Game firms continue to underperform
Netmarble, Nexon, NCSOFT and other game companies have failed to meet market expectations as they struggle to boost their bottom lines amid increasingly unfavorable business conditions, according to industry analysts Wednesday.
The game firms had previously been expected to post strong results in the second quarter on the back of the releases of new games, but the games failed to excite gamers. People also spent less money playing games due to the ongoing economic downturn and more gamers in their 30s and 40s are choosing to watch esports leagues instead, the analysts said.
The operating profits of the “big three” companies — NCSOFT, Nexon and Netmarble — all decreased in the second quarter from a year earlier.
NCSOFT reported sales of 410.8 billion won in the second quarter, a 5.9 percent decrease year-on-year and its operating profit declined by 18.9 percent to 129.4 billion won. Nexon’s operating profit stood at 137.7 billion won, a 19 percent decline year-on-year and Netmarble also saw its operating profit decreased by 46.6 percent year-onyear to 33.2 billion won.
NCSOFT, which didn’t release new titles in the first half, had shown high dependence on its role-playing game franchise “Lineage.”
The company said its lower operating profit stemmed from the decreased loyalty it received from Taiwan.
“We have allowed a local company there to publish our “Lineage M” mobile game and received royalties from it. The game was released in Taiwan in December 2017 and has enjoyed explosive popularity there. As the sales growth of Lineage M in Taiwan has stabilized downward, we have received reduced royalties,” a company official said.
The official added the company is seeking a rebound with a new game title as it is scheduled to release “Lineage 2 M,” a mobile role-playing game based on the PC version of “Lineage 2.”
Netmarble released a series of new titles in the first half of 2019, including “Yo-kai Watch,” “The King of Fighters All-Star,” “The Seven Deadly Sins: GRAND CROSS” and “BTS World,” but the company failed to boost its profits due to the increased expenditure on marketing.
“The sales of Netmarble improved because of new titles but it logged a decreased operating profit as it spent too much on marketing,” Sung Jong-hwan, an analyst at eBest Investment & Securities, said.
A Netmarble official said “the company is expected to see a rebound in the third quarter because highly popular games released in the second quarter will be reflected in our business results in the second half of 2019.”
Nexon logged sales of 571.2 billion won maintaining consistent popularity of its steady-selling games such as “Dungeon Fighter Online,” “Maple Story,” “FIFA Online 4” and “KartRider,” but its profitability worsened because new titles such as “Traha” were not enough to draw gamers’ attention.
Owen Mahoney, CEO of Nexon, said in a recent conference call that the company “could deliver another great quarter, marking the highest second-quarter revenue in our history and recorded a strong double-digit year-on-year growth in key territories.”
But the CEO added its third quarter outlook may turn gloomy because “Dungeon Fighter Online” enjoyed extraordinary popularity in China in the same quarter of 2018 and it won’t be easy to repeat that.