Since the 1998 release of NCsoft's "Lineage," the world's first graphic Internet game, Korea's online game market has grown rapidly and the new full 3D era online games are mushrooming within the game world.Based on a world-class Internet infrastructure, the Korean online game market is growing more than 30% each year and, without losing momentum, Korean online game companies are taking advantage of businessopportunities abroad. They are literally embarked on a conquest of the international game world.
With more than a 30% annual growth, a 1 trillion wonmarket expected this yearAccording to the "Korea Game White Paper 2003" publishedby Korea Game Development & PromotionInstitute, the size of the Korean online game market last year was 587.9 billion wonand this meant a 30% growth from last year?s 452.2 billion won.The market growth has somewhat slowed down considering thatthe annual growth rate was 69% (268.2 billion won). This,however, happened because the market has matured. As for 2004 and 2005, the expected growth rate is still an impressive 25%.The market will be as big as 734.9 billion won to 918.6 billionwon in 2005. However, this forecast is based on market statisticaldata available in mid-2003 that was in turn based on the end-2002market condition. The compilation of 2003 data will be made inthe second quarter of this year. An export drive was not a dominanttrend in 2002 and 2003 and the Korean domestic pie grewmuch bigger in 2003. Considering these factors, our currentforecast may be too conservative.Recently, a Korean newspaper conducted a survey on the sizeof the domestic online market in 2002 and 2003. According to thesurvey results, the top ten Korean online game companies grewmore than 50% and achieved sales totaling 632.9 billion won in.2003. The sales goal of these companies this year is 947.7 billion won, about a 50% increase from last year.
The most outstanding leap forward was made by game portalcompanies such as NHN, Plenus, and Neowiz with their growth rates in 2003 being respectively 128%, 159%, and 317%. This success can be explained by their diversification of sales channels including the introduction of various methods to expand paid subscriptions and a full scale launch of publishing businesses.
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These Korean firms are making inroads into the East Asian market, it was, also, important that China is included in this market. Last year, Gravity launched businesses within 17 countries and attained an amazing sales increase record of 528%. Webzen, also, successfully entered the Chinese market (paid subscriptions became a norm there) and its sales increased by nearly 100%. Similarly, Actozsoft settled a royalty conflict with a Chinese service provider and its sales increased by 180% last year.
Therefore, because the sales of top ten companies alone surpassed900 billion won, the Korean online market as a whole, with hundreds of online game companies, is likely to become a 1 trillion won market.
Wireless/wireline interworking is a dominanttrend; the popularity of cartoon online games increases.
Recently, the wireless and wireline networks are merging rapidly in Korea and, to adapt to the changing environment,online game companies are actively developing new game services in tune with wireless/wireline interworking trends. Games are thus offered for both PC's and mobile phones. Essentially, there is a community of interests between online game companies that are attracted by the rapidly growing mobile game market and
the mobile game companies that cannot ignore the development of the online game market. Furthermore, because of the introduction of the Mobile Number Portability (MNP) this year, new high-end mobile phones have rapidly replaced low-end phones
and this in turn contributes to the evolution of new interlocking trends. Therefore, major online game companies such as Webzen,NAKO Interactive, Gravity, and NCsoft are now offering mobile versions of their existing online games.
NCsoft, which has an inhouse development team, is offering a mobile version of "Lineage," its main game title. Lessons and ideas they get from their mobile experience can be applied to the online version.
Webzen is also offering two mobile games that are interlocked with "Mu." NAKO Interactive, famous for its "Laghaim," as well as developing or has already developed about 10 games that copes with the wireless/wireline interworking trends. The experience points gained in the mobile game field can be transferred to the online version and the ranking can be confirmed on the web. Commenting on the new trend, an authority of a domestic
online game company said, "Because most mobile phones are now high-end, games that offer both wireless and wireline versions will become dominant in the market."
Another new trend is the popularity of cartoon-like online games. Before, the online games were mostly of two types: fantasy games represented by Lineage and chivalry games represented by Yulhyulgangho. The new category is a cartoon online game and a tripartite division of the online game market is emerging.
SunnyYNK's "Seal Online" is a game that takes advantage of a full 3D cartoon rendering technique. During its "open beta service" event, there were about 60 thousand simultaneous users and 15 days after the introduction of charging, the company had already 37 thousand paid subscribers and sales of more than 1
billion KRW. Seal Online was thus threatening the status of Lineage's Mu.
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Similar things can be said about Nexon's "Mabinogi." The game has introduced fresh ideas including minstrels songs based on composition skills. Gravity's"Ragnarok" is probably the most representativeof the successful cartoononline game. There are about 30thousand simultaneous users. Thanksto their cute characters and soft moodthey convey, cartoon-like games arepopular among teens and people intheir twenties and authorities in thisbusiness thinks that the games will enjoy their heydays for awhile, along with fantasy and chivalry games.
Online game's export drive marches on
Such Korean online games were thoroughly tested in thedomestic market and their competitiveness was proven. Boostedby their domestic success, the online game companies are aggressivelypursuing business opportunities in East Asia ¡ª China,Japan, Taiwan, Hong Kong, Singapore and Malaysia. As a result,"Ragnarok" in Japan, "Mu" and "Legend of Mir" in China and"Lineage" in Taiwan became part of ¡®Hallyu (Korea Fever)'.Especially, within the Chinese market, Korean online gamesoccupy more than half of the games ranked on the top 10 list. Itis not an exaggeration to say that the Korean online games are onthe verge of conquering the Asian online game market.The secret of such a outward drive made by online game companies,lies in the world-class very high speed Internet environmentwithin Korea, which was created by the cooperationbetween a government that established the physical and humaninfrastructure necessary for achieving the goal transformingKorea into an IT power and the business sector.According to "Korea's Export in the Game Industry in 2003:Trends and Forecast," a report published by a Korea GameDevelopment & Promotion Institute, the size of online gameexports grew from 100 billion won in 2002 to 188.7 billion wonin 2003. Most analysts think that the overseas online gamebusiness is on the right track considering their export successes.This year, Korean domestic online game companies will pursuemore proactive operational strategies for growth. Therefore, thefuture seems to be bright in this sector of Korean economy.Major game companies that are engaged in an overseasdirected business such as Actozsoft, NCsoft, Gravity, Webzen,Mgame, and CCR, will expand and diversity their exportfootholds from China and Southeast Asia to the United States andEurope. New export items will be promoted as well. In additionto the online role playing games they have been concentrating on,they will release board games and shooting games to the overseas markets, thereby becoming leaders inthe world online game marketplace.
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Actozsoft had achieved exportsales of 11.5 billion won in 2002 byexporting "Legend of Mir II" toChina. Last year, 40 billion won or70% of 60 billion won expectedsales was achieved by exports alone.Following the success of the Legendof Mir, Actozsoft plans to launch"A3," an online game for adults and to enter the European andUS markets. Actozsoft's export is expected to be even moresuccessful than last year's. Although Actozsoft was dethronedfrom its number one exporter status in 2002, it still outranksNCsoft in terms of total sales. This company estimates that the"Lineage" service in Taiwan will gather about 28 billion wonroyalty income. This year, "Lineage II" service overseas willbegin full-scale and new game services will be launched in manycountries including the United States. Actozsoft's goal is tomaintain its status as a leader of the domestic online game market.
According to a preliminary estimate, Gravity, which isoffering "Ragnarok" in 17 countries since 2002, achieved asales record of 37.3 billion won in 2003, more than a 500%increase from 2002. Income from its exports is estimated to beabout 20.7 billion won. This year, its service areas will beexpanded from just China, Japan, and Taiwan to include theUnited States and Europe. It will also launch a characterlicensingbusiness, thus maintaining its status as a majorexporter of online games.
Webzen, which recently has been a much about firm thanksto the success of "Mu," the first Korean 3D online game, is estimatedto have achieved a sales record of 57.8 billion won, ofwhich about 9.3 billion won was earned from abroad.
Mgame, whose 2003 sales estimate is 18.3 billion won,gathered 4.5 billion won from its royalty income. This year'sgoal is 6 billion won, as its overseas market base will beexpanded and diversified from just Taiwan and China toinclude Japan, Southeast Asia and the United States. It is especiallytargeting the US market, where it has sold the license fortheir "Knight Online." CCR is no less ambitious. This year, itwill begin the commercial service of its "FR Online" (thecompany invested 8 billion won for this game) and the salesgoal is 26 billion won, of which more than 8 billion won will befrom overseas markets. Other major game companies, such asNexon, NHN and Plenus are also beginning their overseasexpansion this year and overall, the future of the Korean onlinegame export is bright.
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Foreign human and capital resources are introduced to the domestic online game business
With the vitalization of the Koreangame companies' overseas activities,there is an explosive increase of foreignersworking in the overseasbranches and subsidiaries of Koreancompanies. In December 2002, NCsoftboasted of many famous foreign developersincluding its new R&D vicepresidentrecruited from BlizzardEntertainment, a famous game developer.
In addition, asNCsoft is actively promoting its exports into China, Japan,Taiwan and the United States, the size of its overseas subsidiariesand joint venture companies are increasing and arestaffed by a larger number of foreigners.In the case of NHN, NHN Japan, established in 2000, nowhas more than 100 employees of which about 80% areJapanese. Similarly, Nexon Japan established in 1999, has only23 Japanese among its 30 employees. Plenus, which is runningNetmarble, a game portal site, is employing many foreigners asit is hastening its overseas market expansion into China, Japan,etc. Commenting on this phenomenon, an authority of Koreangame companied said, "As the prestige of the Korean gamecompanies is increasing, many competent foreign developerswant to work in Korean companies."
In addition to foreign human resources, foreign capitalresources are being introduced to the Korean online gamemarket. Recently, a Korea-China game mart, organized by theChinese government and the International Cooperation Agencyfor Korea IT (ICA), in connection with the Ministry ofInformation & Communication, was held in Shanghai and theChinese participants from 30 IT-related companies haverevealed their intent to invest on average more than 1 billionwon into Korean game companies.
This means that the Chinese companies are interested ininvesting at least 30 billion won. They were interested in notonly online game companies, but also, in communications andpublication, which are not directly related to the gamebusiness.
As the Korean online game business is consolidating itsworld's most powerful status, late comers into the business areeager to work with Korean companies who have advanced technologyand experience. In sum, along with semiconductorproducts and mobile phones, online game products and servicesare emerging as major Korean export items.
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