Mixed Fortunes in the 2022 Game Industry, Will This Year Bring a Favorable Breeze?

[Asia Economy Reporter Seungjin Lee] The gaming industry, which has been closing its books for last year’s performance, is experiencing sharply divided fortunes. While companies like NCSoft and Kakao Games are expected to have posted solid results, Netmarble and Wemade are likely to face their worst year yet.

New Year’s Messages Unite on ‘Overcoming Crisis’

According to financial information firm FnGuide on the 5th, Netmarble and Wemade are projected to report operating losses for the full year of last year. Highly anticipated titles failed to deliver, and the ambitious foray into the virtual asset market is facing difficulties. Netmarble is estimated to have recorded sales of 2.6813 trillion KRW and an operating loss of 89 billion KRW last year. Although sales slightly increased compared to the previous year, the company turned to a deficit. New releases such as 'Seven Knights Revolution,' which utilize the company’s flagship intellectual property (IP), struggled, and the increased burden of foreign currency liabilities had a negative impact.

Wemade faced challenges last year due to the delisting of its virtual asset WEMIX. Wemade’s sales for last year are expected to be 482.8 billion KRW, with an operating loss of 62.1 billion KRW. Sales grew by 44% year-on-year, but worsening profitability is expected to result in an operating loss.

The sense of crisis was also evident in the New Year’s messages from both companies. Bang Jun-hyuk, Chairman of Netmarble and Coway, urged all company leaders at the opening ceremony to “overcome the crisis and regain competitiveness through ‘structural reform’ to secure competitiveness and ‘selection and concentration’ for efficient management.”

Jang Hyun-guk, CEO of Wemade, sent a New Year’s message titled ‘Persistence Moves Mountains’ to employees on the 1st, emphasizing that the blockchain business will never be abandoned. He said, “Like the persistent man moving mountains, I ask you to do what must be done and what you want to do,” adding, “Whether what lies ahead is the world’s ignorance and misunderstanding or anything else, we will never give up.”

NCSoft 'Throne and Liberty' Image

Growth of NCSoft, Krafton, and Kakao Games

NCSoft continued its growth last year despite having no new releases, led by its core IP, the ‘Lineage’ series. NCSoft’s estimated sales for last year were 2.5992 trillion KRW, with an operating profit of 596.7 billion KRW, representing increases of 12.6% in sales and 59% in operating profit compared to the previous year. Lineage W, released in November 2020, accounted for 33% of total sales as of the third and fourth quarters.

Krafton and Kakao Games also recorded growth. Krafton’s estimated sales for last year were 1.9068 trillion KRW, with an operating profit of 776 billion KRW, marking increases of approximately 1.1% in sales and 21.3% in operating profit year-on-year. This was due to the sustained popularity of its flagship IP, ‘Battlegrounds,’ despite regulatory challenges from the Indian government. Kakao Games’ estimated sales for last year were 1.1985 trillion KRW, with an operating profit of 203.4 billion KRW, representing growth of 18.4% and 81.8%, respectively, compared to the previous year. The continued popularity of ‘Odin: Valhalla Rising’ and the strong performance of ‘Uma Musume Pretty Derby,’ released in June last year, helped boost results.

On the 2nd, Kakao Games CEO Cho Gye-hyun announced in a New Year’s message that “In 2023, based on accumulated service experience, we will accelerate our global market expansion and aim for ‘Beyond Korea,’” signaling plans to speed up global market penetration this year.

China Opens Doors, Raising Expectations for 2023

This year is expected to bring a favorable breeze across the gaming industry. China, which had tightened regulations and closed its market, has begun to reopen, and a flood of anticipated titles from game companies is emerging.

Last month, Chinese authorities issued licenses (service permits) for six Korean games for the first time in a year and a half. Among these are three games from Netmarble, which turned to a deficit last year. Wemade is preparing to enter the Chinese market by negotiating service contracts for ‘Mir4’ and ‘Mir M’ with local publishers and is also collaborating on non-fungible token (NFT) products using the ‘Legend of Mir 2’ IP in China.

NCSoft plans to launch ‘Throne and Liberty (TL),’ a PC and console-based game, in the first half of this year to pursue global expansion. Nexon will release ‘KartRider: Drift’ (PC, console, and mobile) as a multi-platform title this year. Kakao Games will unveil ‘ArcheAge War,’ a new title developed by XL Games, the developer of the original ‘ArcheAge,’ in the first quarter. Pearl Abyss’s ‘Crimson Desert,’ targeted for completion in the fourth quarter, is also a highly anticipated title. ‘Crimson Desert’ is Pearl Abyss’s next flagship title.