Game companies ignore doubters and take on the future
Game companies are continuing to lay out plans for blockchain-based games despite weak 2021 earnings and the continuing skepticism from gamers and investors.
Investor sentiment toward non-fungible tokens (NFT) or play-to-earn (P2E) games is weak as Korean law does not allow players to change in-game items into money, resulting in Korean game companies releasing their NFT games without the function in Korea and with it elsewhere.
Krafton, Korea's largest game company by market cap, announced during a conference call held last week that it will begin new projects in Web 3.0 and NFT services. Web 3.0 is the idea of a decentralized internet that provides more personalized services based on the blockchain and digital tokens.
This makes Krafton a relative latecomer to the metaverse party in Korea.
CEO Kim Chang-han maintained a conservative attitude last year and said that game companies should "focus on the essence of games," contrary to other major companies, such as NCSoft and Wemade, that had announced their plans last November.
"Through the new program we call 'The Potential,' we will jump into new businesses, such as deep learning, Web 3.0, NFT and virtual reality," CEO Kim said during the conference call.
One such example includes establishing a joint venture with Naver Z, the operator of the Zepeto metaverse, the 3-D online social media where people interact with each other through avatars. The new company will develop a metaverse for user-generated content (UGC), which refers to content created by users, like YouTube videos and Wiki texts.
The company reported a 6.5 percent on-year decrease in net profit in 2021.
Krafton's net came in at 519.9 billion won ($434.2 million), lower than the market consensus of 687.3 billion won compiled by FnGuide.
A 60.9 billion won cost was incurred due to stock options and the newly-released New State mobile game attracted fewer players than anticipated, failing to make up for marketing expenses.
Annual revenue hit a record 1.9 trillion won. It was 13 percent higher than 2020, though it fell short of the analyst expectation of 2 trillion won. Operating profit was also below the 825.2 billion won consensus, standing at 639.6 billion won. That was 17.3 percent lower than the previous year.
NCSoft reiterated its plans to release games where players can earn and trade NFTs of in-game items.
It will start by allowing NFT transactions among American and European users in its latest Lineage W mobile game when it's released in the third quarter of this year. It will not be available in Korea.
The company was one of the first game companies to announce NFT games last year during its November conference call.
The NFT game they have in mind may be different from the play-to-earn games that people think imagine where players get to cash their items into real-life money, according to CFO Hong Won-jun.
"We are fully aware of the skepticism that people have toward new business models," Hong said.
"I want to stress that we never approached the idea of NFT games with a P2E model in mind. Our games will only use the NFTs in a way that does not hurt the in-game economy or currency balance for players."
The company posted disappointing results for 2021.
Its annual net profit last year was 395.7 billion won, down 33 percent on year and lower than the 439.4 billion won consensus.
Other figures were also down. Revenue decreased by 4 percent to come in at 2.3 trillion won, while operating profit dipped 55 percent to 375.2 billion won. Both were below analyst expectations.
According to NCSoft, the decrease came from marketing expenses for Lineage W and bonuses that had to be paid to employees due to the success of Lineage W.
The game is achieving "record-high performance," according to Hong, such as making 357.6 billion won in 58 days.
NCSoft released Lineage W on Nov. 4. Since then, it has been ranking No. 1 on Google and Apple's game charts.
The company will release five new games this year, including TL and Project M.
Pearl Abyss, the publisher of Black Desert massively multiplayer online roleplaying (Mmorpg) game, said it's readying a metaverse business during a conference call on Tuesday.
The company didn't give any details, such as the target release date, but said that it is working on new games that will have play-to-earn (P2E) aspects.
One example is Doke V, an online game under development. Its engineers said last year that the game will be a metaverse project where various entertainment activities can be held, aside from just gameplay. The release date has not been set yet.
Pearl Abyss's yearly net profit dipped 39.4 percent in 2021, with decreased users for its Black Desert and Eve Online games.
Its net was 61.1 billion won, lower than the 65.8 billion won market expectation.
Revenue and operating profit also fell compared to 2020. Its annual sales were 403.9 billion won, down 17.4 percent, and operating profit 43 billion won, down by 72.6 percent.
The company hopes for a better year with the Chinese release of Black Desert Mobile.
Last June, the game received a license for China, becoming the third Korea-made game to receive a license after relations between the countries soured in 2017.
The game will start beta testing in the first quarter and be made widely available soon afterward, the CEO Robin Jung said.
Com2uS will accelerate its Web 3.0 businesses through its blockchain platform C2X and cryptocurrency of the same name.
The company started issuing its C2X tokens earlier this month. It will start infusing P2E aspects into the games from March and start an NFT trading service within the first quarter of this year.
Com2uS released the Com2Verse metaverse on Dec. 28 and its stock price inched up by 0.6 percent that day. It has since fallen by more than 30 percent.
The development cost for new games and services took a toll on the company's operating profit, but not the net.
Its annual operating profit was 52.7 billion won, nosediving 53.8 percent compared to 2020. However, the net profit soared by 62.5 percent to come in at 124.2 billion won, gaining from foreign exchange, according to the company.
Com2uS plans to develop three P2E games and publish two P2E games this year.
BY YOON SO-YEON [email@example.com]