泥中蟠龍's Game愛歌_Video game and fund (Part.1)

泥中蟠龍's Game愛歌

[A love song for games of the dragon waiting for an opportunity]

 

Video game and fund (Part.1)

 

Recently the local gaming industry is having a hard time due to reduced investment. As a venture capitalist, one of the biggest reasons is mostly a huge investment loss in the entire industry from 2013 to 2015. When it comes to venture investment, investors generally expect to make profits, as much as making up for the other losses, from a few companies that they invested in. However, multiple-combined serious losses of the whole industry could lead to a negative view of putting investors' money into video game development. Very few people have generated revenue from game makers in the last three years, while most investors have been losing money. I cannot give you a precise figure, however, the company I'd be in is no exception from it.

The world of national investment, in common with domestic gaming firms becoming more global recently, cannot be separated from the global financial market. The reason Brexit had a direct influence on the local equities market, as well as the real estate market is that the local financial market has a strong correlation with overseas financial markets.

 

Recently the U.S. has consistently raised the rate of interest. It's probably because of a variety of issues such as unemployment, inflation, and national debt, etc. Just very simply, the U.S. interest rates seem to have nothing to do with the interior gaming industry. However, as I've mentioned, financial markets in Korea and overseas are all deeply linked together. If the United States raises its key interest rates, American investors will want to withdraw their investments overseas. In addition to them, many capitalists from various nations will flock to America. Among them, South Korea particularly has a vulnerable fund market structure. A lot of foreign capital, even though it may not be seen, has been flowing into the local industry as a whole. And many domestic game developers and publishers have had a very substantial inflow of investment from other countries through various channels since the Korean gaming industry is one of the best in the world. Capital outflow from the Korean market to the U.S. will lead to further weaken investment in the field of the local gaming industry which is already sharply shriveled.

 

I don't mean that developers should give up to make a video game due to Korea's struggling gaming industry. Sharing the problem with the video game interested, I'd like to find a way to survive in a very tough situation. A game made by people and the workers need money. So I want to talk about capital in the domestic gaming industry over the next few weeks. It's going to be somewhat strict and serious matters, however, I'll try to talk about lighter topics, if possible.

 

 

※ This is from Kyunghyang Games column by 泥中蟠龍 since September 2013.

(http://www.khgames.co.kr)

 

Translation by Kim Ki-hui

泥中蟠龍's Game愛歌_Harsh advice for local game publishers

泥中蟠龍's Game愛歌

[A love song for games of the dragon waiting for an opportunity]

 

Harsh advice for local game publishers

 

I loved Hong Kong action films such as A Better Tomorrow, Casino Raiders, The Killer during my school days. In the early 90s, Hong Kong pictures were pretty fun and their movie characters were all awesome. Schoolboys tried to look cool with a matchstick in their mouth like Chow Yun-fat and Leslie Cheung even appeared in the domestic commercial film on the small screen. However, the Hong Kong cinemas had seen their best days in ten years due to repeated production of popular-formula genre and a few top-rated actors appeared in several movies.

 

Many people say that Korea's gaming industry is struggling nowadays. Top-ranked games have remained the same in order and newly-released games haven't done especially well. Even good performances of some of them are minuscule compared to those of the greatest hits in the past. In such conditions, the majority of investors suffered a great loss and they were reluctant to make any fresh investments in the video games, which has caused a vicious cycle in the industry.

Most readers probably know the situation in the national gaming industry. The reason why I mentioned the widely-known facts is to criticize irresponsible actions of local big game publishers which have prolonged the vicious cycle.

 

Recently, it seems that the number of bankrupt companies may surpass the number of newly-released games. However, data shows that the market has become bigger. Then where did the increased game revenue go? The only winners must be the big publishers. They have earned consistent profits from the minority of games remaining in the upper ranks during the past few years. Netmarble is said to have 1 trillion won in revenue and sales of Gamevil and Com2uS is known to reach half of it. I don't want to take an issue with corporate profits. However, the large publishers have many game developers into the jaws of death for their own hands now. A barely completed game under tough circumstances due to poor investment is like a lifeline for them. It's nothing short of a matter of life and death. The big game publishers don't find out new ways to market those games which are less effective than existing profitable games. Frankly speaking, most major distributors don't take risks to conduct a huge marketing campaign because they won't suffer a serious loss if they make sales as much as up-front advance payment including down payment, minimum guarantee, license fee, or development cost, etc. The neglected games disappear with the developers after barely making money to meet the publishers' costs not even having a chance to be loved for a long time by users. Publishers may prefer the cost-effective favored product than a new game with an unconvincing possibility when it comes to profitability. However, there is nothing forever. If they abandon potential developers for short-term profits, game makers cannot survive in the market and even game studios, that managed to survive the fierce competition, won't like to work with those vicious distributors. Video games are created by men not robots. Game developers cannot pull together with business partners who they don't trust with. Without consistent cooperation from a longer-term perspective to support developers' potentiality, there is no bright future for domestic publishers. I hope that local publishers won't repeat the same failure as Hong Kong pictures in the early 90s.

 

 

※ This is from Kyunghyang Games column by 泥中蟠龍 since September 2013.

(http://www.khgames.co.kr)

 

Translation by Kim Ki-hui

泥中蟠龍's Game愛歌_Brexit and game worlds

泥中蟠龍's Game愛歌

[A love song for games of the dragon waiting for an opportunity]

 

Brexit and game worlds

 

Today I'd like to start this column with a none-video game-related story.

 

The Brexit referendum was the biggest news for me recently. Brexit, a portmanteau of "British" and "exit", is the withdrawal of the United Kingdom from the European Union. As an investor working in the venture capital firm, I thought about various effects both on the global and domestic economy and potential negative impact on venture capital as well. However, I'd like to mention another story here.

Of course, the United Kingdom, which has developed its gaming industry with its world-class market, certainly can be important in the world of the video game. But it's not the major topic. Looking at the English people to exit from the EU, I found that there was one thing in common between the decision-making structure of game users and the popular voting process of the British public. So I'd like to compare both of them side by side.

Granting that a game world is the European Union, game users can be compared to the population of the EU. Like any other video games, there is no game to satisfy everyone. Disgruntled users are everywhere. The UK has benefited from the EU as a member of the political and economic union. It has been given an opportunity in an internal single market for all member states to export and import goods tariff-free and protected with little effort by various international agreements signed by the EU. On the other hand, British membership of the EU put a huge financial burden on the country and it had to take the trouble to host a large number of the refugee population. The UK eventually decided to leave the EU as a majority of people concluded that the membership does more harm than good.

 

Let's compare Brexit with a video game. Now tens of thousands of users are enjoying playing the games. There is no such thing as playing alone among various types of the game. Players sharing the experience with other users by playing the same game each have their legitimate complaints. The best benefit of playing video games is that they offer a wide range of entertainment to users. However, on the other hand, gamers have to spend their time and money for fun. If a game doesn't fulfill the needs of users as much as they spend their energy and money on it, they will leave for another service without hesitation. It's a matter of game balance. If a developer doesn't lead the users to spend adequate time and cash, it cannot make profits. The company will soon be in financial difficulties. On the contrary to this, users being forced to devote so much time and resources finally will give up playing the game. In that case, the game maker also will be in a poor financial situation. So the volume of goods from customers must be kept within the bounds. Developers need to not lose the game balance so that the users are motivated by the costs.

 

None but the fun things in the game can make up for a deficiency in the game balance. There are various fun factors such as brilliant computer graphics, in-game items, and effects, etc. A fun game, which completely satisfies a large number of users, will improve profits no matter how much each player pays for it and, in spite of the high costs and long playtime, users will pay for it as long as the game provides enough fun for them. I expect that many games will continuously have good performances without losing customers, unlike Brexit.

 

 

※ This is from Kyunghyang Games column by 泥中蟠龍 since September 2013.

(http://www.khgames.co.kr)

 

Translation by Kim Ki-hui