Spending cap on online games will be lifted

Change is coming to the Korean gaming industry as a mandatory spending cap will be lifted next month - although the industry is promising “voluntary restraints.”

Kang Shin-chul, president of the Korea Association of Game Industry (K-Games), announced last week in a press briefing that the 500,000 ($437) won monthly spending limit on adult online gamers will be ended. On Monday, the association decided to lift the restriction as early as May by finalizing a new regulation proposal this month.

The spending cap was first imposed in 2007, restricting adult gamers from spending more than 300,000 won per month on online games. In 2009, the industry jacked up the monthly spending limit to 500,000 won and the ceiling has been in place since.

“Spending limits [on users] don’t exist in any other industry, whether in Korea or overseas,” said Kang, a former co-chairman of Nexon, whose term as the head of K-Games was extended in February. “[The cap] constrains the growth potential of the online gaming industry and discourages companies from innovating, and sets a barrier that prevents new players from entering the market.”

The spending cap has been a hot potato issue for the gaming industry for years. Although the limit is not an official regulation, if a game developer does not implement the 500,000-won limit, the Game Rating & Administration Committee (GRAC), an independent organization created through the Game Industry Promotion Act of 2013 to administer classification of games in Korea, will defer a rating of the game - effectively prohibiting its release.

The spending cap doesn’t apply to other game platforms such as mobile or console games, with the exception of mobile “web-board games” such as Go-Stop, a Korean card game, and poker. They have a 500,000-won monthly limit.

“Because of the cap, there were essentially limits to how much revenue game developers could earn,” an industry source said. “It was also criticized as undermining the potential growth of the industry.”

How the spending cap affected the gaming industry is apparent in the experience of developers of web-board games.

The spending cap, put into effect in 2013 by the Ministry of Culture, Sports and Tourism, took a heavy toll on major web-board game developers such as Neowiz and NHN Entertainment. NHN’s operating profit fell 77.3 percent that year while that of Neowiz tumbled 69.4 percent.

“With more freedom in business operations guaranteed, the removal of the spending cap would provide an opportunity for the industry in seeking long-term growth,” said Jeon Sung-min, a professor of business administration from Gachon University.

BY CHOI HYUNG-JO [choi.hyungjo@joongang.co.kr]