An overview of mobile gaming in Asia, Part 1: South Korea

Posted on March 18, 2013 by Eric Benjamin Seufert

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Until mid-2011, mobile gaming in South Korea was a niche activity, despite the country’s reputation as a gaming powerhouse. The reason was regulation: the South Korean government insisted on reviewing all games made available in localized app stores, meaning gamers interested in recent titles were forced to register foreign app store accounts. But since this reversal in governmental oversight in 2011, mobile gaming has surged in South Korea: mobile gaming revenues are expected to grow by about 41% (year-over-year) in 2013 while settling into year-over-year growth of between 12 and 18% in a “maturity stage” from 2015 to 2017.

This month, Mumbai-based Reliance Big Entertainment purchased a 51% stake in Bhusan, South Korea-based Bluesom Inc., the developer of Real Steel and F1 2011. Reliance, which owns 50% stakes in both Codemasters and DreamWorks Pictures, made the acquisition as a play to increase its presence in the South Korean and Japanese mobile gaming markets. A little less than a year ago, GREE acquired South Korea-based Paprika Labs. At the time, Paprika Labs’ flagship game, Hero City, boasted 1.5 million monthly active users on Facebook and was the fastest-growing game on the social network. And in December 2012, Disney acquired South Korea’s Studio Ex — before it had launched any games — as a strategic expansion into the Asian mobile gaming market.

These strategic acquisitions highlight both the growing importance of the South Korean mobile gaming market and the concentration of game development talent in the country. This post serves as a survey of the mobile gaming landscape in South Korea: the largest and most prominent developers and the networks which form the backbone of the market.

Kakao Games

Kakao Games, which launched in South Korea in July 2012 and worldwide in November 2012, is a mobile gaming network operated by Kakao, which also operates KakaoTalk, the most popular OTT (other-the-top) messaging app in South Korea. KakaoTalk has seen 65 million worldwide downloads and is thought to have 95% penetration into the South Korean smartphone market.

Kakao Games operates similarly to other gaming platforms: users are able to download and launch games from within the messaging app, interacting socially with their contacts by challenging friends or playing cooperatively. The games themselves are downloaded through the user’s device app store (such as the iOS App Store or Android’s Google Play), with Kakao Game handling in-game payments (through its own currency, called Chocos) and divvying up the revenue on a 70/30 revenue split between the developer and itself after paying the platform fee. This means that, for an iOS game, Apple would receive its 30% platform fee, and Kakao would take 30% of the remaining revenue.

Kakao Games launched in South Korea to impressive results: over its three month launch period, the platform earned $51.6 million through 82 million downloads by 23 million unique users. $35.3 million of that revenue was earned in October, the month before KakaoTalk launched Kakao Games worldwide.

Of the Top 10 grossing iPhone apps in the South Korean App Store, five have been released for Kakao Games; on Google Play, it is an impressive nine out of ten. Three games launched on the Kakao Games network achieved 10 million downloads in less than two months: Anipang, CandyPang, and Dragon Flight. Outside of South Korea, Kakao Games has an impressive 9 million users in Japan. Kakao has plans to release an additional 100 games for the platform in 2013.

Chinese gaming powerhouse TenCent reportedly owns 13.84% of Kakao, while South Korean online games company WeMade owns 3.8% of the company. Kakao also received angel investment from the CEOs of Ncsoft, NXC, and Neowiz.

Gamevil

Gamevil, a South Korean developer and publisher of mobile games, reported a bumper year for 2012: it recorded revenue of nearly $65 million, up 64% from 2011, with its net income up almost 40%. Gamevil’s development pipeline for 2013 contains 50 titles, with projected total revenues of nearly $100 million. The company derives 70% of its revenues from Android and 39% of total revenues from outside of South Korea.

Of the 43 games released by Gamevil in 2012, 11 were developed in-house and 32 were developed by third-party studios. Gamevil had a 23% “hit ratio” for the year — 10 of the 43 games it published made it to the Top 10 grossing chart on Google Play.

Neowiz

Neowiz is one of the largest online gaming companies in South Korea and the operator of the Pmang portal. Its mobile catalog remained small in 2012 — although it did publish the official mobile game of the 2012 Olympics — but it announced a strategic entry into the Chinese mobile gaming market in mid-July 2012. Neowiz initiated a second round of layoffs last month, owing to the end of its service agreement with EA over FIFA Online and decreasing revenues from its game Crossfire.

NCSoft

NSCoft is the Seoul-based MMO developer behind Lineage, City of Heroes, and the Guild Wars series. NCSoft acquired HotDog Studios, a South Korean mobile games developer, in July of 2011, but, as of November 2012, the company’s non-console, non-desktop revenues remained a minor proportion of the total at 6%. NCSoft has indicated that it will expand further into mobile in 2013 with a mobile version of Lineage, co-developed with GREE.

Hangame

Hangame is an online and mobile gaming portal operated by NHN Corp, which owns a number of internet services in South Korea such as Naver, the country’s most popular search engine, and me2day, an application similar to Twitter. Hangame has been making a concerted push into mobile for the past two years, developing its own titles and publishing others in South Korea and abroad. The company is expanding aggressively, having opened up 200 job requisitions, mostly related to mobile games development, last month.

NHN Corp, the parent company of Hangame, also owns LINE, the messenger app popular in Japan that recently announced it has reached 100 million users globally.

WeMade Entertainment

WeMade is the creator of the popular Legend of Mir MMORPG series, which garnered over 200 million players over its lifetime. The company is apparently planning to launch 40 mobile games in 2013, after having driven $11 million in mobile gaming revenue in 2012. The company’s current mobile catalog is comprised of eight titles, two of which are Top 10 grossing in Google Play in South Korea (both having been released for Kakao Games).

WeMade’s expansion plans for 2013 include China and Japan. WeMade’s US subsidiary, WeMade Entertainment USA, develops and publishes games for the North American and European markets. WeMade recently announced a partnership with WhatsApp, indicating that the messenger app may be building out a games platform of its own.

Andromeda Games

In January 2013, Andromeda Games — developer of the Tap Tap series of games published on Kakao Games, received a $1.3 million investment from IMM Investment and Korea Investment Partners to further expand their catalog of mobile games.