[Asia Economy Reporter Lee Seung-jin] Kakao Games, which achieved its highest performance since its establishment last year, is focusing on global expansion this year. While continuing investments centered on intellectual property (IP), the company plans to strengthen its internal foundation through conservative hiring.
Highest Sales Since Establishment
Kakao Games announced that it recorded its highest performance last year with total sales of 1.1477 trillion KRW, an increase of about 13% compared to the previous year. Operating profit also rose by about 59% to 177.7 billion KRW. In the fourth quarter of last year, sales were 235.7 billion KRW and operating profit was 10.8 billion KRW, down approximately 18% and 76% respectively compared to the previous year.
Last year's performance was influenced by the solid results of existing games such as "Odin: Valhalla Rising," which consistently maintained top sales rankings, and new games like "Uma Musume Pretty Derby." Additionally, growth in other revenues from non-gaming sectors such as Kakao VX and Senatechnology contributed to recording the highest sales and operating profit since the company's founding.
'Eversoul,' released in January this year, is continuing to perform beyond expectations, making this year's performance outlook bright. CEO Cho Gye-hyun said during the earnings conference call, "(Eversoul) is a new IP, but we lowered the game hurdles by focusing on character design, lyrical BGM, and story, and monetized it. The initial results are exceeding our expectations."
He added, "By region, domestic sales account for 60%, with the rest coming from North America, Europe, and other areas. Due to the characteristics of the subculture genre, we expect a spike in sales around the end of Q1 or early Q2 this year."
He also did not hide his expectations for the Japanese market. Since the first launch on January 5, the game has been operated for about a month, and updates for the next 3 to 4 months have already been announced to users, with content prepared accordingly.
This Year is 'Beyond Korea'
Kakao Games aims for 'Beyond Korea' this year. Expanding its reach not only domestically but also into global markets, it plans to introduce new titles across various genres. Along with securing its own intellectual property (IP), the company plans to strengthen continuous external growth through expanding its global pipeline.
Starting with 'Eversoul,' released last month, Kakao Games plans to sequentially launch various new titles such as 'ArcheAge War,' 'Ares: Rise of Guardians,' and 'Godis Order' in domestic and overseas markets.
They will expand their service range with the entry of 'Odin: Valhalla Rising' into the Japanese, North American, and European markets, as well as the release of 'Eversoul' in Japan. Through Metabora, they are building a solid infrastructure including multi-chain and marketplace, expanding the 'BORA' ecosystem, and plan to launch blockchain games in the global market to secure growth momentum in the Web3 market.
Kakao Games is also considering investments in overseas developers. CEO Cho said, "If there is a good development team capable of creating their own intellectual property (IP), we have invested not only domestically but also in overseas developers, and there are teams currently under review. Previously, we sought out and persuaded them, but now good overseas development teams are contacting us directly. We are carefully reviewing and although nothing is finalized yet, we plan to proceed with investments in the future."
Reducing Hiring and Strengthening Fundamentals This Year
Although Kakao Games achieved its highest performance last year, it indicated that it will take a conservative approach to hiring this year. This is because the situation was different in the fourth quarter of last year. Sales and operating profit decreased significantly due to adjustments in new game release schedules.
The decline in quarterly sales was due to underperformance in mobile games. Mobile game sales in Q4 last year were 151.7 billion KRW, down 24.2% year-over-year and 23% quarter-over-quarter. While Odin is delivering stable results, the schedules of multiple new titles were adjusted, and Uma Musume quickly entered a downward stabilization phase.
The burden of labor costs also increased. Operating expenses last year rose 7.7% year-over-year to 970 billion KRW, with labor costs reaching 198.9 billion KRW, a 51.2% increase.
Cho Hyuk-min, Chief Financial Officer (CFO) of Kakao Games, said during the earnings conference call on the 8th, "Labor costs increased last year due to talent recruitment and non-gaming external growth hiring. This year, except for special circumstances such as securing talent for new game development, we will more carefully review the necessity of hiring and focus on improving efficiency in labor costs and other expenses."
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