泥中蟠龍's Game愛歌_Video game and fund (Part.2)

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.2)

 

In Part.2, 'd like to talk about not the influence of the world capital market but the global video game market on the domestic gaming industry. The Korean gaming industry is highly interlinked with the global games market. In the early 2000s, many local video games—mostly PC games—generated a lot of revenue since they made inroads into the global market, which helped some of the companies to list on KOSDAQ at that time and they are now estimated between hundreds of billions to trillions won worth of valuation. Also, Korea's mobile-game developers were in high demand worth of between tens of billions to hundreds of billions won of valuation across the world based on their advanced technology in time for the initial growth of the smart-phone market throughout the world. It could not have happened without large foreign capital in accordance with the high valuation of the national mobile game makers. China, which was emerging as a powerhouse in the field of the mobile game, particularly tried to find potential developers with state-of-the-art technology to put its money on.

 

However, Korea's mobile game companies are not attractive investment destinations to foreign investors any more than before. It's because of the closed technology gap between local game developers and foreign game makers. If there is a relatively lower valuated company within a neighboring country, it's natural for a foreign investor to move its capital to the new attraction.

 

A corporate is a product in the investment market. Of course, prices depend on demand and supply. A company, which was worth about thousands of millions won just three or four years ago, is now valued to be approximately 1 trillion won of valuation and vice versa. In recent years, while new mobile game studios have popped up around the globe, developers in their early days are appreciated way below than expected on the whole. It is because the supply and demand are not well balanced. However, in spite of a glut of video game companies all over the world, most domestic game makers are not satisfied with a lower valuation than they hope to obtain. Decreased demand results in lower prices. The narrowed technology gap and way too high valuation won't attract not only overseas investors but also domestic investors. And in fact, that's what has been happening since last year.

 

I don't mean that local mobile game developers should unconditionally lower their valuation to get funding from investors. But, as I mentioned earlier, people make a video game and money is essential for the employees. It's time to prevail over hard times. Only survival is ever really strong. Surviving means that firms adapt to a changing business environment. However, many local developers still cling to false hope. I suspect that it's time for them to seriously consider to survive in the overheated mobile game market.

 

 

※ 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_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