Nexon ceded the No. 1 spot in Korea's game industry to Krafton in the second quarter this year. Buoyed by the success of flagship intellectual property (IP) "MapleStory" and new title "ARC Raiders," Nexon posted results that beat market expectations in the second quarter, but both revenue and operating profit trailed Krafton.
Nexon said it will secure growth momentum by expanding key IPs and rolling out various new titles in the second half while focusing on expense management to respond to the global game industry slump. Nexon Chair Patrick Söderlund said, "The game industry is going through its hardest period in 30 years," adding that the company will speed up companywide structural reform.
◇ 23-year-old long-running IP MapleStory posts record quarterly revenue
Nexon, listed on the Japanese stock market, said on the 13th that second-quarter consolidation-based revenue rose 2% on-year to 121.1 billion yen (about 1.139 trillion won). Operating profit fell 17% to 31.3 billion yen (about 294.3 billion won) in the same period. Net profit jumped 77% to 29.6 billion yen (about 278.8 billion won).
Looking only at Nexon's second-quarter results, the 23-year-old long-running "MapleStory" franchise and "ARC Raiders," which has sold more than 16.3 million copies cumulatively, underpinned growth. The "MapleStory" franchise grew 63% in a year, posting the highest quarterly revenue on record. "MapleStory World" and "Maple M" made strong contributions.
"ARC Raiders," developed by Nexon's Sweden-based subsidiary Embark Studios, also contributed to second-quarter results. Released in Oct. last year, "ARC Raiders" sold an additional 800,000 copies in the second quarter alone, pushing cumulative sales past 16.3 million copies, and cumulative revenue topped 88 billion yen (about 780 billion won). "ARC Raiders" accounted for 15% of company revenue in the second quarter. In particular, as "ARC Raiders" gained popularity mainly in North America and Europe, Nexon's revenue from Western markets more than tripled from a year earlier.
However, "DUNGEON & FIGHTER," one of Nexon's three main IPs, saw revenue drop 44% on-year due to weakness in the Chinese market. The FC franchise also posted lower revenue as the expected World Cup boost did not materialize. Lee Jeong-heon, head of Nexon's Japan unit, said, "In particular, the World Cup fever in Korea was not what it used to be, so both our plans to acquire FC users and to increase traffic fell short of expectations."
Profitability also weakened. Nexon said the double-digit decline in second-quarter operating profit was because "as game services expanded, marketing costs to acquire users and IT infrastructure expenses such as cloud service fees increased."
◇ Krafton overtakes Nexon: No. 1 in second-quarter revenue and operating profit among game companies
Despite Nexon's solid defense in the second quarter, the industry's top spot went to a rival for the first time. Earlier, Krafton announced that second-quarter revenue jumped 94.9% to 1.2902 trillion won, and operating profit rose 67% to 410.9 billion won, marking the best second-quarter results on record. Strong sales of flagship IP "PUBG: Battlegrounds" and new title "Subnautica 2" drove performance. This is the first time Krafton has surpassed Nexon in both revenue and operating profit.
On a cumulative first-half basis, Krafton has also overtaken Nexon. Nexon announced that first-half revenue was 273.3 billion yen (about 2.5603 trillion won) and operating profit was 89.4 billion yen (837.9 billion won), up 17% and 13% on-year, respectively. These are record first-half results. However, Krafton held the edge with first-half revenue of 2.6616 trillion won and operating profit of 972.5 billion won.
Still, based on first-half results alone, it is hard to say the rankings between Nexon and Krafton have changed, and the market is watching whether Krafton will take the No. 1 spot for the full year depending on second-half performance trends.
◇ "The game industry is in its toughest stretch in 30 years"... tightening expense management
At the second-quarter earnings conference call, Nexon's management said it will transplant the "MapleStory" playbook into the "DUNGEON & FIGHTER" franchise to seek a rebound and strengthen growth momentum by launching various new titles. For "ARC Raiders," the key driver in Western markets, the strategy is to increase engagement from existing users and attract new ones through "Frozen Trail," the largest update since its Oct. launch scheduled for this Oct.
In particular, the company will raise the chances of success for new titles and continue its expense-efficiency stance through a "selection and concentration" strategy that expands core IPs and diversifies the pipeline. Chair Söderlund said, "For the next few months, we will focus on expense management," adding, "We will keep annual labor costs at last year's level and reallocate resources to proven franchises to continue companywide structural reform efforts." He added that Nexon will continue to invest in new technologies such as artificial intelligence (AI) to increase development speed and efficiency.
He said the game industry has fallen into its worst slump in 30 years, noting, "Western markets are contracting, the console market is in decline, and games priced at $60 to $100 are collapsing under the weight of surging production costs." As a result, he said, numerous projects and games are being canceled, studios are closing one after another, and tens of thousands of developers have been laid off.
He emphasized that "Nexon has a business structure that generates recurring revenue rather than one-off sales and owns proprietary IP based on long-accumulated, highly loyal communities," saying the company has a foundation to respond to market changes.