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South Korea Game Makers Eye gGobal Expansion

June 17, 2006

LOS ANGELES – South Korea, home to the world’s most sophisticated online games, is preparing an assault on North America, Japan and Europe, setting the stage for an international scrum in an industry poised to nearly triple in value in the coming years.

South Korea is one of the world’s most Internet-connected nations and only recently began allowing sales of video game consoles that are so popular in Japan and the West.

As a result, all of the country’s gaming efforts have gone into online games that offer open-ended stories set in virtual universes that can support tens of thousands of players.

South Korean Internet cafes, known as PC baangs, are the launching pad for online gamers and such a vital part of the social fabric that it is not unusual for youngsters in the throes of puppy love to visit one while on a date.

With domestic growth opportunities crimped by a relatively small and saturated market, South Korea’s leading game makers, NCsoft Corp. and Webzen Inc., are looking abroad.

Publisher NCsoft is already a contender in wealthy and comparatively red-tape-free Western markets with massively multiplayer online games (MMOG) like “City of Heroes,” “City of Villains” and “Guild Wars Factions,” but it has yet to have a cross-over hit with a home-grown game.

“MMOGs are still a relatively niche segment of the North American video games market, but I believe they have the potential to be as big here as in Asia,” said Webzen America CEO Cindy Armstrong.

Josh Larson, director of GameSpot Trax, said NCsoft’s “Tabula Rasa” and Webzen’s “Huxley” and “Soul of the Ultimate Nation” are among the 10 most anticipated massively multiplayer games, based on buzz on GameSpot’s U.S. Web sites.

Thus far, the only title to crush international barriers in the fragmented industry is “World of Warcraft,” the record-shattering online game from Blizzard Entertainment.

California-based Blizzard has operated for several years in South Korea, where its “StarCraft” online strategy game is a best-seller and has spawned a television show and tournaments that draw more than a half a million spectators each year. Blizzard is a division of Vivendi Games, a unit of French media giant Vivendi.

BIG OBSTACLES, BIG OPPORTUNITIES

The global market for online game subscriptions, downloads and advertising is forecast to grow to $13 billion in 2011 from $3.4 billion in 2005, according to research firm DFC Intelligence.

North America, Europe and Japan — where most gamers grew up playing on consoles like Sony Corp’s PlayStation 2 — are expected to offer the most significant growth and to account for $9 billion in online game revenue in 2011.

Last year, online games made a small contribution to the $28.5 billion global video game market, but their influence is seen rising as more homes get high-speed Internet connections and next-generation video game consoles add online services.

“Now that ‘WOW’ has been so successful, there are going to be a lot of people trying (to cross borders). The opportunity is there, but it’s not going to be easy. It’s not like Blizzard sprung up overnight,” said DFC President David Cole.

Sierra Online, also a division of Vivendi Games, will shoot for a Korea-U.S. cross-over early next year with the debut of “FreeStyle Street Basketball” — a multiplayer pick-up basketball game developed by South Korea’s JC Entertainment.

Sierra President Ed Zobrist expects “FreeStyle” — which allows online players to customize their character’s physical appearance and garb — to have mainstream appeal, and said Sierra has been approached by other South Korean game makers.

“If they want to go global, here is where they need to be,” said Zobrist, who added that South Korea’s laser focus on online play has given its game makers a fresh perspective.

“They experiment more … They take more shots at the goal,” he said.

Making games in South Korea is also less expensive.

Webzen’s Armstrong said it can cost $15 million to $40 million to make an MMO in the United States, while a similar project might cost closer to $10 million in Korea.

Webzen has teams in Korea and the United States working on North American versions of its upcoming games, Armstrong said.

“As the regional markets grow together, we’ll see more cross-over hits,” predicted Robert Garriott, chief executive of NCsoft North America.




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