The earnings outlook for major domestic game companies in the second quarter is bleak. The performance, which had retreated in the first quarter due to the absence of new releases and a decline in sales of existing titles, is expected to continue into the second quarter. Game companies plan to aim for a rebound in the second half of the year, when major new releases are scheduled.
Domestic Game Companies' Q2 Earnings Decline One After Another
Financial information firm FnGuide forecast that NCSoft will record sales of 463.9 billion KRW and an operating profit of 48.7 billion KRW in the second quarter. These figures represent a 37% and 80% decrease, respectively, compared to the same period last year. NCSoft's operating profit in the first quarter fell by 66% year-on-year, and the decline is expected to be even greater in the second quarter.
The situation is similar for most major domestic game companies. Netmarble, which has been posting losses since the first quarter of last year, is unlikely to return to profitability in the second quarter. Netmarble is expected to record sales of 614.1 billion KRW and an operating loss of 31.1 billion KRW in the second quarter, marking six consecutive quarters of losses.
Krafton’s second-quarter sales are projected at 393 billion KRW, with an operating profit of 125 billion KRW, representing decreases of 7% and 25%, respectively, compared to the same period last year. Kakao Games’ second-quarter sales are expected to be 272 billion KRW, with an operating profit of 28.7 billion KRW, down 20% and 65%, respectively, year-on-year.
The poor performance of game companies is due to the absence of new releases and declining sales of existing titles. NCSoft’s ‘Lineage’ series still ranks high in game rankings, but all titles have entered a phase of stabilized downward sales. Additionally, there have been no major new releases since the launch of ‘Lineage W’ in November 2021.
Kakao Games’ ‘ArcheAge War,’ released at the end of the first quarter, partially mitigated the decline in performance, but the sales drops of ‘Odin’ and ‘Eversoul’ were significant. Netmarble and Krafton were also heavily affected by the lack of new releases.
On the other hand, Nexon is expected to continue its dominance. The Japan-listed company provided second-quarter guidance during its first-quarter conference call, projecting sales of up to 893.2 billion KRW and an operating profit of 265.1 billion KRW. These represent increases of 15% and 26.4%, respectively, compared to the same period last year.
Nexon’s ‘FIFA Online 4’ recently recorded a market share of 32.88%, ranking first in the overall popularity rankings at PC bangs. The new PC game ‘Dave the Diver,’ released on the global game platform Steam on the 29th of last month, surpassed 1 million cumulative sales, and other major games are also performing well, suggesting strong earnings are expected in the second half of the year.
Only New Releases Can Be Trusted
Domestic game companies, which stumbled in the first half of the year, are hoping for a rebound in earnings in the second half when new releases are concentrated.
Kakao Games is the first to start. Kakao Games will release the new title ‘Ares: Rise of Guardians’ on the 25th. After starting pre-registration on May 31, it gathered 1 million users in just five days and reached 2 million on the 7th, raising expectations. On the 20th, the new title ‘Eternal Return’ will also be launched, anticipating improved earnings in the third quarter.
Netmarble is raising expectations in the Chinese market. Netmarble’s China entry based on the ‘StoneAge’ IP, ‘Neolithic Era,’ ranked within the top 7 in sales on the Apple App Store after its release on the 28th of last month. Additionally, in the second half of this year, Netmarble plans to target the Chinese market with currently serviced titles such as ‘Shop Titans’ and ‘Neolithic Era,’ as well as ‘The Second Country: Cross World,’ ‘The Seven Deadly Sins,’ and ‘A3: Still Alive.’
Krafton will officially launch ‘Defense Derby’ in the third quarter through its independent studio Rising Wings. The game has already been released in six countries, including Singapore, Malaysia, Indonesia, Australia, Canada, and Hong Kong.
NCSoft’s earnings improvement is expected around next year. The highly anticipated title ‘Throne and Liberty’ is preparing for release at the end of the third quarter or early fourth quarter. The world’s number one cloud provider, Amazon, will handle global distribution, raising expectations. However, marketing expenses will increase immediately after launch, so the release effect is expected to be reflected next year.
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