Korean game developers cut wages while focusing on future projects

NCSoft Corp. headquarters [Courtesy of NCSoft]

The average annual salary for employees at South Korea’s top five listed game developers has declined for the first time since the pandemic last year, according to their recent business reports.

An analysis of the reports by Maeil Business Newspaper showed Thursday that the average wage of employees at the five game companies dropped slightly to 106 million won ($82,127) in 2022 from 110 million won in 2021. The five developers are NCSoft Corp., Krafton Inc., Netmarble Corp., Kakao Games Corp., and Pearl Abyss Corp.

The total spending on the wages, which includes stock compensations, insurance fees, and taxes, however, increased to 936 billion won from 868.4 billion won during the same period as they expanded workforce for future projects.

NCSoft, for example, had 169 more employees working for the company last year.

The average salary for the local game industry has increased by more than 10 million won on average. The average wage for employees at the big five publishers topped 100 million won for the first time in 2021 amid a surge in demand for software developers during the pandemic. Game companies were forced to engage in cash-hemorrhaging competition for talent at a great expense to develop core IP for the post-pandemic world. In this process, labor and marketing costs jumped, but operating income and profit margins fell.

Game developers that are wrapping up their projects are now entering a phase of cost-cutting by strengthening their reward systems based on performance. Some companies have implemented cost-cutting measures by reducing executive bonuses.

For example, Krafton Chief Executive Officer Kim Chang-han voluntarily reduced his own bonus significantly last year. Netmarble Chairman Bang Jun-hyuk waived his right to set his performance bonus for two consecutive years.

Future salary and incentive increases for the game industry will depend on the success of their upcoming game releases this year.

NCSoft, which set its best-ever sales record in 2022 with “Lineage W,” raised incentives for employees based on their performance, resulting in an increase in average salaries.

Meanwhile, Korean game companies are also sparing no expense on R&D in new areas such as artificial intelligence, digital humans, and metaverse.

The total amount of R&D spending of the top five game developers increased significantly to nearly 2 trillion won last year from 1.56 trillion won in 2021. The average R&D expenditure of each company also rose by more than 20 percent to 400 billion won.