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Media & Entertainment

South Korea's gaming 'Big 3' zero in on smartphone users

Shifting focus from PCs, Nexon and others lure more players in China and Japan

Tens of millions of users in China have preregistered for the mobile version of South Korean gaming company Nexon’s popular action role-playing game, Dungeon & Fighter. (Courtesy of Nexon)

SEOUL -- South Korea's top three gaming companies are shifting focus from online games for PCs to mobile games, as smartphones and consoles have become the new battlegrounds.

The country's gaming companies grew with a focus on online games for PCs. South Korea was among the first to introduce nationwide broadband communication networks, enabling high-speed, large-capacity data transmission and resulting in numerous online games being released in the early 2000s. That is a stark contrast with Japan, where gaming companies have developed mainly on Nintendo and Sony's consoles.

Most South Korean PC games have evolved uniquely as they can be played in large numbers and enable complex operations using keyboards. The so-called "3Ns" -- Nexon, NCsoft and Netmarble -- have led the country's gaming industry and are now making their PC games available on various devices.

Market leader Nexon has partnered with Chinese internet giant Tencent Holdings to provide games for the Chinese streaming platform. It is said that the mobile version of Nexon's popular action role-playing game "Dungeon & Fighter" has drawn preregistration by over 60 million Chinese users ahead of its launch in the country. Another such game, "MapleStory," and other popular PC game titles will also be made available on smartphones.

Nexon has hinted that it will focus on mobile games. "Now that billions of people around the world have smartphones that have the same performance as PCs, the potential market for the mobile games has expanded dramatically," said a company spokesperson.

The company also plans to release a race game, "KartRider," for Microsoft's Xbox console, exploring business opportunities in such platforms as well.

NCsoft, meanwhile, started streaming its popular role-playing game "Lineage" for smartphones in 2017. The company's "Lineage 2M" posted record sales on Google Play in South Korea alone in the first quarter of 2020.

Over the same period, the company's sales doubled and operating profit more than tripled from the same period last year, lifted by an explosive growth in mobile game streaming.

Netmarble plans to release a new "Seven Knights" series for Nintendo Switch later this year. It is the first time for Netmarble to develop gaming software for consoles. The company plans to develop more such software, as both Sony and Microsoft are scheduled to release new high-performance versions.

According to Dutch games and esports analytics provider Newzoo, the mobile game market surpassed that for game consoles and PC games in 2015. The mobile game market came to $69 billion in 2019, doubling from three years before. And while gaming markets for PCs and consoles have grown, that for mobile gaming has been even bigger.

Providing existing titles on different devices will enable gaming companies to increase their revenues while curbing on development costs. In fact, South Korea's top three gaming companies have increased their profit-earning capabilities, thanks to the growing mobile game market.

In the second quarter of this year, Nexon and NCsoft's operating profit margins jumped to 41% and 39%, respectively, while Netmarble's operating profit margin rose 6 percentage points on the year to 12%.

Due to stay-at-home orders and travel restrictions due to the pandemic, "more people are spending less on leisure and are enjoying playing games at home," said a Nexon spokesperson.

This trend has sent shares in South Korea's big three gaming companies higher. At the end of August, the stock prices of Nexon and NCsoft were 69% and 52% higher, respectively, than what they were at the end of 2019, with both hitting all-time highs. Netmarble's share price, meanwhile, was up 85%.

"With many titles scheduled to be released in the second half of the year, the 3Ns are expected to have bright prospects for 2021 and beyond," said Lee Jin-man, an analyst at SK Securities.

But Chinese gaming companies have improved their technical prowess, intensifying the race for cross-border game development. A compatibility to new devices, including virtual reality equipment and foldable smartphones, is also growing in importance.

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