Pearl Abyss Prepares Korean IP 'Dokkaebi' [Company Exploration]

In-House Game Engine Development... MMORPG-Specialized Competitiveness
Increased Advertising Industry Expectations After Dokkaebi Trailer Video Release

[Asia Economy Reporter Hyungsoo Park] The augmented reality (AR) game 'Pok?mon GO' surpassed a cumulative revenue of $6 billion (approximately 7.8 trillion KRW) six years after its launch. This is an example demonstrating the value of globally popular intellectual property (IP). In South Korea, IPs with worldwide recognition such as Lineage and Black Desert are also emerging. Pearl Abyss, famous for the online game 'Black Desert,' is developing a Korean-themed IP called 'Dokkaebi.' Expectations are growing that Dokkaebi, utilizing metaverse technology, can evolve beyond gaming into an advertising platform.

Pearl Abyss develops and services massively multiplayer online role-playing games (MMORPGs). It has been servicing Black Desert Online, launched in December 2014, in 150 countries worldwide (in 12 languages). It has gained recognition in North America, Europe, Japan, Taiwan, Russia, and other regions, establishing itself as a global IP. Using the Black Desert IP, it launched Black Desert Mobile in February 2018. The game gained popularity, surpassing 1 million cumulative downloads within just 5 hours of its official release.

Before developing games, Pearl Abyss spent two years developing its proprietary game engine, the 'Black Desert & Black Space Engine.' Unlike most game companies that use commercial engines like Unreal or Unity, Pearl Abyss invests significant costs and efforts in developing and improving a proprietary game engine specialized for MMORPGs. As gamers' expectations have risen, they have also developed a next-generation engine. Pearl Abyss confidently stated that the next-generation engine can deliver top-level graphics, including realistic texture expression and natural lighting effects. Additionally, it offers the advantage of shortening game development time. It can be applied across all platforms, including PC, console, and mobile. Using commercial engines requires regular engine usage fees, which increase as the game becomes more successful.

Using a proprietary game engine allows even junior developers to be deployed for game development within 1 to 2 months. Compared to competitors, it is easier to secure manpower, reduce labor costs, and shorten training periods.

Based on the next-generation game engine, Pearl Abyss is developing new titles such as 'Red Desert,' 'Dokkaebi,' and 'Plan 8.' Red Desert and Dokkaebi are action-adventure games with distinct worlds.

Pearl Abyss released a video last August showcasing actual gameplay footage of Dokkaebi. The metaverse game Dokkaebi is a 'Dokkaebi collection open-world action-adventure' game that unfolds a unique worldview where the protagonist embarks on an adventure to find Dokkaebi. Players collect Dokkaebi in the city and summon them to defeat boss monsters. It is being prepared as a PC and console game.

Amid the rising global popularity of K-content led by K-pop, Dokkaebi is filled with Korean elements such as traditional tiled roofs and sotdae in its game background. This differs from most domestic games, which have traditionally been set in medieval fantasy settings. Pearl Abyss is expected to meticulously implement actual props and terrain as in-game objects using its 3D scanning technology.

Following the release of the Dokkaebi trailer video, companies from various industries including food and beverage, cinema and film, clothing brands, and entertainment have shown great interest. Kiwoom Securities expects Dokkaebi to evolve beyond a simple game into an advertising platform. They analyzed that advertising revenue could be generated by naturally exposing brands as if they were real. The long-term revenue value of Pearl Abyss's advertising business is estimated to reach 341 billion KRW by 2026. Pearl Abyss is expected to release Dokkaebi in the first half of 2024.

Pearl Abyss recorded sales of 91.4 billion KRW and operating profit of 5.2 billion KRW in the first quarter of this year. Sales decreased by 10% and operating profit dropped by 60% compared to the same period last year. Given the declining sales trend of the existing Black Desert IP, growth through new titles is necessary. There is speculation that releasing Red Desert in the first half of next year will enable external growth. Sojung Lee, a researcher at SK Securities, explained, "As a triple-A blockbuster, we expect 4 million copies sold and 288 billion KRW in sales in the first quarter," adding, "In the mid to long term, revenue from in-app purchases is also anticipated."

At the end of the first quarter this year, Pearl Abyss's debt ratio was 78.3%, and its cash and cash equivalents amounted to 220 billion KRW. It spent 33.2 billion KRW on research and development in the first quarter. The R&D ratio relative to operating revenue was 36%.