Korean video game publishers eye China amid eased regulations

[Courtesy of PearlAbyss]

South Korea’s video game producers are targeting the Chinese market with new releases as local authorities ease video game licensing for foreign games.

According to industry sources on Thursday, China’s National Press and Publication Administration issued licenses for 15 foreign games earlier this month, including PearlAbyss Corp.’s “Black Desert.”

PearlAbyss has partnered with Tencent Holdings Ltd. to publish the game in China. NCsoft Corp. is also working with Tencent to localize “Blade & Soul 2,” aiming for a release this year after receiving a license in December. Wemade Co. received a license for its flagship game “Mir M” last year.

Netmarble Corp. released “Ni no Kuni: Cross Worlds” in China in February, with Tencent as the local distributor.

Nexon Korea Corp. released “Dungeon & Fighter Mobile” in late May, which topped revenue charts on the Chinese application store immediately after its release and has maintained its lead.

China, the largest single market for mobile games, is crucial for Korean game companies seeking revenue.

However, as more Korean games enter China, the influence of Chinese distributors is expected to grow rather than the benefits that Korean game makers can reap from the market.

Game makers seeking to enter China need online business and publishing permits in addition to game licenses, but these permits cannot be obtained by foreign companies alone and require cooperation with local publishers.

An Internet Content Publishing (ICP) permit, which is required to offer online games in China, has strict requirements, including a cap on foreign ownership and a complex acquisition process.

To address the challenges, Korean game companies often sell their intellectual property (IP) to Chinese companies.

Typically, the revenue split between publishers and developers is around 7:3. While the developer’s share can increase with the influence of the IP, local distributors usually take at least half. This means that the more successful a Korean game is, the more profit the Chinese distributor makes.

Major Chinese game companies reinvest these profits in game development and talent acquisition, achieving significant results in the global market.

According to app analytics firm Sensor Tower, Chinese games dominated the top three spots in global mobile game revenue last year.

After a dispute over the deployment of a U.S. missile defense system in Korea, China had effectively stopped issuing licenses for major Korean games, but resumed issues in 2022.

With Korea and China agreeing last month to resume follow-up negotiations on the Free Trade Agreement (FTA), there is optimism among game makers about further opening of the Chinese market, according to sources.