'Salary King' NC, Worst Performance Among 3N [Buaeri's Game Dictionary]

[Asia Economy Reporter Buaeri] As the first-quarter earnings of major domestic game companies were released, the report card of NCSoft, a representative of the gaming industry, was dismal. Among the 3N (Nexon, NCSoft, Netmarble), it posted the worst performance. Some argue that NCSoft needs to improve its user response methods and develop new intellectual property (IP).

According to the gaming industry on the 15th, NCSoft recorded sales of 512.5 billion KRW and operating profit of 56.7 billion KRW in the first quarter. These figures represent a decrease of 29.9% and 76.5%, respectively, compared to the previous year. NCSoft, which posted record-high earnings last year, recorded an 'earnings shock' below market expectations this year. In contrast, Nexon grew 7% in sales and 4% in operating profit year-on-year, posting 927.7 billion KRW in sales and 455.1 billion KRW in operating profit despite controversies over 'probability-type items.' Netmarble also posted strong results with sales rising 7% year-on-year to 570.4 billion KRW and operating profit increasing 165.7% to 54.2 billion KRW.

NCSoft's poor performance was largely influenced by increased labor costs. NCSoft's first-quarter labor costs were 232.5 billion KRW, a 26% increase compared to the previous quarter. Due to fierce competition for talent in the gaming industry, NCSoft paid incentives of 8 million KRW to all employees in March. Although not reflected in the first-quarter results, employee salaries were also raised by 13 million KRW+α for development positions and 10 million KRW+α for non-development positions, indicating that labor cost outflows are expected to increase further. NCSoft even explained that "a double-digit increase in labor costs this year is certain."

Kim Taek-jin, CEO of NC

NCSoft maintains one of the highest levels of compensation in the gaming industry, often earning the nickname 'Salary King.' As of last year, the average salary of its 4,224 employees was 105.5 million KRW, ushering in the '100 million KRW salary era.' This was about a 22% increase from the 86.41 million KRW average salary in 2019. CEO Kim Taek-jin's salary was also high at 18.414 billion KRW, surpassing major conglomerate owners such as CJ Group Chairman Lee Jae-hyun (12.3 billion KRW) and Lotte Group Chairman Shin Dong-bin (11.2 billion KRW). Of course, this was a result of NCSoft's record-high earnings last year, driven by the success of the 'Lineage brothers.'

However, in the first quarter of this year, the performance of NCSoft's main revenue sources, the mobile Lineage brothers (Lineage M and Lineage 2M), was sluggish. The combined sales of Lineage M (172.6 billion KRW) and Lineage 2M (152.2 billion KRW) in the first quarter totaled 324.8 billion KRW, a 41% decrease from 553.1 billion KRW in the first quarter of last year. Public sentiment worsened as Lineage M users launched a boycott. Regarding this, NCSoft IR Director Lee Jang-wook stated during a conference call after the earnings announcement, "Considering the traffic, we cannot find any impact from the boycott." However, speculation continues that dissatisfied Lineage users reducing in-game purchases (item purchases) could have a long-term negative effect.

There are also criticisms that NCSoft is neglecting new IP development. NCSoft's new titles, such as 'Trickster M' and 'Blade & Soul 2,' are games utilizing existing IPs. It is argued that game companies leading the Korean game industry should aggressively invest in IP. Professor Wi Jeong-hyun of Chung-Ang University, president of the Korea Game Society, said, "The onslaught of Chinese games is intensifying, but Korean game companies show no will to fight back. New releases are delayed, and games are aging," adding, "Game companies should not be complacent with the COVID-19 boom but actively invest in IP."

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This content was produced with the assistance of AI translation services.