We all know that the growth of mobile means the growth of mobile games. Korea is seeing a transition from online games to mobile games in 2013. In the second half of 2012, mobile games slowly overwhelmed online game.

1. Approximately 61% of Korean smartphone users play games on their phone
2. Smartphone users download an average of 26 apps.
3. rise of KakaoTalk and LINE messenger services.
4. the growth of LTE in Korea
5. Prominent companies are expanding into the Korean mobile games market (such as LG Uplus, KT, and SK Telecom)

Important game market players

• Com2us,
• Gamevil,
• SK Telecom,
• WeMade,
• NCsoft,
• Nexon,
• CJ E&M,
• Neowiz; and
• NHN.

Mobile game results

Mobile games such as AniPang is non-comparable to any other popular online games in terms of its growth. This means that major game companies such as NHN and Neowiz would have shown a bigger interest in the mobile game market. (see Agentschap NL)

• Anipang (20 million downloads, 10 million daily users, 0.3 million simultaneous users); and
• Dragon Flight easily surpassed the number of online game users.

The government?

Government regulation and rapidly changing market is the new hurdle. Government regulations may make the market instable - games are so closely connected to social issues, are seen as cause of crimes with regards to violent games.

• We all remember the 'Shutdown Policy' by the Ministry of Gender Equality and Family and 'Selective Shutdown Policy' by the Ministry of Culture, Sports, and Tourism - the industry shrank slightly.
• The number of games classified by the Game Rating Board at the end of Q2 2012 was 385, which is less than 31.5% less than the Q2 2011.
• Games targeting aged over 18 increased by more than 50%. Others have decreased by approximately 10%.

See also: http://betech.asia/2013/01/strengthening-shutdown-policy-korea/

Shutdown policy: Implications for the market - why it's important:

• The Constitutional Court of Korea passed legislation the nonetheless.
• The policies do not apply to mobile games, but it will be considered by 2015.
• Age identification for shut-down policy is going to be a huge cost burden for the developers if they were to add systems for age identification.
• The competitiveness of the mobile market is obviously speed - a quick and accurate market and customer analysis is absolutely key. With that in mind, making a mid-long term strategy is going to be more difficult. There is uncertainty to the mobile game market, and 2013 will be a year of risk and opportunity for the mobile game market.

Growth

• South Korean mobile games market is underestimated to say the least. The market is expected to grow twofold, and at a double-digit rate well into 2017.
• Uptake of smartphones
• Opening up of app stores by OS vendors
• Nomura in 2012 predicted that the South Korean mobilie game sector will grow at a compound annual growth rate of 34%.
• This is from 10.2 million in 2011 to 33.1 million in 2015.
• The domestic mobile game market will experience double-digit yearly growth from 2011 to 2017.
• Growing stage will stretch in the first four years.
• Local mobile game market expected to increase by 60% year-on-year to reach 344 billion won - approximately USD 305.5 million.
• Yearly growth in 2013 is to be 38% year-on-year, reaching 475 billion won - approximately USD 421.8 million.
• The market next year in 2014 will grow at 26% year-on-year to reach 600 billion won - approximately USD 532.8 million.
• 2015 - 2017, Korean mobile game market enters maturity stage, growing at 18% in 2015.
• In 2016, 15%.
• In 2017, 12%.

Com2us and Gamevil expanding investment to prepare for competition - each planning to release 40-50 new games in 2013.

Shift from PC to mobile games

There is also a shift from PC games to mobile games in South Korea.

• In 2011, spending in Korea's mobile game market was at 215 billion won (US$190.9 million), approximately 10% of the size of its PC online game market
• Spending on mobile games was expected to increase to 710billion won (US$630.5 million) in 2015 to account for 26% of the modestic PC online games market.
• Korean mobile game market to see "rapid transition" to a freemium business model in smartphone games.
• Local mobile game developers were moving away from paid downloads to in-game microtransactions
• Gamevil, for example, feature-phone game revenue for the company dropped from 71 percent in the Q4 2010 to 13 % in 2011 during the same period.
• In contrast, the developer's in-game item sales grew from 48 percent of total revenue in fourth-quarter 2010 to 80 percent of revenue in fourth-quarter 2011.

Kakao Games

Kakao Games is a mobile gaming network operated by Kakao, which also operates KakaoTalk, the most popular messaging app in South Korea.

• launched in South Korea in July 2012 and
• worldwide in November 2012,
• KakaoTalk has seen 65 million worldwide downloads and is thought to have 95% penetration into the South Korean smartphone market.

How it works:

• 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)

How they make money:

• Kakao Game handling in-game payments (through its own currency, called Chocos)
• 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. 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 animpressive 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 —
• announced a strategic entry into the Chinese mobile gaming market in mid-July 2012.
• Neowiz initiated a second round of layoffs in February 2013, 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.

This includes:

• Naver, the country’s most popular search engine,
• 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 in February.

NHN Corp, the parent company of Hangame, also owns LINE, the messenger app popular in Japan.

• LINE recently announced it has reached 100 million users globally.

WeMade Entertainment

WeMade is the creator of the popular Legend of Mir MMORPG series.

• Legend of Mir 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

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 In January 2013, to further expand their catalog of mobile games. Recent games investment, acquisitions and public company valuations (see the June transaction update of our Global Video Games Investment Review 2011 for the data) indicate that investors may be taking a similar view.

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