The gaming industry is suffering from the effects of user churn and delays in new releases due to excessive billing models. Add to this the controversy over lobbying for the legalization of ‘P2E’ (Play to Earn) games, which earn money by playing games, and it seems that the game industry’s position is getting narrower and narrower.
Some analysts believe that the ‘earnings party’ that the game industry has been enjoying for the past five years is over with the launch of various business models (BMs) based on probabilistic items. While major game IPs have served as the ‘golden goose’, there are also laments that the introduction of excessive ‘in-kind (cash payment) inducement’ BMs eventually led to user churn, and ‘it was five years that split the belly of the golden goose’.
Performance of domestic listed game companies… Halved in a year
The Seoul Economic Daily analyzed the performance of seven major game companies listed on the Korean stock market, including Crafton, NCsoft, Netmarble, Kakao Games, Pearlvision, Comptus, and WeMade, and found that the combined operating profit of these companies was 287.2 billion won in the first quarter of this year. That’s less than half of the 594.1 billion won in combined operating income for the same period last year. Nexon, the undisputed leader in the Korean game industry, is listed on the Japanese stock market, so it was excluded from this analysis.
Among these companies, the decline in profits at NCsoft, which has been on the rise in recent years with its “Lineage” series, stands out. The company posted an operating profit of 244.2 billion won in the first quarter of last year, but only 81.6 billion won in the first quarter of this year. As the controversy over the probabilistic item-based billing model that arose with each release of the ‘Mobile Lineage’ series, including Lineage M, Lineage 2M, and Lineage W, continues for the fifth year, the revenue-generating power of the Lineage IP is not as good as before. In addition, WeMade, which has recently attracted attention from the political sphere due to the virtual currency ‘WeMix’ controversy, recorded an operating loss of 46.8 billion won in the first quarter of this year and turned into a loss-making company, while Netmarble and Comptus widened their operating losses.
There are many reasons for the decline in the game industry. First of all, China’s restrictions on the issuance of game licenses have made it difficult to penetrate the Chinese market. In fact, with the exception of Nexon’s “Dungeon & Fighter” and Smilegate’s “Crossfire,” domestic game companies have not been able to make a significant impact in China.
In addition, the increasing number of so-called “pay to win” (P2W) games in recent years, which require players to spend money to win, has led to a backlash and fatigue among game users who are tired of being overcharged, which has also contributed to the decline in sales. The increase in outdoor activities by gamers due to the pandemic and the expansion of the share of Chinese game companies represented by “Wenshin” in the domestic market also negatively affected the performance of domestic game companies. A game industry insider said, “Some game companies expected to expand sales by activating P2E games linked to coin issuance, but the recent controversy over Representative Kim Nam-guk’s investment in game company coins has hindered the legalization of P2E.” “Only by focusing on developing games with inherent fun and completeness, as opposed to ‘Lineage-like’ games that stimulate gamers’ competitive spirit and generate profits, will we see box office hits like ‘The Next Battlegrounds’ in the global market.”
‘LineageLike’… ‘Mr. Linzer’ closes his wallet
‘Lineage M’, which was released in June 2017, has changed the landscape of mobile games in Korea, not just for NCsoft. The reason is simple: the ‘Lineage Mobile’ series has been a so-called ‘jackpot’ with trillions of won in sales so far.
In fact, the cumulative sales of “Lineage M” have reached $4.3 billion by February this year. In addition, ‘Lineage 2M’, released in November 2019, is said to have generated $1.8 billion in sales, and ‘Lineage W’, released in November 2021, is said to have generated $1.1 billion in sales, making it a cash cow for NCsoft.
While investment and manpower were limited, domestic game companies with a common goal of maximizing profits began to imitate Lineage’s success one after another. Multi-connection role-playing games (MMOPRGs) such as DK Mobile, R2 Mobile, Icarus Eternal, and Akihabara are representative of these games, which have BMs similar to Lineage.
The problem is that most of these games were optimized for “pay-to-win” (P2W), where gamers buy items to increase their character’s stats, rather than for gameplay. Gamers began to refer to these games as “Lineage-like,” and there were a number of cases of so-called “Lineage players” who announced that they were withdrawing from their Lineage accounts in response to the excessive inducement policy. In recent years, the voice of the business team in charge of BM, rather than the storyline and content departments, has become increasingly louder in the production of games, leading to the assessment that such ‘Lineage-like’ games have become the mainstream of Korean mobile games.
The industry believes that the success formula of Lineage-like games has reached its limits. Just look at the performance of NCSoft. In the first quarter of this year, the company posted an operating profit of 81.6 billion won, one-third less than the previous quarter. In particular, Lineage M, which still has a high level of user loyalty, has been stable at around 130 billion won every quarter, while Lineage 2M’s revenue for the first quarter of this year was 73 billion won, a significant drop from the same period last year (127.3 billion won). The same is true for Lineage W, which posted revenue of 1225 billion won in the first quarter of this year, only one-third of the year-ago period (373.2 billion won).
A game industry insider said, “CEO Kim Taek-jin expressed his desire to make a game like ‘The Legend of Zelda’ when he presented a Nintendo Switch to his employees in 2017, but since then, Lineage mobile games have become a huge hit, repeating the success equation of launching localized games based on Lineage IP.” “NCSOT also recognized this problem and is trying 메이저사이트to compete by launching ‘Tron & Liberty (TL)’ with differentiated gameplay and BM,” he said.
P2E game legalization also a factor in ‘Kim Nam-guk Gate’
In addition, the issue of Rep. Kim Nam-kook’s investment in game company coins is also holding back game companies. In particular, it is said that the legalization of P2E games, which some game companies had hoped for, has been hindered by the ‘Kim Nam-guk incident’.
P2E games utilize blockchain technology to exchange items obtained during game use for virtual currency or fiat currency.