Bitter Game Stocks... Blockchain Momentum Holding Them Back

Rebound in Q4 Last Year on NFT and P2E Hopes
New Releases Blocked and Regulatory Concerns... Krafton Plummets 25.87%

[Asia Economy Reporter Gong Byung-sun] Game-related stocks, which surged with blockchain-related positive news, are experiencing a bitter start to the year. There has been no news of new releases incorporating non-fungible tokens (NFT) and Play to Earn (P2E), while concerns about regulatory measures by authorities are also rising.

According to the Korea Exchange on the 18th, Krafton has fallen 25.87% since the beginning of this month. Other game-related stocks with a market capitalization exceeding 1 trillion won are also sluggish. NCSoft dropped 8.55%, followed by Netmarble (-10.40%), Pearl Abyss (-19.09%), Kakao Games (-23.30%), Wemade (-22.54%), Com2uS (-17.95%), Com2uS Holdings (-32.08%), and Devsisters (-16.25%).

In the fourth quarter of last year alone, their stock prices soared significantly on news of starting blockchain businesses. Com2uS Holdings, which actively entered the blockchain business by acquiring shares in the domestic cryptocurrency exchange Coinone, rose 532.49% during the fourth quarter of last year. Other game companies also surged as they announced plans to develop NFT and P2E games. Jung Ho-yoon, a researcher at Korea Investment & Securities, explained, "The market's strong interest in the combination of blockchain and game companies is due to the expectation that the P2E business model can expand the size of the game market."

However, the mood in the securities industry has recently shifted. Among 21 reports on game stocks issued this month, 16 have lowered their target prices. In the case of Krafton, all five institutions that issued reports (NH Investment & Securities, Meritz Securities, Samsung Securities, Eugene Investment & Securities, Hyundai Motor Securities) lowered their target prices. Although the game companies' fourth-quarter results last year were poor, except for Wemade, it is difficult to find concrete plans for new blockchain-related releases. Sung Jong-hwa, a researcher at eBest Investment & Securities, emphasized, "NCSoft's Q1 showcase this year should be an opportunity not only to unveil a few new titles but also to disclose a concrete strategy for operating the P2E business."

Concerns have also been raised that government regulations could hamper NFT and P2E games. The Game Rating and Administration Committee (GRAC) considers P2E games illegal due to their gambling nature. On the 14th, Song Seok-young, head of the rating service team at GRAC, stated at a policy forum hosted by Representative Yoo Dong-soo of the Democratic Party, "P2E games have many side effects and concerns even before their release."

Presidential candidates are also rushing to prepare regulations. Not only Lee Jae-myung of the Democratic Party but also Yoon Seok-youl of the People Power Party and Ahn Cheol-soo of the People’s Party have voiced support for regulating probability-based items. Wi Jeong-hyun, president of the Korea Game Society and co-head of Lee Jae-myung’s game and metaverse special advisory group, said, "Games based on virtual currency prepared by game companies pose liquidity problems," adding, "Regulations on probability-based items will affect game companies' sales, but in the long term, it will lead to the development of the game industry."

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