October 8, 2014 1:00 pm JST

Nexon competes for global leadership in gaming world

TAKAHITO FUJIWARA, Nikkei staff writer

The smartphone game "Legion of Heroes" has been a hit in South Korea.

TOKYO -- The video game publisher Nexon aims to take a leading role in the global gaming industry, using the expertise it has gained in its home country of South Korea.

     South Korea is one of the most advanced countries for online gaming, and this has helped Nexon to expand its business to other markets. Nexon's future profitability depends on how the company can take advantage of its local experience and expertise to grow its user base in Japan and North America.

     Though from South Korea, Nexon is headquartered in Tokyo, and releases games not only in Japan and South Korea but also in China, North America and elsewhere. Nexon debuted on the first section of the Tokyo Stock Exchange in December 2011. The choice of listing on the Tokyo market was due in part to its accessibility to investors and its transparency.

     Most of Nexon's revenue is made in South Korea. The game "FIFA Online 3" has proven a recent hit in South Korea. By region, Nexon's sales in South Korea for the April-June quarter jumped 56% on the year to 13.4 billion yen ($121 million). The rise was driven by strong sales of its games for both smartphones and PCs.

     Its game "Legion of Heroes" is another focus of attention. Released this year in South Korea, the massively multiplayer online role-playing mobile fantasy game is globally competitive in large part because of its high quality as a smartphone game. Downloads of the game have topped 2 million and the title generates 300 million yen per month.

Cultural differences

Nexon has been steadily increasing its user base in China as well, particularly with the PC-based online game "Dungeon & Fighter." The company has built up a regular user base with repeated upgrades and additions.

     The company has been strengthening its business in South Korea and China ahead of Japan. Tastes differ by country, and in Japan, the preference has not changed much from the era when social networking services for mobile phones dominated the market -- simpler games that can be played with one hand are popular. Best-sellers include "Puzzle & Dragons," released by Japanese online game developer GungHo Online Entertainment, and is a common sight on the phones of train commuters in Japan.

     But this type of game does not sell well elsewhere. Made-in-Japan smartphone games are growing up independently of global trends, following the path made by Japan's mobile phone industry, which is losing its international competitiveness.

     Such mobile phone-dedicated games have not caught on as greatly in South Korea and China as they have in Japan. Popular smartphone games are those that mimic the use of video game consoles. An official at Nexon said that releasing games in South Korea and China first and earning experience will be a shortcut for the company to jump into gaming markets in the U.S., Europe and elsewhere.

     Owen Mahoney became President and CEO in March. Mahoney, an American, has made a policy of developing games that deliver consolelike experiences. He is also concerned about the tendency of the online gaming industry to focus on how to make users spend more on fee-based games. Instead, Mahoney is putting greater importance on high-quality games that also let the developers have fun creating them.

     Nexon's group net profit for the January-June half fell 24% on the year partly because of royalties for intellectual property rights to its hit soccer game. For this reason, shares have recently been trading lower at around 900 yen. To send the stock higher, Nexon will likely need to prove that its strategy of becoming a leader in the global gaming market, starting in South Korea and China, is working.

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