Korea's video game industry is losing steam as competition from overseas heats up.
Though the sector saw robust growth in the Chinese, European and Southeast Asian markets with exports reaching W5 trillion, its overall performance is deteriorating (US$1=W1,122).
Analysis of 35 game companies listed on the Korea Exchange released Thursday shows that 18 of them suffered an operating loss in the third quarter, compared to six in the first quarter of 2016. Their combined operating profit fell 33.4 percent on-year to W364.8 billion.
Both the country's game giants and small to medium companies as well as related distribution and service industries are wilting.
The top three game developers Netmarble, NCsoft and Nexon all suffered deteriorating performances. NCsoft, which enjoyed a record profit last year thanks to its mobile role-playing game Lineage M, saw operating profit plummet 57.6 percent in the third quarter on-year to W139 billion.
Netmarble suffered a drop in operating profit of nearly 40 percent to W67.2 billion. Nexon, which is listed on the Japanese stock exchange, also posted losses, at least excluding royalties earned in China from its game Dungeon Fighter, which was produced by Nexon subsidiary Neople.
But the three companies stayed in the black overall thanks to steady sales of their bestselling staples. Lineage M came out in 2017 and Dungeon Fighter in 2005, but nearly no game released this year earned over W10 billion in profit.
Smaller companies are even worse off. An industry source said, "The reality for smaller companies is that they have to pray that one hit new item will revive them or they can't pay their staff."
The main factors are the lack of new titles and growing competition from China and the U.S. Instead of developing new games, Korean game heavyweights are mostly releasing mobile versions of popular PC games, meaning new hits are largely absent. For example, six of the nine games NCsoft released since last year or scheduled for release next year are simply mobile editions of the PC games Lineage, Aion, and Blade & Soul
Three of the five most popular PC games in the country are American, while Chinese companies have made huge strides in the mobile game market.
The adoption of a shorter working week and the emergence of labor unions in the game industry have heightened the sense of crisis. Nexon and Smilegate now have unions affiliated with the militant Korean Confederation of Trade Unions.
An industry source said, "The ability to respond to shifts in market trends and release games at the right time is key to staying ahead. But game companies haven't been able to focus on development this year because they had to adapt to the 52-hour working week."