Game companies realize K-pop is a whole new world

Game companies had big dreams of expanding their businesses using K-pop. The dreaming has given way to reality. Game publisher NCSoft is trying to sell Universe, a K-pop fan community service developed in 2021, after failing to compete with ...

An image of NCSoft's K-pop fan community service Universe shows how users can dress the avatars of their favorite stars with virtual costumes they buy. [NCSOFT].

Game companies had big dreams of expanding their businesses using K-pop.

The dreaming has given way to reality.

Game publisher NCSoft is trying to sell Universe, a K-pop fan community service developed in 2021, after failing to compete with rival services offered by HYBE and SM Entertainment, true experts in the K-pop business.

NCSoft is in talks with Starship Entertainment, a K-pop agency owned by Kakao Entertainment, according to industry insiders. Both companies only said that “nothing has been decided.”

NCSoft established Klap, a subsidiary it owns 66.7 percent of, in 2020 to develop and manage Universe. It was supposed to become an “all-in-one” K-pop entertainment platform where fans could communicate and get closer to their favorite singers.

The game giant used all the tech skills it has mastered to add fun to the user experience, such as mimicking artists’ voices with the use of artificial intelligence (AI) and creating avatar versions of popular stars that fans can dress up.

Popular acts signed on to Universe, including (G)I-DLE, IVE, Kang Daniel and Monsta X. It is available in 233 countries and has been downloaded over 24 million times. Ninety percent of users are from outside of Korea.

A Twitter post criticizing NCSoft's Universe service for poor portrayal of artists [SCREEN CAPTURE]

Despite some impressive numbers, the service suffered from sore feedback from day one, with fans accusing NCSoft of trying to wring money out of them. Universe users had to pay to listen to artists' AI voices or buy virtual costumes for the avatars.

NCSoft did not specify why it was selling, but Universe has been bleeding money all year.

Kakao Entertainment is considered a likely buyer after recent reports that the Public Investment Fund (PIF) of Saudi Arabia may invest 700 to 800 billion won ($538 million to $615 million) in the entertainment company with Singapore’s sovereign wealth fund GIC.

The Kakao subsidiary was also planning to go public, but that’s been postponed indefinitely due to the poor IPO market this year. The company has also been in talks to buy 18.5 percent of SM Entertainment shares owned by founder Lee Soo-man since last year, but a deal hasn't been clinched.

There are a few things that need to be ironed out by the next owner of Universe.

The service has been in the red since the first quarter of this year and recorded a 300 million won operating loss in the third quarter.

NCSoft abruptly ended its contract with The Boyz and receive complaints from the boy band’s fans for not providing enough information about the termination last month. The contract was renewed a week later, leading to even more criticism.

The reason that HYBE’s Weverse and SM Entertainment’s DearU Bubble are doing well is because HYBE and SM Entertainment already have artists and intellectual properties (IP) tied to them. NCSoft needed to pay to have K-pop acts sign with them.

An image of Netmarble's BTS Dream: Tinytan mobile game [NETMARBLE]

NCSoft is not the only game company failing in its K-pop challenge.

Game publisher Netmarble said last October that was stopping development of BTS Dream: Tinytan, a mobile game, due to lack of demand from both gamers and BTS fans.

The company announced BTS Dream in a conference call with analysts in May 2021 and released an in-game trailer to the local press last January. The BTS-based music game was supposed to be a mobile music game where players press buttons according to the rhythm of a song while BTS characters dance in background videos.

“We tested BTS Dream game multiple times in Canada and Thailand, but there were big differences in what fans and game players preferred,” the company said.

“We weren’t able to get the results we had hoped for and so we halted the project in agreement with HYBE.”

HYBE called the decision a “mutual” one.

Netmarble released two BTS-based games in the past, BTS World and BTS Universe Story, and neither were very successful considering the band’s popularity in the real world.

Analysts say the companies failed to see that even though games and music seem like they are natural partners, they are two entirely different markets.

“The gaming market is like the manufacturing sector where they have to compete with good products, but that’s not the case with K-pop, which has to make profit from fandom,” said Seo Yong-goo, a professor in the school of business at Sookmyung Women’s University.

“Fandom is constantly changing and the generations are also changing," he said, "so the K-pop business is one with so many variables that need to be accounted for.”

BY BAE JUNG-WON, YOON SO-YEON [yoon.soyeon@joongang.co kr]