Chinese game companies expand presence in Korea

An image of “Last War,” a Chinese shooting game

Chinese game publishers are making strides in the South Korean market while domestic companies are under various industry regulations, such as the obligation to disclose item information.

According to multiple sources from the game industry on Sunday, “Last War,” a shooting genre game developed by Chinese gaming company FirstFun, topped the Google Play Store’s domestic sales rankings. The game has been at the lead since April 15th, 2024, pushing NCSoft Corp.’s “Lineage M,” the previous undisputed leader, aside.

Industry analysts noted that the game attracted users in a short period by recruiting popular entertainers and pouring out advertising marketing on major social networking services such as Instagram and TikTok. According to app statistics analysis platform Sensor Tower, Last War recorded cumulative sales of $180 million, with the Korean market accounting for 28 percent of the total.

In Korea, three of the top five revenue-generating games were developed by Chinese game companies.

“Legend of Mushroom,” developed by Joy Nice Games, ranks third, followed by “WOS” by Century Games (fourth place), and “Honkai: Star Rail” by HoYoLAB ranks sixth.

There are growing concerns among Korean publishers, who note that their Chinese peers could dominate the entire market as expand their presence due to a regulatory blind spot.

Although the obligation to disclose probability-based item information took effect on March 22nd, 2024, controversies over reverse discrimination continue as there is no way to enforce the law on overseas game companies that do not have corporate entities in Korea.

Under the amended Game Industry Act, game companies with an average annual revenue of over 100 million won must disclose the probability information of items purchased for a fee, but its efficacy is debatable.

“Most of the Chinese game companies dominating the top revenue rankings do not have offices or branches in Korea, making it difficult to confirm whether they are subject to the law,” an industry insider said.

Although the amendment to the Game Industry Act, which obligates overseas game companies to designate domestic agents, was proposed to the National Assembly, it is unclear whether it will be passed.

[Graphics by Song Ji-yoon and Lee Eun-joo]

Many Chinese game companies who release games in Korea still do not disclosing probability-based item information. This contrasts with Korean game companies, who hastily updated information related to game interfaces, websites, and game advertisements in line with the schedule for the revision’s implementation in March 2024.

Last War and Legend of Mushroom followed suit belatedly, sources said. Industry insiders also note that many Chinese game companies do not even have a Korean gateway to communicate with users.

The Game Rating and Administration Committee recently sent corrective request letters to nine game companies that were found to have not properly complied with the obligation to disclose probability-based item information in April 2024. It is known that these were foreign game companies, mainly from China, rather than Korean game companies.

Controversy also continues over false advertisements by Chinese game companies, sources said, which are marketing via SNS and backed by their enormous financial resources, but practical sanctions are difficult.

Unlike Korea, China controls the entry of foreign game companies. To operate a game business in China, a company must obtain a game license regardless of whether it is a local company or a foreign company. Not a single license was issued for Korean games in 2018 and 2019 in the wake of the THAAD incident.

China also prioritizes its own games as it prohibits Internet culture management by foreign companies. Korean companies can only enter the market by signing publishing contracts with local game companies.