[Reporter’s Notebook] Why NCSoft’s Spin-Off Fails to Gain Sympathy

Until just a few years ago, no one could clearly answer the question of who could topple the dominance of NCSoft or Lineage. However, now NCSoft has lost its position as the 'number one domestic game company,' falling behind competitors in both brand reputation and market capitalization. To overcome this crisis, they even took the drastic step of 'spinning off.'

There is a clear opposition to the spin-off within the company. Since NCSoft co-CEO Park Byung-moo officially announced the spin-off at an online and offline briefing early last month, the number of union members has increased by about 400 in one month. Currently, NCSoft has around 1,700 union members. With the total number of employees just under 5,000, about one-third are union members. They are concerned that if they are reassigned to the newly established corporation, their employment contracts will change, and the continuity of employment will be uncertain, potentially leading to layoffs.

Song Garam, head of the NCSoft union (Uju Jeongbok), recently said, "Since the spin-off announcement, many employees have been very anxious," adding, "Although it is said to be for efficiency, transparency, and increasing responsibility, we suspect that the spin-off is actually intended for layoffs." The union is currently discussing future response plans related to the spin-off. They have also left open the possibility of collective action, which means there could be strikes or other disputes.

The reason NCSoft had to pull out the spin-off card despite employee opposition is simple. To overcome the ongoing 'crisis theory,' there is no more proven and efficient method than reducing the number of employees. NCSoft has faced continuous crisis theories due to deteriorating performance over the past few years. The revenue decline of the 'Lineage' series, which had been a reliable cash cow, continued, and the highly anticipated title 'Throne and Liberty (TL)' essentially failed to succeed, leading to poor performance.

It is certainly understandable that various attempts and efforts are needed to overcome the company's crisis. However, these attempts and efforts only become meaningful when the exact causes are identified.

At the briefing, Co-CEO Park said, "NCSoft is a company with sales in the 2 trillion won range, and during the process of compressed growth, the organization and personnel rapidly increased. After the endemic phase, the overall game industry has entered a stagnation period, and the intensified market competition in the main genre, MMORPG, has made the situation even more difficult." He attributed the crisis to external circumstances and high labor costs.

NCSoft has long been managed by three people: founder Kim Taek-jin, his wife President Yoon Song-i, and Kim's younger brother Vice President Kim Taek-heon. It was essentially a 'family management' system. NCSoft West, led by President Yoon, recorded an operating loss of 22.2 billion won in 2015 and posted losses for six consecutive years until 2020. Since then, it has fluctuated between losses and profits, accumulating a loss of 280 billion won over ten years. Vice President Kim also attempted business diversification by leading the subsidiary KLEB, which handled the entertainment business, but failed to produce significant results and eventually sold the company. In other companies, it would be difficult to maintain such positions. Although the roles of President Yoon and Vice President Kim have since changed, they still remain in senior positions.

The NCSoft union's founding declaration includes this phrase: "The vertical bureaucratic culture based on family management has covered up failures and malpractices, shifting the responsibility and damage onto the employees."