Frequent M&A Change Market Shares in South Korea’s Online Game Industry
Another very interesting read.
Large-scale game makers’ frequent merger and acquisition activities are changing the market shares in South Korea’s online game industry. After four well-known acquisitions, Nexon has reinforced its leadership in South Korea’s online game industry, leaving other competitors far behind, while at the same time, NHN and CJ E&M are gradually being kicked out. The R&D power of large enterprises and the deepening of the online game market have attracted wide attention aroused the great attention of many industry insiders.
During this merger and acquisition wave, Nexon really showed its mightiness. Many South Korean developers, including Wizet, Neople, Ndoors, Gamehi and JCE were taken over by Nexon, as a direct result of which 8 hot-selling games in South Korea, including Maplestory, Dungeon Fighter Online, Atlantica Online, Sudden Attack, Free Style, FreeStyle Football, Free Style 2 and Cyphers, joined Nexon’s lineup.
Achieving a 1.2 trillion won sales volume in 2011, Nexon became the first South Korea-based online game company with an annual sales volume of over one trillion won. And with its latest acquisition, in which Nexon took JCE under its control as the largest shareholder, Nexon’s sales volume in 2012 is expected to reach 1.5 trillion won.
CJ E&M which had been lagging behind in the leading publishers group, finally “woke up” since last year. They acquired their long-term partner Ani-Park, the developer of MaguMagu, to ensure its stable service. However, they also got poached by Nexon and lost the publishing right of Sudden Attack Online to Nexon, which dealt a big blow to the company.
CJ E&M achieved a sales volume of 257.6 billion won in 2011 and their situation will probably get worse when they hand over Sudden Attack Online to Nexon in 2013. In 2006, Nexon’s annual sales volume was only twice of CJ E&MC‘s. But after 5 years, the gap between the two companies has been enlarged five times. If Rift, CJ E&M‘s latest painstaking effort, fails to make a success, the gap will be further enlarged.
While Nexon embarked on an acquisition spree and CJ E&M faces an uncertain future, super large enterprises like NCsoft and NHN are also involved in the acquisition wave. Both of them have long cast a covetous eye on Wemade and other small developers. However, it seems like Wemade has no interest in becoming someone else’s appendant. Recently they acquired Silkroad Online‘s developer Joy-Max, which had acquired IO Entertainment. It’s a clear sign that they are determined to forge their own path.
According to South Korean media, a couple of years ago, Wemade lost to China-based Shanda in the competition for acquiring Dragon Nest‘s developer Eyedentity Games, which didn’t set them back, but instead intensified their acquisition and expansion determination. After successfully acquiring WiseCat, NHN started to try taking over JCE as its co-publisher. However, it turned out they were not even close to competing with Nexon.
In order to include some sports MMO titles in its lineup, Nexon guided Gamehi, one of its subsidiaries to acquire OnNet, the developer of Golf-theme MMO Shot Online. NCsoft, on the other hand, finally bought Ntreev and successfully tapped into the casual MMO market after 6 months of long and hard talk. According to some insider, NCsoft has been irritated by the fact that Nexon had left them out of the casual MMO market during last two years and the current sales volume of Nexon in this market is about twice as much as theirs.
Some analysts argued that compared with acquiring famous or emerging MMO-related companies, it is usually a lot easier to buy matched ones, which sometimes really give unexpected surprises. And that is what Nexon exactly did to expand its business.
The on-going merger and acquisition wave also brought a major problem to South Korea’s MMO industry: it has become more and more difficult for small and medium-sized enterprises to survive in South Korea, which may make the industry less dynamic than it used to be.