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Musing on NCsoft's Future

Richard Aihoshi Posted:
Columns The Free Zone 0

I suspect many people in this hemisphere would assume or guess that NCsoft is the largest Asian publisher in terms of annual revenue. This was the case for quite some time, but the situation has changed in recent years due to the rapid growth of the Chinese market. This not only allowed the domestic leaders there to vault ahead, but has also dramatically impacted certain Korean-based firms by bringing in enormous licensing fees, enough to shift the overall rankings.

As of 2010, Nexon had taken over the top spot. I recall that some observers felt the company had an outside shot at reaching the 1 trillion won level that year. Since this viewpoint was pretty optimistic, it wasn't a surprise when it fell short. However, the odds were much better that it happen would in 2011. And it did.

According to figures that have surfaced during the past few weeks, Nexon recorded 1.21 trillion won in sales for 2011. This represented a healthy increase of 26 percent, which was more or less in the expected range. Based on the current exchange rate, this jump allowed it to become the first Korean-based member of the $1 billion USD club.  The company just made it, with “only” $36 million to spare.

The key offering for Nexon may well surprise those who don't keep track of the Asian online gaming landscape. It's Dungeon & Fighter, known here as  Dungeon Fighter Online, which is tremendously popular in China, where it has topped the 2.5 million concurrent user mark. Based on this measuring stick, it's number two there. According to Korean publication This Is Game, it brought over 537 billion won, representing 44 percent of the company's sales. This converts to about $460 million. If we make the assumption that this is just the licensor's share, it would mean the title generated well over $1 billion in just one country.

And what of NCsoft? Like probably the vast majority, I did not expect to see it ranked as low as fourth. Neowiz took over second place last year, well back of the top spot with sales of 666.7 billion won ($571 million). Its primary contributor was CrossFire, which holds a clear lead on the Chinese CCU list with a huge total of 3.5 million. This raises the possibility - and maybe even a pretty decent probability - that 2011 saw WoW knocked off its long-held global leadership perch as I speculated might happen a while back.

Third place went to NHN, which came in at 640.6 billion won ($548 million). NCsoft generated 608.9 billion ($521 million), which was a drop of more than nine percent. This followed a gain of two percent in 2010, which means it has had two lacklustre years in a row after a very impressive 83 percent jump in 2009, largely attributable to the release of Aion.  The company is still well ahead of fifth, which is occupied by CJ Entertainment & Media with sales of 257.6 billion won ($220 million).

As a bit of an aside, I find it interesting to consider these figures in the light of where other western publishers stand on the worldwide scale. Activision aside, is it likely that any others are even near the $500 million level? Could EA be there on the back of SWTOR? At $15 per month, it takes nearly 2.8 million subscribers to bring in that much. Even factoring in box sales, we still come up short. Let's say three million over a full 12 months with the publisher share being $30 per unit. That's a very nice chunk of change, $90 million. But that still leaves $410 million to go, basically from monthly fees. I haven't seen any credible indications that the game has the user base to be in such a lofty ballpark.

Getting back to NCsoft, it's natural to ask how the future looks. While I'm not pessimistic by any means, it's also hard to generate a lot of optimism. Yes, Guild Wars 2 is coming. However, it's fair to wonder how well it will fare outside North America and Western Europe. It will undoubtedly sell a lot of boxes, but how large and steady will its ongoing revenue stream be in the overall corporate picture? Blade & Soul will be available fairly soon as well, but how significant an impact is it truly likely to have?

On the other hand, the company has given up its longstanding adherence to P2P, which effectively shut itself out from the larger segment of the global market.  However, it's not clear how well or soon this will impact NCsoft's overall prospects. It's one thing to offer F2P, but another to compete against publishers with more experience in this sector, which means they have established titles and audiences, and quite possibly a better understanding of monetization.

So, my best guess at this time is that NCsoft will not regain its former position among Korean publishers any time soon. At best, I'd say its trajectory will be slightly upward in 2012 as well as for the next year or two. That said, I also feel there isn't much down side.


Richard Aihoshi

Richard Aihoshi / Richard Aihoshi has been writing about the MMOG industry since the mid-1990s, always with a global perspective. He has observed the emergence and growth of the free to play business model from its early days in both hemispheres.