[NEWS IN FOCUS] Loot box backlash worries entire Korean game industry

A horse-and-buggy protest over shoddy treatment of players of an online game by Kakao Games is swelling into a challenge to the entire Korean gaming industry. On Sept. 23, 201 users of mobile game Uma Musume Pretty Derby filed a class action ..

Users of Uma Musume Pretty Derby hold a horse buggy protest on Sept. 13 on Pangyo, Gyeonggi, where Kakao Games is headquartered at. [NEWS1]

A horse-and-buggy protest over shoddy treatment of players of an online game by Kakao Games is swelling into a challenge to the entire Korean gaming industry.

On Sept. 23, 201 users of mobile game Uma Musume Pretty Derby filed a class action suit against Kakao Games in the Seoul Central District Court demanding refunds of money they spent on the game. That suit demanded 200,000 won ($142) for each plaintiff, or 40.2 million won.

Developed by Japanese company Cygames, Uma Musume Pretty Derby was released in Korea by Kakao Games on June 20. It is a mobile simulation game where players must choose and train their own uma musume — "horse daughters" in Japanese — that have been personified into young girls with horse ears and tails.

Since early August, players have been criticizing Kakao Games' managing of the game, saying it's different than when played in Japan. Users claim Kakao Games failed to give proper notice about major events in the game and offered fewer benefits to Korean users compared to Japanese, especially regarding loot boxes.

In late August, protests tailored to the game arose: angry players started taking horse-and-buggy rides around the Pangyo neighborhood in Gyeonggi that is home to Kakao Games.

Kakao Games released multiple apologies that were rebuffed for being “half-hearted.”

Company managers sat down for a face-to-face talk with representatives of the pissed-off players on Sept. 17, but that ended badly. Kakao Games said it will hold another in-game event from Oct. 11 to 12 in an aim to appease users.

But the whole industry is worried, as Korean users start viewing the loot box business model as a rip-off that forces players pay in order to win.

Lawyer Shin Jae-youn of LKB and Partners LLC, the attorney for the class action suit against Kakao Games at center, explains the reasons behind the suit to the local press on Sept. 23. [YONHAP]

Loot boxes are in-game lucky draws where players buy a box at a certain price and it gives off a wide range of items of different value. If you're lucky, you get the better items; if not, you get the cheaper ones.

Korean game companies have relied on this business model, especially for online games. While most games can be played for free, users are forced to spend money along the way to get ahead, to win. That has given them the negative nickname of "pay to win" games.

In contrast, popular overseas games charge for access but not for anything in the gameplay, including games on the Steam platform and the World of Warcraft online game.

Having once topped the Google popular games chart, Uma Musume has fallen to No. 10 on Google's Play Store games chart as of Oct. 6. Last month, Kakao Games shares traded at their lowest level since the company went public in September 2020 and analysts are lowering expectations for the company’s third-quarter revenues.

“Users have suffered damages both financial and psychologically due to Kakao Games’ immature game management, therefore we demand compensation,” said lawyer Shin Jae-youn of LKB and Partners LLC, the attorney for the class action suit.

“This is a warning to game companies that have only seen users as purses to shake money from. We hope that game users will come together in solidarity and help bring about meaningful change.”

Uma Musume was particularly crucial for Kakao Games because of the timing of its release. Its subsidiary Lionheart Studios will go public on the Kosdaq market by November.

Lionheart Studios is the developer of Odin: Valhalla Rising, an online mobile game that topped the mobile game charts for weeks after its release in June 2021 and a cash cow for Kakao Games.

The developer recently finished submissions for its initial public offering (IPO) to the Financial Services Commission, aiming to raise up to 604.2 billion won. If the top price band is met, Lionheart Studios is expected to enter the stock exchange with a market cap of 4.5 trillion won, surpassing Kakao Games, whose market cap stood at 3.4 trillion won as of Thursday.

Kakao Games needs to prove it can survive without Lionheart Studios in order for the IPO to succeed. Uma Musume was a test, and its grade is pretty low.

“The IPO of Lionheart Studios was a given, so its influence on Kakao Games’ stock price will be limited but uncertainties do still need to be removed,” said Lee Kyu-ik of Cape Investment & Securities.

Lineage 2M players hold an LED truck protest against NCSoft last August. [YONHAP]

Users of Lineage 2M online mobile game file a class action suit against NCSoft on Sept. 30. [CHUNOTV]

The rest of the industry is looking on with alarm, and NCSoft is already being singed by the flame of users' wrath.

On Sept. 30, some 380 users of NCSoft’s Lineage 2M online mobile game filed a suit with the Busan District Court demanding the game company compensate them for mental distress.

According to the plaintiffs, NCSoft paid YouTubers to make promotional videos for Lineage 2M without admitting they had been paid. NCSoft posted a video of apology on YouTube, which angered users more.

“We stand in solidarity with Uma Musume users,” said YouTuber ChunoTV, one of the plaintiffs. “This is not about the money, but about game users’ rights in general. We hope to bring a change to the gaming industry through this case.”

Though these two cases involve different games, analysts say gamers are mad as hell about shelling out their hard-earned won without getting respect from the companies — and aren't taking it anymore.

Major Korean game companies have focused on creating massively multiplayer online roleplaying games (MMORPG) in which users pay for loot boxes. Players are encouraged to spend millions, even billions, of won on each game. Even casual games or board games rely heavily on loot boxes to open up players' wallets.

“Korean game companies tilted toward the loot-box business model in order to secure a steady source of revenue, which did work in the past but consumers’ expectations have changed,” said Kim Young-jin, a professor at ChungKang College of Cultural Industries.

“Although it won’t be easy for game companies to come up with a new business model in the short term, they have to realize that without doing something, consumers’ dissatisfaction will only build up more.”

Minister of Culture, Sports and Tourism Park Bo-gyoon said on Wednesday during a parliamentary audit that the government will regulate in-game loot boxes by forcing game companies to reveal just how likely each loot box is to give off desired items.

Six bills have been put forward by different teams of representatives to force companies to be more transparent about their loot boxes and suffer penalties if they do not.

"We will focus on regulating game loot boxes and nurturing the Esports industry," Park said.

BY YOON SO-YEON [yoon.soyeon@joongang.co.kr]