Game Companies Trapped in 'Deficit Quagmire' Due to Lack of New Titles... "This Year, the Resolve Is Different"

Deficit Continues for Kakao Games and Pearl Abyss Due to Lack of New Titles

Pearl Abyss Makes Aggressive Investments in "Crimson Desert"

Kakao Games Looks to the Second Half as New Releases Are Delayed

Game companies that suffered poor performance last year due to the absence of new releases are now anticipating a turnaround as they prepare to launch new titles this year, hoping to escape from deficits.

Red Desert, the new release from Pearl Abyss. Photo by Pearl Abyss

According to the gaming industry as of February 28, Kakao Games posted an operating loss of 39.6 billion won last year, turning to a deficit from an operating profit of 19.1 billion won in the previous year. Revenue also fell by 25.9% during the same period, down to 465 billion won, resulting in both lower sales and profitability. Pearl Abyss faced a similar situation, recording an operating loss of 14.88 billion won last year, marking its third consecutive year in the red.

The common factor behind these poor results was the lack of new releases. Due to the nature of the gaming industry, the performance of new titles has a direct impact on financial results, but both Kakao Games and Pearl Abyss failed to launch any new games that could drive up earnings last year.

Kakao Games' MMORPG Odin and Pearl Abyss's MMORPG Black Desert only managed to maintain a stable user base, but nothing more. The release dates for new titles continued to be postponed. Kakao Games initially planned to release a total of five new titles in the second half of last year, but the schedule was delayed. Likewise, Pearl Abyss postponed the launch of its new open-world action adventure game, Crimson Desert, which was originally slated for the fourth quarter of last year.

Kakao Games logo. Provided by Kakao Games

Whether the two companies can escape deficits this year depends on the success of their new titles. Pearl Abyss is ramping up related marketing efforts ahead of the launch of its new game, Crimson Desert, which is scheduled for release on March 20. The company is also unveiling its production site at 'Pearl Abyss Home One' in Gwacheon, Gyeonggi Province. Pearl Abyss's advertising expenses increased from about 7.3 billion won in the first quarter of last year to about 12.3 billion won in the fourth quarter, and this upward trend is expected to continue this year. An industry insider commented, "The essential condition for the success of a new title is attracting and retaining as many users as possible in the early stages after launch. Pearl Abyss appears to be pursuing aggressive marketing even before the release of Crimson Desert to improve its performance."

Kakao Games, which set a target of launching seven new titles this year, is expected to ramp up activity in the second half, as the release schedule for its new game OdinQ, based on its core intellectual property Odin, has been postponed from the second to the third quarter. Kakao Games' advertising expenses in the fourth quarter of last year were 7.2 billion won, down 21.1% from the previous quarter. As a result, active marketing is unlikely until the first half of this year.

Hyukmin Cho, Chief Financial Officer (CFO) of Kakao Games, stated during a recent conference call, "With the launch of a major new title scheduled for the third quarter of this year, marketing activities will be ramped up starting in the second quarter. As a result, the proportion of marketing costs to sales could temporarily rise to around 15% on a quarterly basis, but we plan to manage it at around 10% on an annual basis."

This content was produced with the assistance of AI translation services.