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The Free Zone: What Games Drive Nexon's and NCsoft's Profits?

General Article By Richard Aihoshi on February 25, 2014

Pop quiz. Which title generated the most revenue for NCsoft in 2013? As I noted last time, February is always an informative month for those of us who like to follow the state of the global MMOG industry because it's when various publicly traded publishers report their Q4 and full year financials. So, we now know that the answer to our question was not, as many here in North America might have guessed, Guild Wars 2.

Using the current exchange rate, ArenaNet's game brought in a very healthy sum, over $114.7 million US. However, this wasn't nearly enough for it to claim the top spot within NCsoft's portfolio. Indeed, it wasn't even close since the company's leading seller reached $267.8 million. Its identity may well surprise readers who don't watch international markets. Could it be Aion? Nope - third at $89.1 million. Then what about Blade & Soul? Also no - fourth at $64.1 million. Any possible way it could be Lineage II? No again - it ranked fifth with $53.2 million.

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Hmm. What's left? It's Lineage. Unavailable here since mid-2011, it still has a very strong following in Korea. Even more surprisingly, its sales jumped substantially last year, a shade more than 40 percent. Despite this, NCsoft's total barely budged, rising about 0.2 percent to $642.6 million. GW2 was a major downward influence, dropping over 25 percent from its 2012 figure, which it had achieved in just over four months. Here again though, it was second since Aion experienced an even more precipitous decline of 32.3 percent.

The corporation's consolidated 2013 sales, including royalties et al, were about $704.6 million, also just a fractional gain. It reported net income of roughly $147.7 million; this represented another marginal increase. Overall, it seems to have fared reasonably well last year, retaining its number 2 ranking among Korean publishers (assuming we count Nexon, which is technically headquartered in Japan).

Since NCsoft provides sales numbers for its subsidiaries, we know that NC Interactive and ArenaNet totaled $123.9 million, which was down approximately 26.3 percent from 2012. NC Europe experienced an even sharper decline, around 33.5 percent to $47.1 million.

And what are the company's prospects like for this year? There isn't enough readily available information to make a confident prediction, but I'll hazard a guess that 2014 will be relatively uneventful, both globally and here in this region. Anyone think otherwise?

In sharp contrast, 2013 was anything but flat for Nexon. It reported an enormous spike in revenue, gaining around 43.3 percent. Using the current exchange rate, its total was more than $1.5 billion. Due to differences in the rates from year to year, the increase was quite a bit smaller when converted to $US, in the ballpark of 15 percent. The company's net income was up about 7 percent in yen, but down about 1.5 percent in $US. That said, “only” $295.8 million is obviously substantial. I'd have to guess it will stay on the acquisition trail in 2014.

With respect to Nexon's prospects for this year, its portfolio does have some question marks. One stems from the fact that Dungeon & Fighter (no longer available here where it was called Dungeon Fighter Online) is an enormous revenue generator, mainly due to its great popularity in China. While the exact figure wasn't stated, it had a single-digit drop there in 2013. While this may turn out to be a blip, it's hard not to expect another decline this year. Should this happen, it could have a significant impact on total revenue.

In addition, the company admitted that both Counter-Strike Online and Cyphers (a MOBA) didn't meet expectations in China last year. Although these titles aren't as important to the overall corporate picture, it appears unlikely that they're positioned to pick up any slack. Reading between the lines, I wonder if Nexon is expecting 2014 to be flat or even down in this key market.

Globally, the company has never been nearly as strong in North America and Europe. Last year was no different. In Q4, for example, China, Korea and Japan combined to generate 71.7 percent of total revenue. There's no apparent reason to think this will change much in 2014. As for the three key regions, it will be interesting to see if Nexon can at least hold its own. It has several mobile titles in the pipeline, but for the PC, only MapleStory 2 and Ghost in the Shell, and those seemingly just in Korea.

So, I'm guessing that this year will be relatively uneventful for Nexon as well, especially in the western hemisphere. That said, I continue to think of its status here as akin to a sleeping giant. I don't think it will awaken soon, but I do wonder how much longer it will sleep.


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The Free Zone
Richard Aihoshi has been writing about MMOGs since the mid-1990s, always with a global perspective. As a result, he has observed the emergence and growth of the free to play business model from its early days in both hemispheres.

He is the former Editor of RPG Vault and his column, focusing on free to play MMOs, appears on MMORPG.com every Monday.
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