Words by Vaughan Wallis, Illustrations by Pat Volz

You may have heard of the Korean Wave, the spread of Korean culture through movies, dramas, pop music, and more. But did you know that leading the wave—at least in terms of cash—are video games?

The Korean video game industry generates more export revenue than all other Korean content industries combined. A representative from the Korea Creative Contents Agency (KOCCA) explained:

“The total value of the Korean game market reached about 7.43 trillion won in 2010. The game market is very important for the Korean government in terms of export and employment scale. In 2010, Korean game companies exported a total of around US $1.6 billion, which accounted for over 50% of contents export.”

The success of Korea’s video game exports is an indicator of the vibrant games scene within Korea. Infrastructure, innovation, early acceptance of gaming into mainstream culture, and favorable governmental policy have quickly turned gaming in Korea into a multi-billion dollar
industry.

In the beginning…

The story of Korea’s game industry began in 1996 when then-fledgling game firm Nexon released the role-playing game (RPG) Kingdom of the Winds. The game was one of the world’s first massive multiplayer online (MMO) games — environments in which thousands of people play together at the same time.

Two years later another Korean company, NCsoft, released the groundbreaking MMORPG Lineage. After 14 years, the original Lineage is still one of the top 10 games of its kind. MMORPGs like these flourished in the late 90s on Korea’s burgeoning broadband and mobile infrastructure.

“Korean companies were able to position themselves as first movers in new (game) markets and away from traditional console and handheld game markets,” explains Jihun Lee, Head of Publishing at veteran online-game publisher Webzen.

The Korean government also played a key role: “To help create jobs, overcome the repercussions of the Korean financial crisis, and position Korea’s IT industry, the Korean government offered a variety of benefits from the late 90’s to the early 2000s to foster the IT industry and support the set-up of venture companies,” says Lee. “The pool of talent and government support made for an excellent investment environment.”

Ding! Gaming Levels Up

As the industry grew, Korean games ventured abroad — especially to China. In 2001, Actoz Soft released Legend of Mir 2 on the mainland. The MMORPG, developed by WeMade Entertainment, was an early star in an age where Korean MMORPGs would dominate Chinese gaming. China remains Korea’s biggest game export market even today, over a decade later, accounting for 37.1% of game export revenue according to KOCCA’s 2011 White Paper on Korean Games.

Domestic momentum was just as forceful, and online game companies began to diversify into casual titles like Hangame’s online version of Matgo (a popular Korean card game), as well as into other genres, including first-person shooters like Sudden Attack and Special Force.

The technology used to make games advanced at an even pace. More complex 3D graphics made their debuts as game development budgets began to swell: Webzen’s Mu Online and NCsoft’s Lineage 2, both released in 2003, were both bigger and prettier than the global competition.

New business models also ushered in a more profitable age for Korean developers. One of the most significant business-side advances was the replacement of subscription-based profit with microtransactions, where players pay cash to unlock new content or buy in-game items, money, and power-ups.

“Korean online games were essential in securing microtransactions (as a core business model),” says Webzen’s Lee. This model is still widespread across most Korean games, whether or not the game users have to pay for the game itself.

Game developer Nexon has thrived on a free-to-play model for years with games like MMORPG MapleStory (2003) and racing game Kart Rider (2005). Microtransactions account for a lion’s share of the revenue from such titles. And as a business strategy, it seems to work: Nexon’s IPO on the Tokyo Stock Exchange at the end of last year was priced at $1.2 billion.

“Korean users look for a way to finish the game in as short a time as possible, and then go back and explore the game’s contents in more detail,” says Jinwan Kim, PR manager at NCsoft. Such a play style works well with microtransactions, whether users want to march right through or slow down to tweak their gameplay experience with new items and content.

Korean gamers, especially those playing RPGs, also peddle in-game items to other users through third-party sites. Online and mobile game companies don’t get a cent from what KOCCA estimates is over 1 trillion won in player-to-player market value. The practice is tolerated, however, as item trading is part of the glue that keeps communities together in the most popular games.

Looking for Group: The Social Gamer

Korean games from Lineage to Kart Rider all have strong social elements, and the community often extends beyond the game itself. “People play online games, but also create social networks offline and meet up to do things together,” says NCsoft’s Kim.

The social aspect of Korean gaming extends to the phenomenon of Internet gaming rooms (IGRs), known in Korea as PC bangs (literally PC “rooms”). IGRs are integral to the story of Korea’s game industry. They provide a public space for friends to gather, play their favorite games, and try out the latest releases, and in doing so validate their hobby.

“The amount of IGR market share for an online game is a key yardstick in deciding whether the game becomes a hit,” says Webzen’s Lee.

It is unsurprising then how much effort game companies invest into IGRs. Most games have special IGR versions, which users pay a small hourly rate to play. Exclusive in-game incentives like game buffs and bonus experience while playing at IGRs are part of the formula.

In 1998, there were 3,000 IGRs in Korea. Today, there are around 15,000 – 18,000. These range from rag-tag Mom-and-Pop operations to franchised brand shops, where the rooms hum to the sound of the latest video cards and gigs of RAM.

A Virtual Celebrity: Korean E-Sports

The transformation of gaming into a professional sport is nowhere more evident than it is in Korea.

“E-sports draw a lot of attention from media and teenagers, so a number of e-sports teams are sponsored by big companies. Various international game tournaments—sponsored by the country—have elevated e-sports in Korea further,” explains a KOCCA representative.

For over a decade, Korea has taken the lead in developing professional gaming into something resembling a real sport, with leagues, corporate sponsorships, and serious full-time training. The top players can look forward to handsome tournament payouts and celebrity status. The success of e-sports competitors has also contributed to the acceptance of gaming as a popular pastime.

Game on the Go: Move to Mobile

Even the worldwide switch from desktops to smartphones and tablets is no match for Korea’s gaming prowess. Mobile game developers in Korea have been around since the beginning of the early days of mobile gaming.

Even in the early 2000’s when the Java-based mobile game scene was just kicking off, Korean developers Com2uS and Jamdat (now a part of EA) stood toe-to-toe, fiercely competing for the brand-new mobile market. This meant that when smartphone app stores exploded in 2008, Korean developers were well-prepared.

“Korean game companies have spent a long time looking at user demographics, and have built up an excellent sense of how to design games that users will like,” says Heewon Kang, VP of Strategy and Communications at Com2uS. “We make good use of new opportunities in the market.”

However, Korea’s monolithic desktop game firms may soon be moving in on mobile developers’ niche. Nexon and WeMade Entertainment both had mobile titles on display last November at G-Star, Korea’s annual game expo. But despite the threat that these big brands pose, Korea’s mobile developers are ready for the competition. Brian Oh, senior manager of international business at mobile developer Gamevil, says, “We have (always had) a focused strategy on mobile games, and commit to creating games and marketing that suit the smartphone space.”

Social network gaming (SNG) is also fertile ground for Korean developers. Facebook is prominent in Korea, but there are a host of other major SNG platforms including on Naver, Korea’s biggest internet portal. One of the most popular Korean portal games is Sundaytoz’s ocean simulation AquaStory, which saw over two million user registrations in its first two years. Yann Heo, director of international development, explains of the game’s popularity: “Town building is a well-known genre in social games, but in Korea, games that focus on cultivating in-game characters work better. AquaStory has over a hundred fish types, and this element is a key reason for its success.” High levels of customization are indicative of the high expectations for rich content that characterize Korean gamers – something that most game companies see as crucial to the success and quality of Korean gaming contents overall.

Korean game companies have suffered under some rather heavy-handed regulations at home over the last few years. Yet, overall, most estimates see double digit growth over the next few years both at home and abroad. As the game market continues to grow, games will help expand the reach of Korea’s contents
globally.

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Vaughan Wallis has spent much of his life in the video game industry. He has worked as a producer, PM, and development manager in both the mobile and PC-game sectors in Korea and the UK. He is based in Seoul, but heralds from London.

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Who’s Who in the Korean Game Industry

Words by Sidney Goulet

Nexon is by far one of Korea’s most successful video game developers, with its immensely popular game MapleStory, worldwide distribution of most of its products, and its own currency called NX cash.

NCsoft established its reputation in 1998 with the release of its first MMORPG, Lineage. Its success continues into today with the popular Guild Wars series, Aion and the new Blade & Soul, which quickly rose to the top 10 within a month of its release.

Webzen is a leader in 3D MMORPGs, with impressive releases such as MU Online, Archlord and Soul Ultimate Nation that are proving free-to-play games can be as successful or moreso than their pay-to-play counterparts.

WeMade Entertainment has its sprite-based MMORPG series The Legend of Mir to thank for its success, and even has an official Guinness Book record for most players online at once: 750,000 playing The Legend of Mir 3.

Gamevil is one of the biggest developers of games on mobile devices with over 60 mobile games published, including the Baseball Superstar series and mobile RPG ZENONIA series.

Com2uS was Korea’s largest mobile developer until the recent rise of Gamevil – now the two run neck and neck. Classics like Chronicles of Inotia, Homerun Battle, and Super Action Hero are among its most popular titles.

Sundaytoz was one of the earliest social gaming developers for Korean social sites like Nate and Naver. It is still the most established company of its kind, with Aqua Story and Ani Majong being its two most popular titles.

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So You Want To Play A Game?