In the first half of the year, the game industry's report card split depending on the performance of key cash-cow intellectual property (IP) and new releases. Large game companies such as Krafton, Nexon, and NC, which succeeded in hitting with new titles based on flagship game IPs with fervent fan bases, improved their results. In contrast, Kakao Games, SHIFT UP, Neowiz, and Devsisters, where the growth of existing games slowed or the gap between new titles lengthened, saw profitability deteriorate.
As the global game industry enters a stagnation phase, some say the gap is widening between large companies with robust capital and small and midsize game companies. Notably at the top, a seismic shift occurred as Krafton's revenue and operating profit surpassed Nexon's for the first time, putting it in first place in Korea's game industry.
Facing a tough environment of soaring expenses and the rise of short-form (short video) content that threatens games, game companies plan to attract new users with a range of new titles that can compete in the global market in the second half, and pursue growth through a franchise strategy that extends the reach of popular game IPs to lengthen their lifespans.
◇ PUBG, Maple, and Lineage are model earners
Krafton and Nexon continued to run ahead in the first half. Krafton posted all-time high results for both the second quarter and the first half. First-half revenue was 2.6616 trillion won and operating profit was 972.5 billion won, topping Nexon's results for the first time. Steady performance from its flagship "Battlegrounds" and the hit new release "Subnautica 2" drove the results. "Subnautica 2" sold more than 5 million copies just 22 days after its May launch. As a result, the company's PC platform revenue surpassed 500 billion won in the second quarter for the first time.
Nexon, which has held the No. 1 spot among domestic game companies since 2008, also set a first-half record. Nexon said first-half revenue rose 17% year over year to 273.3 billion yen (about 2.5603 trillion won), with operating profit up 13% to 89.4 billion yen (837.9 billion won). Its 23-year-old long-running IP "MapleStory" and the new title "ARC Raiders," which succeeded in North America and Europe, were the main drivers. However, with weaker performance from "Dungeon & Fighter," one of its three main IPs, and the FC franchise, Krafton outpaced Nexon in results.
NC, which had experienced ups and downs for years, managed a rebound. Boosted by the popularity of "Lineage Classic" and growth in its nascent mobile casual business, second-quarter operating profit (173.9 billion won) jumped tenfold from a year earlier. Revenue rose 101% over the same period to 770.5 billion won, the highest ever for a quarter. "Lineage Classic" alone generated 185.5 billion won in second-quarter revenue, lifting NC's PC game revenue and offsetting declines from other titles.
Pearl Abyss posted strong first-half results as its new title "Crimson Desert" gained popularity mainly in Western markets.
◇ Existing games lose steam and new titles are lacking… aiming for a turnaround with second-half releases
By contrast, companies with weak or missing new titles saw results stall. Netmarble's first-half revenue rose 4.4% to 1.4009 trillion won on solid overseas performance, but operating profit fell 11.7% to 133.2 billion won due to higher marketing and labor costs. The main reason was that new titles did not succeed enough to offset expenses. Of the four new titles Netmarble rolled out in the first half, only "Sol: Enchant" contributed to revenue. Netmarble CEO Kim Byung-gyu said, "The performance of the new titles released in the first half fell short of expectations," acknowledging the slump.
Kakao Games, whose management control shifted to Japan's LY Corp., also failed to avoid losses as the slump in existing titles coincided with a lack of new releases. First-half operating loss was 48.5 billion won, with the deficit nearly doubling from a year earlier. SHIFT UP likewise saw first-half operating profit halve from a year earlier due to the impact of no new releases, despite continued growth of its flagships "Goddess of Victory: Nikke" and "Stellar Blade," while revenue fell 33.4% to 103 billion won.
In addition, Wemade, Neowiz, Devsisters, and Webzen, which sold management control to Chinese capital, either posted losses or saw growth slow as they entered a stabilization phase with fewer users for existing games and no new releases.
In the second half, the performance of new titles is also expected to steer major game companies' results. Krafton, Nexon, and NC will accelerate their push into the global market by expanding their model IPs. Netmarble will pursue "selection and concentration," moving away from a strategy of many releases to nurture long-running games to restore profitability. In the second half, it will release three new titles: "Solo Leveling: Karma," "Shangri-La Frontier: The Seven Supreme Species," and "Project EGIS."
Kakao Games will also seek a turnaround by fronting new titles such as "Goblin's World," "ArcheAge Chronicle," and "Dungeon Arise." Com2uS will roll out "Zeus: God of Hubris," Wemade will release "Night Crows W," and Devsisters will unveil "Cookie Run: Crumble." With no new-release plan, Pearl Abyss is preparing Crimson Desert DLC (downloadable content), and Neowiz will strengthen development capabilities through a reorganization that appoints Park Sung-jun, head of the new development group, as co-CEO.