[This Week's Controversy] From 'Baeg' to 'Injoy'... Krafton’s Life-or-Death Baton Touch

Korean Version of 'The Sims,' inZOI, Receives Positive Early Reviews
Rebounding Battlegrounds Traffic Draws Attention
Expectations Rise for New IP Discovery and Enhanced Shareholder Returns

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Despite achieving record-high performance last year, Krafton’s stock price plunged, but now the atmosphere is clearing concerns over the absence of next-generation flagship IP (intellectual property). The new game titled 'inZOI,' carrying the label of the Korean version of 'The Sims,' is receiving favorable reviews in its early release phase, drawing attention to whether it can become Krafton’s new cash cow. The securities industry is focusing on Krafton’s announced investment plans and the steady growth of its flagship IP 'Battlegrounds,' predicting strong performance and stock price increases this year.

Will the well-received inZOI alleviate the one-game risk?

On the 28th, Krafton ambitiously released the life simulation game inZOI, which is showing initial results beyond expectations. Before its release on the online game distribution platform Steam, inZOI had about 250,000 followers and ranked first on the wishlist (purchase intention list). Within 40 minutes of launch, it achieved the number one global sales rank (based on revenue). Although it dropped to second place in weekend sales rankings, the peak concurrent users rose to 87,000, and positive reviews from Steam users approached 84%, indicating smooth sailing.

Jung Hoyoon, a researcher at Korea Investment & Securities, said, "Since it is still very early after release, users’ playtime may not be long yet, but many Steam reviews say it is 'better than The Sims.'" He added, "Some negative reviews focus more on bugs, optimization, and relatively insufficient content due to early access rather than the game’s fun itself, so future evaluations of the game’s quality are expected to be generally positive."

The success of inZOI is seen as a key to resolving Krafton’s 'one-game risk.' Although Krafton produced the global hit Battlegrounds, the nature of the game industry is such that sales decline over time, so high dependence on a single title’s sales can hinder corporate value growth.

Lee Ji-eun, a researcher at Daishin Securities, estimates inZOI’s sales volume this year at 1.7 million copies, saying, "Considering it is still in early access, selling over 1.5 million copies would already be a success." She added, "The success of inZOI should be noted more for its potential to expand the game lineup in the future rather than short-term earnings contribution. If the success is confirmed to some extent in the second quarter, it could lead to expectations for new releases in the second half." Krafton plans to consecutively release new titles such as 'Subnautica 2' and 'Blind Spot' in the second half of this year, starting with inZOI.

Unyielding 'Efficient Helper' Battlegrounds

Until inZOI grows into a pillar for Krafton, Battlegrounds remains responsible for the company’s immediate performance. Battlegrounds, which marks its 8th anniversary this year, is Krafton’s flagship star holding the record for the highest concurrent users on Steam (3.25 million) and the title of the best-selling PC game globally. Although concurrent users once dropped to 450,000 in 2023, it rebounded through steady content updates, and last year, for the first time since its founding, its revenue and operating profit each surpassed 2 trillion KRW and 1 trillion KRW, respectively.

Last year, Battlegrounds PC achieved 941.9 billion KRW in revenue, the highest ever since it became free-to-play, and is expected to continue growing this year. Choi Seung-ho, a researcher at DS Investment & Securities, said, "Various updates and the influx of collaborations and user maps scheduled this year are expected to push traffic levels beyond 1 million users." He added, "The growth-type avatar update to be released in April will be an event that improves average revenue per user (ARPU) again, similar to when growth-type weapon skins were launched." Battlegrounds Mobile is also expected to follow a similar trend as its updates synchronize with the PC version.

The future plan is also evaluated as thorough. Researcher Choi said, "Krafton has set long-term goals such as introducing AI NPCs (Non-Player Characters) that think and act like humans, upgrading to Unreal Engine 5, and officially launching user maps." He added, "All three plans are expected to semi-permanently extend PUBG’s product life cycle (PLC)."

Aggressive investment, IP discovery, shareholder returns

Krafton also states it will not neglect efforts to find a successor to Battlegrounds. Kim Chang-han, CEO of Krafton, said during the Q4 earnings conference call last year, "The growth of Krafton’s core business, the game business, ultimately depends on securing big franchise IPs." He expressed ambition to invest up to 1.5 trillion KRW over the next five years to secure 20 new titles and achieve 7 trillion KRW in sales. Of the 7 trillion KRW, 60% is expected to come from Battlegrounds and 40% from new IPs. Krafton already invested the largest amount ever in game R&D (424.8 billion KRW) last year, surpassing NCSoft for the first time.

It is not only internal development projects. Krafton is also one of the most active domestic game companies in IP discovery investments. Starting with equity investments in five companies in 2022, it is estimated to have invested in 11 companies the following year and more than 13 companies last year. Last year, Krafton acquired the license for 'Palworld' from Japan’s Pocketpair and is expanding it to mobile platforms. Recently, Krafton’s India subsidiary acquired a 13.75 million USD (20.2 billion KRW) stake in the local mobile game developer 'Nautilus Mobile,' attracting attention. Nautilus Mobile owns the 'Real Cricket' series, which has accumulated 250 million downloads.

Its active shareholder return policy also stimulates investment sentiment. On the 26th, Krafton announced a plan to repurchase treasury shares worth 325.9 billion KRW by June 26. This is about 64% higher than last year’s acquisition amount (199.2 billion KRW), and the company plans to cancel more than 60% of the repurchased shares. Baek Dong-geun, Krafton’s Chief Financial Officer (CFO), said, "We announced a three-year shareholder return policy three years ago and have been conducting share repurchases and cancellations." He added, "We will actively consider dividends more than before in response to recent market environment changes. We expect to announce a new three-year shareholder return policy at next year’s general meeting of shareholders."