The first quarter performance of major domestic game companies is expected to differ significantly this year. Nexon and KRAFTON, which had satisfactory results last year, are expected to have favorable performances, buoyed by strong overseas results and successful new releases. Netmarble, which has successfully optimized expenses, is also expected to improve its operating profit. On the other hand, NCSOFT and Kakao Games are likely to report disappointing results due to declining revenue from their core games and a shortage of new releases.
According to financial information provider FnGuide on the 21st, the first quarter performance of 3N2K (Nexon, Netmarble, NCSOFT, KRAFTON, Kakao Games) is expected to vary. Nexon and KRAFTON, which recorded their largest sales last year, are showing signs of maintaining strong results. Nexon expects its first quarter revenue to reach a maximum of 1.1296 trillion won, with an operating profit of up to 327.5 billion won. This represents an increase of 13.1% and 22.1% respectively compared to the same period last year. During the same period, KRAFTON is estimated to achieve revenue of 793.7 billion won and an operating profit of 386.1 billion won, up 19.2% and 24.4% respectively year-on-year.
These game companies seem to have been partially impacted by the strong performance of existing hit intellectual property (IP) and the results of new releases launched in the first quarter. Nexon's 'Dungeon & Fighter Mobile,' released in China last May through Tencent, is performing well. The title 'The First Descendant,' introduced to the overseas market last July, is also gaining popularity. Additionally, the performance of the two new releases launched at the end of last month had an effect. 'Mabinogi Mobile' is currently ranked 4th in revenue on Google Play and is performing well, while 'First Berserker: Kazan' secured the second place in the global popularity ranking on Steam on its release day.
KRAFTON's hit IP, PUBG, is also performing well in the global market. Enjoy, which was released in early access on Steam on the 28th of last month, sold 1 million copies within a week of its release and ranked first in global popularity among games. In terms of sales volume alone, it has the fastest sales rate among domestically released games in the last 2–3 years.
Netmarble's first quarter performance is also expected to improve. During this period, Netmarble's revenue is expected to reach 603.2 billion won and its operating profit to 38.1 billion won, which represents an increase of 3.0% and 931.5% year-on-year, respectively. Netmarble's operating expenses for the first quarter are projected to decrease by 2.9% year-on-year and 7.9% quarter-on-quarter to 565.1 billion won, which is interpreted as the effects of expense management initiated last year becoming more evident. Notably, there are significant declines in major expense categories such as ▲labor costs (-4.4%) ▲payment commissions (-10.0%) ▲depreciation expenses (-6.1%), contributing to the improvement of profitability.
Additionally, Netmarble's major update of 'Solo Leveling: Arise (hereafter Solo Leveling)' undertaken last December is also showing a rebound in traffic and revenue. 'RF Online Next,' released on the 20th of last month, has exceeded concerns prior to its launch, ranking first in the two major app markets and maintaining a top position on Google Play and the Apple App Store as it continues to perform well.
On the other hand, NCSOFT and Kakao Games, which have lacked new releases or failed to achieve success, are also expected to receive disappointing reports for the first quarter. During this period, NCSOFT's revenue is expected to decline to 367.3 billion won, with an operating profit of 8.5 billion won, representing decreases of 7.7% and 66.9% respectively compared to the same period last year. However, considering that the company recorded a loss of 129.5 billion won in the fourth quarter of last year, it has effectively turned a profit through expense adjustments.
Kim Hyun-yong, a researcher at Hyundai Motor Securities, noted, "The revenue from the mobile Lineage series in the first quarter is expected to be similar to that of last year’s fourth quarter, particularly because Lineage M returned to the top revenue spot last month, maintaining a substantial user base. However, he added that the occurrence of one-time labor costs and increased marketing expenses may result in a profit margin that is smaller than expected."
Kakao Games is expected to record an operating loss of 7.1 billion won in the first quarter, a reversal from a profit of 12.3 billion won in the same period last year. During the same period, revenue is also projected to decrease by 43% to 140.4 billion won. This is attributed to the decline in revenue from existing flagship games and the failure of new releases to perform well. Revenue from established hits like 'Odin,' 'ArcheAge War,' and 'Uma Musume' has declined, and this year's first new release, 'Valhalla Survival,' has also not achieved good results.
Jeong Eui-hoon, a researcher at Eugene Securities, analyzed, "In the PC institutional sector, the traffic of 'Path of Exile 2,' released last December, has steadily decreased, leading to poor results. Meanwhile, the revenue from 'Valhalla Survival,' released in January, did not even reach the top 20 in sales rankings, showing underwhelming performance."
Industry insiders expect that the turning point for NCSOFT and Kakao Games will be after the second half of this year. NCSOFT has announced the upcoming releases of new games like 'Aion 2,' 'LLL,' 'Tactan: Knights of the Gaz,' and 'Breakers: Unlock the World.' Kakao Games is also likely to showcase publishing new titles such as 'Goddess Order,' 'Project C,' 'Chrono Odyssey,' and 'Project Q.'