Smash Hits
Game developers recording a smash hit with just a single title are drawing the attention of many with the Korean game market mired in a recession due to government regulations and the popularity of imported games.
For example, Smilegate posted 376 billion won (US$349.7 million) and 255 billion won (US$237.2 million) in sales and operating profits last year. The profit-to-sales ratio amounts to approximately 70 percent, which is matchless in the domestic market. Although the company is also generating profits via its subsidiary Palmple, a mobile game service provider, the largest portion of the profits is derived from Crossfire. The only online game provided by Smilegate, Crossfire is continuing rapid growth in China, topping the charts.
SundayToz, which serves AniPang, has recorded a five-fold increase in stock price just four months since its listing on the KOSDAQ in November last year. The company’s annual sales and business profits reached 47.6 billion won (US$44.2 million) and 17.3 billion won (US$16.1 million) in 2013, respectively. The successful performance has been led by its mobile game, even though a sequel, AniPang 2, made its debut earlier this year.
Dev Sisters posted 61.7 billion won (US$57.4 million) in sales and 25.6 billion won (US$23.8 million) in operating profits last year with its Cookie Run, which is available on the KakaoTalk platform. The sales per employee amounts to 1.5 billion won (US$1.4 million), given that about 40 employees are currently working for the company. Dev Sisters is planning to attract investment through an IPO this year before making inroads into overseas markets.
What these companies have in common is that they have hit home runs after failures of their first titles. For instance, Smilegate came up with Headshot Online after four years of development, failed to make it popular, and then changed it to Crossfire before heading to the Chinese market.
SundayToz released AniPang on CyWorld back in 2009. However, it was KakaoTalk that provided the opportunity for the game to turn itself into a smash hit. Dev Sisters’ first game, Oven Brake, was not very popular in Korea, although it succeeded in catching eyes in North America.
Experts explain that the one-hit wonders reflect the recent trend of the game industry, that is, choice and concentration defining the competitiveness of a company. These days, more and more games are available with similar structures and content, while the trends are changing fast, which means strategic blockbuster games do not guarantee success any more. This is why the profit-to-sales ratios of Com2Us and GameVille, which have released 40 to 50 new games each year, dropped from 34 percent to 21 percent and from 14 percent to 10 percent between 2012 and 2013, respectively.
“The competitiveness of the content themselves and the timing of the release are increasing their importance in the industry nowadays,” said 5Rocks, a mobile content analysis company, adding, “What also matters is to target the global market from the early stage of development.”
In the meantime, large game companies are splitting themselves these days, while more and more firms are rushing into the M&A market in the middle of such a trend. Smilegate made a strategic investment of approximately 120 billion won (US$11.6 million) in SundayToz on March 24 to acquire about 20 percent of the latter’s shares. “We will provide full support for SundayToz’s overseas market penetration and networking through this investment,” Smilegate explained.