Mixed Fortunes in Q2 Earnings for '3N'... Only Nexon Smiled

[Asia Economy Reporter Seungjin Lee] The second-quarter earnings of major domestic game companies have been announced. The three leading companies in the gaming industry, known as the 3N (Nexon, NCSoft, Netmarble), showed sharply divided results. The two latecomers, 2K (Krafton, Kakao Games), are showing growth trends and are expected to maintain solid performance this year as well.

The Mixed Fortunes of New Releases: Nexon and Netmarble

According to the gaming industry on the 12th, the 3N's second-quarter results diverged based on the performance of new releases. Nexon established a long-term hit system with the growth of existing titles and the success of ‘Dungeon & Fighter Mobile,’ officially released domestically in March. Netmarble's new releases in the second quarter failed to shine, and the company plans to recover its performance with new titles in the third and fourth quarters. NCSoft is expected to see a decline in sales in the third and fourth quarters due to continued decreases in the Lineage series revenue.

Nexon announced that its second-quarter sales reached 84.1 billion yen (8.175 trillion KRW), a 50% increase compared to the same period last year, and operating profit was 22.7 billion yen (2.204 trillion KRW), up 47% year-on-year. Net profit recorded 24.7 billion yen (2.401 trillion KRW), a 176% increase from the previous year, and cumulative sales for the first half rose 21% year-on-year to 175.2 billion yen (17.022 trillion KRW).

‘FIFA Online 4’ more than doubled compared to the previous year, setting a record for the highest performance for two consecutive quarters. ‘Dungeon & Fighter Mobile,’ released in March, has maintained a steady revenue by staying within the top 7 in domestic app markets. Nexon saw growth in sales in the Chinese market compared to the previous year, continuing its growth trend in Southeast Asia and other regions. Sales in North America and Europe increased by 30% compared to the same period last year, boosted by the new release ‘DNF DUEL.’

Netmarble 2022 Q2 Earnings

Netmarble recorded losses again in the second quarter, following the first quarter. It posted sales of 660.6 billion KRW and an operating loss of 34.7 billion KRW. Although sales increased by 14.4% year-on-year, the operating loss widened. Netmarble explained that titles like ‘Ni no Kuni: Cross Worlds’ global version and ‘Merge Kungya Island’ were released late in the second quarter, contributing little to sales.

Netmarble CEO Kwon Young-sik explained during a conference call, "The high marketing costs in the second quarter were mainly due to the global pre-registration and launch expenses for Ni no Kuni, as well as significant pre-marketing costs for the release of Seven Knights Revolution." He added, "In the third quarter, marketing costs for pre-launch of new titles are expected to decrease compared to the second quarter. Sales in the third quarter are expected to increase actively as the revenue from new titles released in the second quarter will be fully reflected."

NCSoft’s Lineage ‘Loses Its Edge’

NCSoft recorded an operating profit of 122.966 billion KRW in the second quarter of this year, a 9% increase compared to the same period last year. During the same period, sales amounted to 629.278 billion KRW, up 16.85% year-on-year, and net profit was 118.728 billion KRW, a 25.85% increase from the previous year.

Although results improved compared to last year, sales decreased significantly compared to the previous quarter due to declining revenue from the Lineage series. Second-quarter sales and operating profit dropped 20% and 50%, respectively, compared to the previous quarter. In particular, mobile game revenue fell 26% quarter-on-quarter due to stabilization of Lineage W’s sales and a decrease in Lineage 2M’s revenue. By mobile game, Lineage W generated 223.6 billion KRW, Lineage M 141.2 billion KRW, Lineage 2M 96.2 billion KRW, and Blade & Soul 14.2 billion KRW.

NCSoft Q2 2022 Earnings Results

Regarding this, Hong Won-jun, NCSoft’s Chief Financial Officer (CFO), said during the second-quarter earnings conference call, "About a year after launch, the game enters a stabilization phase. The results vary depending on the type of updates and the timing of new content releases. As Lineage M has entered its fifth year and the timing of updates has improved, the results continue to be positive, so we expect stable performance in the third and fourth quarters."

NCSoft is developing new titles across various genres, including ‘TL’ (Massively Multiplayer Online Role-Playing Game), ‘Project R’ (Battle Royale), ‘Project M’ (Interactive Movie), and ‘BSS’ (Collectible Role-Playing Game). Among these, TL is targeted for release in the first half of next year. CFO Hong stated during the second-quarter earnings conference call, "We are strategically discussing the best timing for overseas expansion and the best partners for TL’s launch."