day drop since August 20 last year (-6.90%). The concern is that if the full revision of the Game Industry Promotion Act currently being pushed in the National Assembly introduces mandatory disclosure of the types and probabilities of probability-based items, performance could suffer.

The financial investment industry views these concerns as excessive. Even now, under self-regulation, the probabilities of probability-based items are disclosed, yet purchases continue. Moonjong Lee, Senior Researcher at Shinhan Financial Investment, explained, "The amendment to the Game Industry Promotion Act requires disclosure of probabilities for 'synthesis items,' which currently do not disclose probabilities. Since purchases have continued with the understanding that synthesis items have low probabilities, the impact of the law's introduction will be limited."

Rather, it is seen as an opportunity to expand market share. Performance improvement is expected due to new releases. The flagship title, Lineage 2M, will be released in Taiwan and Japan on the 24th. Based on the Lineage 2 intellectual property (IP), which has relatively higher overseas recognition compared to Lineage 1, its success is anticipated. Initial daily sales of Lineage 2M are expected to be 1 billion KRW in Japan and 500 million KRW in Taiwan. The most anticipated title for the first half of the year, Blade & Soul 2, is expected to be released as early as the end of next month. It has gained popularity, attracting 2 million pre-registrations within 18 hours of starting on the 9th of last month.

Even if first-quarter results are somewhat sluggish, the new releases are expected to drive strong performance in the second quarter. According to financial information provider FnGuide, NCSoft's consolidated earnings forecast (consensus) for the second quarter of this year is 869.7 billion KRW in sales and 368.7 billion KRW in operating profit, representing increases of 61.5% and 76.4% respectively compared to the same period last year. Mina Lee, a researcher at Daishin Securities, predicted, "With revenue diversification through multiple games, mid- to long-term performance stability will improve."