Fall of the gaming industry

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Fall of the gaming industry


Wi Jong-hyun
The author is a professor of Chung-Ang University Business School and president of the Korea Academic Society of Games.

Yuan Shikai (1859-1916) was a notorious politician and militarist in China in the twilight of the Qing Dynasty. He forced the abdication of the Qing’s final emperor and became the first president of the new republic. As a young man, he came to Korea as the supreme defender of Seoul amidst an army uprising in 1882. He abducted the most powerful politician, Heungseon Daewongun, a royal regent who ruled on behalf of the young King Gojong, his son. Yuan returned to Korea as the supreme adviser and blatantly meddled in the domestic and foreign affairs of the Joseon dynasty. He replaced 20 ministers and King Gojong could not make any decisions without his prior consent.

Korea was able to overcome that humiliation when Korea’s internet games invaded the Chinese mainland about 20 years ago. I remember one official from China’s Ministry of Culture in 2006 expressing worry about Korean gaming influencing the minds of young Chinese. He feared that Korean fictional games with plots from the feudal age could brainwash young Chinese.

The Chinese government was not pleased with Chinese teenagers raving about products made by Korea, which it still remembered as one of its subject states. The Chinese elites were annoyed by the reversal of fortunes in the two countries. Korean PC games were an early part of the Hallyu — the Korean Wave of cultural content — which caused an upset in the cultural history of the Korean and Chinese civilizations ahead of television dramas and K-pop.

The founder of Nexon wants to sell his entire stake in the country’s top gaming company. The exit of this pioneer of Korea’s PC and mobile gaming industry demonstrates his skeptical view of the future for our local gaming industry. Tencent, China’s top internet-based technology and cultural company, is mentioned as a strong candidate to acquire Nexon, perhaps for as much as $9 billion. The sale of Nexon to Tencent would mean a de facto capitulation by Korea’s mighty gaming industry to its Chinese rivals.

Tencent is the third largest shareholder in Netmarble Corp., another leader in the Korean gaming sector, with a 17.71 percent stake. Netmarble is the third largest shareholder in its local rival NCSoft. Therefore, if Nexon is sold to Tencent, Korea’s three big gaming companies could come under direct or indirect influence by Tencent. The three local majors make up 60 percent of the revenue from Korean games. In short, the Korean gaming community could find itself under the Chinese company.

Korea used to be unrivalled in gaming software. Its position has become vulnerable largely due to the impotence of the Korean government, whose policy is entirely made up of regulations. The Korean gaming industry started going downhill over the last 10 years due to this mountain of regulations. A curfew was enforced to discourage teenagers from playing games late at night beginning in November 2011. In Korea, computer games joined the ranks of drugs and liquor in the fight against so-called addictive social evils.

The Ministry of Health and Welfare demoralized game developers by trying to identify games as a disease. What kind of creativity and passion can blossom in a country that regards games the same as mind- and body-poisoning substances?

The industry has also hit maturity. Revenues of the three major gaming companies have been skidding. NCSoft reported revenue of 403.8 billion won ($360 million) and an operating profit of 139 billion won in the third quarter of last year, a 44-percent on year drop and a 58-percent fall, respectively. Netmarble suffered a 9.6-percent fall in sales of 526 billion won and a 39.8-percent drop in operating profit of 67.3 billion won.

Innovation is lagging. Most local gaming companies are bent on using their existing games on mobile platforms for new revenue sources. They should be developing novel concepts or new intellectual properties — the Korean gaming industry has become complacent.

Their global outreach is limited. They cannot easily break the entry barriers erected by China. Other global markets are already mature, offering fewer opportunities for Korean games. The Nexon acquisition could be a turning point. Whether it is sold or not, the very idea should be a wakeup call to the Korean gaming industry.

Translation by the Korea JoongAng Daily staff.

JoongAng Ilbo, Jan. 16, Page 29
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