Publisher profits plunge as game market continues to contract

Korea's three gaming giants reported declining profits for the first quarter, reflecting the continued impact of the Covid-19 pandemic.

Poster for Nexon's FC Online [NEXON]

The three major Korean gaming companies — Nexon, NCsoft and Netmarble — all reported a decline in profitability for the first quarter, reflecting ongoing market contraction following the Covid-19 pandemic.

Tokyo-listed Nexon posted a stronger-than-expected operating profit of 29.1 billion yen ($186 million), an on-year fall of 48 percent, citing dismal market conditions such as lower consumer spending and rising costs.

Revenue sank 13 percent to 108.4 billion yen but outperformed the market outlook that ranged between 97.1 billion and 107.1 billion yen.

Net profit decreased 32 percent to 35.9 billion yen but beat market expectations, which were set between 16.4 billion and 22.9 billion yen.

Nexon said that it was able to deliver consensus-beating earnings due to the strong performance of FC Online, FC Mobile and Blue Archive.

“We’re now re-energizing key titles and developing multiple new games with the potential to become global hits,” said Nexon CEO Lee Jung-hun. “We’ve established a franchise management strategy to unlock the enormous potential in our most popular intellectual property and prioritized the improvement of Nexon’s profit margins with top-line growth, operational efficiency and cost management.”

NCsoft logged operating profit of 25.7 billion won ($18.76 million), plummeting 68.5 percent on year. However, the figure exceeded the market consensus of 13.9 billion won compiled by market tracker FnGuide.

Revenue slid 16.9 percent to 397.9 billion won, falling below the analyst projection of 412.7 billion won.

Net profit lost 50 percent to reach 57.1 billion won, clocking in above the market expectation of 26 billion won.

NCsoft opened a voluntary resignation program in an effort to shave off 10 percent of its workforce this year as the company’s profitability continued to dwindle. It also plans to purchase 98 billion won worth of its own stock before Aug. 8. The 533,417 shares, which co-CEO Park Byung-moo said account for 10 percent of the company, will be utilized for mergers and acquisitions.

“Titles Battle Crush, Project BSS and a global version of Throne and Liberty will be launched accordingly to the schedule, I promise you,” Park said on a conference call Friday. “Next year, the lineup will be followed by AION2, LLL and Project G.”

Blade & Soul 2, which received approval to operate in China, is expected to be released this year as well. Park said the company is working with Chinese technology giant Tencent to “turn the game into an entirely new one.”

Poster for Netmarble's Solo Leveling: Arise

Netmarble’s operating profit swung black to 3.7 billion won, far exceeding the analyst forecast of 9.2 billion won operating loss.

The company has turned an operating profit from the fourth quarter of last year after reporting losses for seven consecutive quarters beginning in 2022.

Revenue sank 2.9 percent to 585.4 billion won, falling below the market consensus of 619.9 billion won.

Net loss amounted to 9.9 billion won, missing the market expectation of 1.4 billion won.

Netmarble announced Thursday that it had divested its 2.66 percent stake in K-pop powerhouse HYBE for 219.8 billion won to secure additional liquidity.

The company has four titles scheduled for release this year: The Seven Deadly Sins: Origin, King Arthur: Legends Rise, RF Online Next and Demis Re:Born.

Sales of Arthdal Chronicles: Three Factions and Solo Leveling: Arise — two highly anticipated releases from April and May — will be reflected in the second quarter's earnings.

“Daily active users of Solo Leveling within 24 hours of its release hit 5 million and generated revenue of 14 billion won, exceeding our expectations,” Netmarble CEO Kwon Young-sik said.

“Six months’ worth of narrative development has been completed so that users will be drawn back to the new plotline through consistent updates,” he added. “The plan is to launch the title on Steam by the second half of the year followed by a console version to be released next year to extend the life span of the game.”

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]