[KH Explains] NCSoft pins hopes on new titles to stop bleeding

NCSoft is seeking answers to rebound with new titles and managerial overhauling efforts amid its falling stock price, as the first-generation South Korean gaming powerhouse hopes to get back to the throne.

Experts forecast that the success of new games NC plans to roll out and reorganization of human resources will determine whether the game developer can turn things around in the short term.

Plummeting shares

NC’s stock has been practically in a free fall since reaching its peak at 1.05 million won ($784) per share in February 2021 based on the strong business model NC had established with its popular massively multiplayer online role-playing game, or MMORPG, series Lineage and the COVID-19 pandemic restricting outdoor activities.

The new titles that were released later on -- namely mobile MMORPG Trickster M and another MMORPG Blade & Soul 2 -- failed to meet the gaming community’s expectations, as each of them was labeled “another Lineage-like” game by many users.

Gamers and investors turned their backs on NC, causing a steep and continuous drop in the game developer’s market price. The company’s stock fell to its lowest point in the last five years when it logged 156,000 won at the market closing on Aug. 9 this year. The stock price has recovered a little, closing at 180,100 per share Friday.

With the plunging share price and growing negative sentiment toward NC, the company reported 8.8 billion won for its second quarter operating profit, down 75 percent on year. Second-quarter revenue dipped by 16.2 percent on-year to 368.9 billion won.

Streamlining efforts

As extreme times call for extreme measures, NC tried something it had never done. In March this year, the company announced a co-CEO structure by appointing Park Byung-moo, a former lawyer at Kim & Chang -- one of Korea’s leading law firms -- who has an extensive amount of experience in investment companies, as the co-CEO alongside Kim Taek-jin, founder of NC and the “father of Lineage”

Under the new leadership system, NC said Kim will concentrate on developing games and enhancing their competitiveness, while Park will work to streamline management and pursue new business opportunities through mergers and acquisitions.

The game developer has made some dramatic changes at least on the surface. In June, the company held a board meeting to approve the establishment of two new companies -- NC QA and NC IDS -- through a corporate spinoff. NC QA focuses on quality assurance services. NC IDS is tasked with application software development and supply.

The split came as a part of efforts to improve workforce efficiency and cut down fixed costs. Park, the co-CEO, said NC is working on reducing the number of employees to the mid-4,000s, whereas the figure was about 5,000 in December last year.

Since Park became co-CEO, NC has conducted two investments in two game developers -- $3.5 million in Swedish firm Moon Rover Games and 37 billion won in Korean subculture game company Vic Game Studios -- as it seeks growth engines.

Silver lining

NC launched Hoyeon, a mobile MMORPG based on the intellectual property of Blade and Soul, in Korea, Japan and Taiwan on Aug. 28. The new title, which had drawn high anticipation, instantly became the most popular game on Google's app store in the Korean and Taiwanese markets and topped the most popular games chart on the Apple app store in Japan.

The development of Hoyeon was an attempt to break away from the traditional Lineage-like graphics and gaming style, as the new title features more subculture characters and allows gamers to collect up to 60 different characters.

Chung Ho-yoon, an analyst at Korea Investment & Securities, said despite the attempt to try different things with subculture-style graphics and a combination of various characters and new controls, such a complex system made it unfit to be played on smart devices.

“The lingering NCSoft-style interface and business model have caused repulsion among the users,” he noted.

“(NC) needs to change its strategy for developing new games. They need to develop new games that target new markets and users. In order to grow, they should show that they have changed. Vague attempts only lead to vague results.”

Lee Chang-yoon, an analyst at Yuanta Securities, pointed out that the global launch of MMORPG Throne and Liberty, scheduled for Oct. 1, has garnered much attention and interest from overseas gamers, as about 84,000 players participated in the global open beta test in July. The analyst also mentioned that 16,000 streamers played the game on livestreaming platform Twitch to 3.8 million accumulated viewers.

Lee noted that the launch of Blade and Soul 2 in China and Lineage 2M in Southeast Asia in the fourth quarter of this year as well as the release of seven new games next year, including NC’s first real-time strategy game Project G in the first half and MMORPG Aion 2, and massive multiplayer online shooter Project LLL in the second half are likely to play a positive factor in improving sales.

”The increased speed and volume of new title launches in comparison to the past, as well as the release of various IPs, various genres and various platform games, present high chances for sales enhancement in the future,” he said.