Game Industry Lost in 'Fog' of Performance... Only Eyes on Global New Releases

Domestic Game Companies Thriving During Pandemic
Stock Prices Plummet, Q3 Earnings Fall Below Market Expectations
Aiming for Earnings Rebound with New Global Releases

[Asia Economy Reporter Seungjin Lee] A red light has turned on in the rapidly growing gaming industry triggered by the COVID-19 pandemic. As major game companies' stock prices have collectively hit new lows, analyses suggest that third-quarter earnings will also fall short of market expectations. The only thing to rely on is new releases. From the fourth quarter through early next year, major game companies plan to focus on targeting overseas markets by announcing new games.

Third Quarter Hampered by Lack of New Releases and Operational Controversies

According to financial information firm FnGuide on the 13th, except for Nexon Games, NCSoft, Netmarble, Krafton, and Kakao Games all posted third-quarter earnings below market expectations.

NCSoft's third-quarter revenue is projected to increase 13.8% year-on-year to 569.6 billion KRW, with operating profit expected to rise 1.9% to 98.1 billion KRW. NCSoft has relied on the Lineage series without any significant new releases over the past year, causing quarterly growth to decline. Lineage M, which had maintained the top spot in mobile game revenue, recently lost first place to Kakao Games' Odin: Valhalla Rising, making a rebound through new releases necessary.

Netmarble is expected to continue operating losses in the third quarter, following the first and second quarters of this year. The anticipated title Seven Knights Revolution entered a downward stabilization phase earlier than expected, and increased marketing expenses have raised operating costs. As a result, Netmarble's third-quarter revenue is expected to increase 13.1% year-on-year to 686.6 billion KRW, but operating losses are projected at 17.6 billion KRW.

Kakao Games and Krafton both saw their third-quarter earnings fall short of market expectations due to controversies related to game operations. Kakao Games faced conflicts with users over the operation of Uma Musume Pretty Derby. As a result, Uma Musume, which was once ranked within the top 10 in mobile game revenue, dropped outside the top 50. Krafton's earnings were impacted by the suspension of service for PUBG Mobile India in the Indian market.

Image of NCSoft's new release 'TL' scheduled for launch in 2023. (Photo by NCSoft)

The Answer to Earnings Recovery: ‘Global’

The gaming industry's attention is focused on the new releases lined up from the second half of this year through next year. Most of these upcoming titles are aimed at the global market, which is expected to be the key to reversing earnings declines.

Netmarble, which urgently needs an earnings rebound, plans to release multiple P2E (Play to Earn) based games in the second half of this year. Starting with King of Fighters: Arena in the fourth quarter, titles such as Monster Arena Ultimate Battle, Modoo Marble: Meta World, and Champions: Ascension are scheduled for release. All of these are P2E-based and will target the global market. The industry expects these new titles, all developed in-house, to improve operating profits by reducing the previously high proportion of publishing (distribution and marketing) games that negatively affected earnings.

NCSoft, which has relied on the domestic market centered around Lineage, is also expanding into the global market. NCSoft plans to release the new title Throne and Liberty (TL) next year, with North America and Europe as the main target markets. To appeal to Western audiences, NCSoft has proposed differentiated content, business models, and platforms compared to existing MMORPGs (Massively Multiplayer Online Role-Playing Games), and plans to incorporate these elements into TL.

Kakao Games, which declared ‘Beyond Korea,’ is also focusing its major new releases next year on the North American and European markets. Kakao Games is preparing for the global launch of Ares: Rise of Guardians and Eversoul next year. Odin, currently serviced in Taiwan, Hong Kong, and Macau, aims to enter the Japanese market in the first quarter and the North American and European markets in the second quarter of next year.

Krafton is preparing to release the new title The Callisto Protocol in December. Last month, Krafton accelerated its global market expansion by launching the new title Moonbreaker on the global game distribution platform Steam.