The recession and shrinking investments are rapidly increasing the number of startup closures. In particular, the gaming industry, with its high fixed costs such as labor and development expenses, is facing structural limitations that make it difficult to endure the investment vacuum, threatening the very survival of new corporations in the market.
According to the venture investment information platform TheVC, 88 domestic startups reported closures in the first half of this year. This figure represents nearly double the number from the same period last year (45 companies). By industry, the bio-healthcare sector had the most closures at 9, followed by the gaming and education sectors with 8 each.
The mobile-centered domestic gaming market has entered a phase of negative growth, and the combination of high development costs and the offensive of major Chinese games is rapidly diminishing the survival prospects of new gaming companies. JandiSoft, which secured 89 million won in cumulative investments, reported its closure in February after ending global services for its MMORPG "Mad World," while Enfusion, which raised 55 million won from Samil Group and KB Investment, also ceased operations last month. Digital Frog, despite receiving about 47 million won in investments, was unable to continue game development and closed down.
These corporations had received hundreds of millions of won in investments over 2 to 3 years to develop games, but they repeatedly exited the business due to poor performance after launch and failure to secure subsequent investments. In the past, companies could at least launch new titles to gain recognition, but nowadays, there are an increasing number of game companies that run out of funds without even entering development, according to industry insiders.
Among the 88 startups that closed in the first half, 92% were at the seed to Series A stage, and 69% had been in operation for less than 3 years. The gaming industry has high fixed costs in labor, art, servers, and marketing, and because of the long lead time to monetization, smaller studios face structural limitations that make survival during investment gaps difficult. In fact, the number of new gaming companies established in the first half has significantly decreased, leading to a sense of crisis in the industry, with some stating that "the environment is not conducive to starting a business at all."
In contrast, large gaming corporations are accelerating new investments and technology development, demonstrating a contrasting trend.
KRAFTON has consistently expanded its research and development investment, allocating 424.7 billion won last year. The life simulation game "inZOI," released in March this year, achieved first place among popular global games on Steam, proving its success. NCSOFT, despite undergoing restructuring and voluntary retirements last year, has maintained a research and development budget of 421.8 billion won while continuing to pursue multi-genre projects, including its next title "LLL."
An industry representative noted, "The limitations of a mobile MMORPG-centric portfolio are becoming apparent, and the oversupply structure is collapsing, but very few mid-sized companies have succeeded in transitioning. Even with initial investments of hundreds of millions of won, a single failure to succeed in the market leads to immediate withdrawal, resulting in many cases where companies cannot even start due to a lack of investment from the planning stage."